New report outlines world’s most overvalued property markets

A new report in The Economist reveals that France’s housing market is the most overvalued in the world when comparing average house prices against average incomes, while Hong Kong property is the world’s most overvalued when comparing the relationship between the costs of buying and renting.

FranceTo reach its findings, the magazine compared the ratios of these two factors against their historical averages (dating back to the mid-1970s). If they were higher, then property is overvalued; if they are lower then it is undervalued.

The report found that, using this system, French property is 31 per cent overvalued when house prices are compared against average incomes in the country, placing it ahead of Canada (30 per cent), Australia and New Zealand (both 24 per cent) and the Netherlands 21 per cent.

The most affordable property markets of the 19 nations surveyed when comparing property prices and incomes were Japan, China, Germany, the United States and Ireland. Property prices in all five of these countries were found to be significantly undervalued.

When comparing the relationship between the costs of buying and renting, Hong Kong property was found to be a whopping 84 per cent overvalued, followed by Canada (again) at 74 per cent and New Zealand at 68 per cent).

The most undervalued markets were found to be Ireland, Spain, the Netherlands and Japan.