Still early in the game… A 20% gain still to come.

“Look at the Scoreboard!”

You know me. I'm not backward about coming forward. And I'll admit, when I used to play football, I used to enjoy a bit of sledging. For me it was just a bit of fun – a way to bring a bit of wit to physical contest.

I remember one rainy and mucky away game. After an unimpressive and ugly passage of play, one of their team lobs a lame attempt at a shot towards the goal. Lucky for him, there's a bit of confusion between the goalie and another bloke, and the ball wobbles across the line.

The guy who scored stats jumping about like someone's just set fire to his shorts. “Take it easy mate,” I said. “If that goal was any uglier I might have mistaken it for your sister.”

“Look at the scoreboard!” he said.

Hmpf. I thought that was a pretty weak comeback. It's something you get a lot from the unimaginative, but what does it prove when you're 5 minutes into a game? (We went on to win 3-1.)

I got a few similar replies to my last post, about how claims that Australia is facing a financial meltdown are totally overblown, that were in a similar vein.

“If the recovery's on track, why have house prices been so slow to get going?”

I could take issue with this. If house prices keep growing like they have for the past six months, we'll be seeing 8%+ growth rates in a short time. That's not too bad.

But I think a lot of it comes from a misreading of what this chart here is about:

There's a few different versions of it floating around. The central premise is that if you look at what house prices have done since the latest rate cutting cycle began, and you compare that against what they did in other rate cutting cycles, the recovery has been a bit disappointing so far.

Well, what's my response to that? C'mon Jon.

The first point is that short periods of history aren't a good basis for predictions about the future.

Bertrand Russel made the point that if an alien came down and watched the first 15 years of a child's life, it would conclude that by the time the child was 50, it would be 80 ft tall, and weigh 200 tonnes.

And be a first round draft pick for St. Kilda.

So the claim that two years of softer-than-expected results prove that the property market is broken is some soft logic.

But still it begs the question, why has the cycle been so slow to assert itself this time around. Why have houses and units been dragging their feet?

They key: is confidence.

There are many factors at play, there always are, but I think if you understand what's happening with confidence, it unlocks a lot of the mystery around house prices at the moment.

The first point to make is that consumer confidence and house prices are highly correlated. Have a look at this graph here:

The other thing to take from this graph is that confidence leads house prices. That's easy enough to understand. As people become more optimistic about the economy's prospects the more likely they are to buy into a property upswing, or decide that now is a good time to invest.

And this confirms what a lot of us already understand about the property market itself. It's a highly emotional affair for a lot of people. Houses are more than a box to live in, and even most investors trade on ‘feel'.

(Which is of course one of the challenges for us: to get out of the Sex and the City cycles of tears and champagne, and anchor our investment strategies to facts and to data and to 800 word op-ed pieces by millionaire trouble-makers.)

But if confidence is the key to property, what's going on with confidence? Well, interestingly enough, there's been a paradigm shift in confidence in recent years.

Traditionally, confidence has been tied to the job market. When people had jobs, and when people felt that their jobs were more secure, they just felt better about things. But that relationship's broken down in recent times.

I'd argue that there's been an internationalisation of sentiment in the last 5 years. The GFC took a lot of people by surprise, and showed us just how vulnerable we were to factors completely beyond our borders and beyond our control.

And since then, for nervous consumers looking across the seas, there's been no shortage of ghosts in white sheets – fiscal cliffs, sovereign debt crises, Eurovision.

And look at the confidence data released yesterday. A 5 percent drop took everybody by surprise. But come on. What's changed in the past month? Everything's on the up.

The only news of course was the saga in Cyprus.

Sentiment has been internationalised.

And I think this internationalisation explains why confidence (and therefore house prices) have been softer than you'd normally expect given how robust the Australian economy has been.

And so if we come back to our first graph, I think this is also a big part of the reason why there's been a 15-20 percent lag in house prices.

And the implication of course is that the property market isn't “broken”. Rather, there's a lag building up, waiting for that comeback in confidence.

But with the outlook for the US and Europe looking a lot more solid, and unemployment here remaining low, I think confidence will put the funny numbers this month aside, and keep advancing forward.

And if that happens, then house prices will come charging back too, and we could make up that 20 percent very quickly – perhaps in as little as 6 to 12 months.

Those numbers will look very sweet up on the scoreboard. Very sweet indeed.