Somewhat contrary to current suggestions that the country is heading for a dreaded “bubble”, the Reserve Bank has now said that Australian house prices are 30% undervalued.

“Under our assumptions owning a home is now more attractive, relative to renting than it has been at any time in the past 30 years,” says Peter Tulip, Reserve Bank senior research manager, stressing that the opinion is his rather than the bank’s. The research refers to current price expectations neither “unusual” nor “irrational”.

Tulip told a session on housing at the Australian Conference of Economists in Brisbane that whereas a year ago home prices were “fairly valued”, today they are about “30% undervalued”. In the past year, national house prices have risen by 9.8%, with Sydney house 16.2% up and Melbourne 10.2% up.

Tulip and his co-author, Ryan Fox, says that rising prices say nothing about whether homeownership is good value compared to renting.

“We find that owning a house costs 30% less than renting, that is, houses are 30% undervalued,” Tulip told the session.