In the past, there's been no better kick-start for the housing market than a few interest-rate cuts. This time, however, something's different. Cheap debt has failed to trigger the type of bounce seen in previous rate-cutting cycles.
What does this mean for property investors? According to economists, it suggests they should probably prepare for softer capital gains than in the past.
Each period of Reserve Bank interest-rate cuts since late 1990s has been followed by a strong increase in house prices, as you can see in this week's graph. The latest cutting cycle, however, has been different. Since late 2011, the Reserve has cut the cash rate by 2 percentage points to 2.75 per cent. Most of this reduction has been passed on to typical mortgage rates - which, at about 5.3 per cent, are low by historical standards.
House prices have responded, but it's been relatively muted, with home values rising by annual rates of 4.6 per cent in Sydney and 2.1 per cent in Melbourne. This has occurred despite auction clearance rates building for the past year or two, a sign of stronger confidence. So why the relatively soft bounce in prices? For one, it's worth noting that auction clearance rates tell only part of the story. The fact that more homes are being sold at auctions suggests there's life in the market, but it could also mean more sellers are happy to settle at realistic prices.
Another big part of every house price boom has been debt - which tends to amplify price growth. And that's the key area where things are very different today.
Recent research from Bank of America Merrill Lynch found the typical loan size had increased by about 5 per cent in the past year, and this increase was probably the main reason house prices had also risen.
But it also argued that households would remain reluctant to take on more debt, because they are a much more cautious bunch today than they used to be.
"We expect this caution to continue and therefore do not expect average loan size to rise markedly ... and this will weigh on house prices," the research said.
A key reason households are unlikely to take on more debt, it argued, was that many people remained nervous about their employment prospects. Even though unemployment has not jumped too dramatically, the reports of wide-scale job cuts are understandably alarming.
And with the economy going through a weaker period of "transition" after a mining bonanza, most think the labour market will remain patchy for a while yet.
The bottom line?
We are far more reluctant to bid up house prices today than we have been in the past, even though debt is very cheap. Therefore, economists say, don't bank on blockbuster capital gains of years gone by.
House price lag