The Most Over/Under-Valued Housing Markets In The World

This is very inter­est­ing (and seri­ous):

OECD compare the prices

OECD com­pare the prices

House prices — with respect to both lev­els and changes — dif­fer wide­ly across OECD coun­tries. As a sim­ple mea­sure of rel­a­tive rich or cheap­ness, the OECD cal­cu­lates if the price-to-rent ratio (a mea­sure of the prof­itabil­i­ty of own­ing a house) and the price-to-income ratio (a mea­sure of afford­abil­i­ty) are above their long-term aver­ages, house prices are said to be over­val­ued, and vice-ver­sa. There are clear­ly some nations that are extreme­ly over-val­ued and oth­ers that are cheap but as Soc­Gen’s Albert Edwards notes, it is the UK that stands out as author­i­ties have gone out of their way to prop up house prices — still extreme­ly over-val­ued (20–30%) — despite being at the epi­cen­ter of the glob­al cred­it bust. Sum­ming up the cen­tral bankers anthem, Edwards exclaims: “what makes me gen­uine­ly real­ly angry is that bur­den­ing our chil­dren with more debt to buy ridicu­lous­ly expen­sive hous­es is seen as a solu­tion to the prob­lem of exces­sive­ly expen­sive hous­ing.”

Screwed (ie SELL!):

  • UK
  • Spain

Not-Screwed (ie BUY!):

  • Por­tu­gal
  • Switzer­land

So quite sim­ply sell any prop­er­ties that you have in the screwed group and buy them back in the not-screwed group. Voila! These coun­tries break down into Five Cat­e­gories:

Where hous­es appear broad­ly cor­rect­ly val­ued. This cat­e­go­ry includes the Unites States, where prices have start­ed ris­ing again after a sub­stan­tial cor­rec­tion; Italy, where prices are falling rapid­ly; Aus­tria, where prices are ris­ing; and Ice­land, Korea and Lux­em­bourg where prices are rough­ly flat.

Where hous­es appear under­val­ued and prices are still falling. This cat­e­go­ry includes Euro­pean coun­tries hit hard by the cri­sis – Greece, Ire­land, Por­tu­gal, Slove­nia, Slo­va­kia and the Czech Repub­lic – but also Japan.

Where hous­es appear under­val­ued but prices are ris­ing. This cat­e­go­ry includes only Ger­many and Switzer­land, two Euro­pean coun­tries where strong growth in house­hold dis­pos­able income and favourable financ­ing con­di­tions have boost­ed prices (despite macro-pru­den­tial mea­sures in Switzer­land).

Where hous­es appear over­val­ued but prices are falling. This cat­e­go­ry is the largest as it includes many Euro­pean coun­tries where the post-cri­sis hous­ing mar­ket cor­rec­tion is still ongo­ing, most notably Spain, but also the Unit­ed King­dom, Bel­gium, Den­mark, Fin­land, the Nether­lands and one non-Euro­pean coun­try, Aus­tralia. While price cor­rec­tions in these coun­tries are nec­es­sary, they are also con­cern­ing as they weak­en house­holds’ finan­cial health and poten­tial­ly frag­ilize bank­ing sec­tors.

Where hous­es appear over­val­ued but prices are still ris­ing. This is the case in Cana­da, Nor­way, New Zealand and, to a less­er extent, Swe­den. Economies in this cat­e­go­ry are most vul­ner­a­ble to the risk of a price cor­rec­tion – espe­cial­ly if bor­row­ing costs were to rise or income growth were to slow.

Get the full scoop:

The Most Over/Un­der-Val­ued Hous­ing Mar­kets In The World

Hap­py House Hunt­ing …

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