The latest OECD economic outlook report hit us with some fascinating stuff about global house prices. And what is really good about the OECD data is that it may well have presented just about the most meaningful data of the lot. It looked at the ratio of average prices to income and rent going back from 1992 right up to today.

It looked at all the economies in the OECD, but in this article we are just looking at the UK, US, Japan, Germany, France and Spain. Japan makes a fascinating read because it shows us what could happen. Data on the US yields a surprising conclusion. As for Germany, well, it tells us something we already knew, but it’s good to see some numbers behind the talk. As for the UK and Spain, well, oh dear.

Alas, the OECD data only goes back to 1992, which is a shame because Japan’s woes began before that. But in 1992, the average price of Japanese property relative to rent was 128, and relative to income 110. Every year since, without one single exception, has seen both ratios fall on the previous year. In 2009, the ratio of price to rent was 66.9, and price to income was 66. (Figures are based on a long-term average of 100).

Just remember the classic reasons used to justify high house prices in the UK: land is short and the density of the population is high; Britain is an island, therefore house prices will always go up. It is odd though, because when the author of this article did geography at school he was told that Japan was an island (or several if you want to be more precise), and the population even more dense.

As for the US, right now the ratio of price to income in 2009 was 97, compared to an average since 1992 of 94, and a period high of 107. Now there are several interesting things here. First of all, note that the current price is only marginally above the average. Secondly, see how the scores are quite low. To put this in context, at peak the average ratio of price to income in the UK was 150. It is odd, however. Despite the fact that US house prices are not especially high in historical terms, it is generally agreed that they are likely to fall quite rapidly this year. In fact, the latest Case-Shiller reports have been showing declines for several months now, and with the stock of unsold houses so high, if US prices don’t continue to fall it would be about as big a surprise as the US winning the World Cup.

What’s interesting about Germany is how boring the data is. From 1992 to 2009, the ratio of price to income peaked at 92, and currently stands at its lowest point so far of 64. So, in Germany, prices have always been cheap, and right now are cheaper than ever. (It’s funny how savings are high in countries where house prices are low, isn’t it. It’s just a coincidence, of course, as economists kept telling us during the noughties that house prices don’t really affect the mix between consumption and savings. Click on this article to read what we really think about that .)

In Italy the latest ratio of price to income to income is 107, compared to a series average of 98.

But it is in the UK, France and Spain where we see the real fireworks. In these countries the series average for price to income is 105, 82, and 118 respectively. The highest scores between 1992 and 2009 are 150, 138 and 157 respectively. The latest reading, following the same order as above, is 126, 124 and 136.

In other words, house prices in the UK, France and Spain relative to income are still very high.

But before we leave this topic, there is one more gem lurking within the data. Let’s take the UK. At one point the average price to rent ratio was just 78. During the peak of the boom it was 165, last year 135.

Now you can argue that house prices should be high because of the shortage of supply. But if that was the case, rent should be high too. Why is it, then, that the ratio is now so much higher than at the low point? Surely if lack of supply was the real driver of high house prices, then the ratio of price to rent should be unaffected.

For more on house prices and our view on the arguments for and against further rises/crash, see House prices: digging beneath the foundations

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