Of 20 global housing markets tracked, the vast majority were overvalued in the third quarter, according to an annual survey from The Economist.

The magazine compared the current ratio of house prices to rents with its historical average to determine a market’s "fair value." Only four markets were undervalued: Japan (-34.6 percent), Germany (-12.9 percent), Switzerland (-6.4 percent), and the United States (-2.1 percent). The Case-Shiller Home Price Index was used to determine the U.S. figure.

 

Of 20 global housing markets tracked, the vast majority were overvalued in the third quarter, according to an annual survey from The Economist.

The magazine compared the current ratio of house prices to rents with its historical average to determine a market’s “fair value.” Only four markets were undervalued: Japan (-34.6 percent), Germany (-12.9 percent), Switzerland (-6.4 percent), and the United States (-2.1 percent). The Case-Shiller Home Price Index was used to determine the U.S. figure.

“America’s housing market, almost alone among those which experienced a big bubble, is more or less fairly valued at this point, at least according to price-to-rent ratios. But price rises may not last for long. Earlier gains were driven by substantial reward programs and government subsidies, many of which have now lapsed,” the London-based publication said.

“America’s overhang of housing inventory may get worse if concerns over lenders’ foreclosure processes jam up sales. The temptation for the country’s 11 million underwater borrowers to walk away is another threat.”

Besides the aforementioned four, every other market was overvalued by double-digit percentages. Australia had the most overvalued housing market at 63.2 percent. Italy’s market was the least overvalued at 10.5 percent.

Year-over-year, four markets experienced price decreases: Ireland (-17 percent), Japan (-4 percent), Spain (-3.4 percent), and Italy (-2.8 percent). Thirteen of the 20 markets saw prices rise less than 5 percent. Prices rose the most in Singapore (23.1 percent), Hong Kong (20.6 percent), and Australia (18.4 percent).

Top 10 global overvalued markets:

Country % Overvalued Latest % year-over-year price change
Australia 63.2 18.4
Hong Kong 58.1 20.6
Spain 47.6 -3.4
France 42.5 6
Sweden 41.5 8.9
Britain 32 3
Belgium 21.6 6.5
Canada 23.9 4.5
Netherlands 23.6 4.2
New Zealand 20.2 3.4

Source: The Economist.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
The best event in real estate kicks off next week! Tickets are selling quickly.Register Now×
Limited time: Get 30 days of Inman Select for $5.SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription