UK house prices may be rising again, but they are still too expensive. Or so is the inference from data published by the OECD this week.
In fact, suggests the OECD, UK house prices to rent are 31 per cent higher than the historical average since 1980, and to income they are 22 per cent above average. That may seem a tad worrying.
But then again in Canada, average prices to rent are 64 per cent over the Canadian long-term average, and price to income is 30 per cent over average. In Australia the extent of apparent over valuation is 37 and 21 per cent respectively.
The OECD data suggests that house prices are also more over-priced in Belgium, Norway, and Sweden than they are in the UK.
In France and Sweden, the ratio of price to rent and income, is at a similar level to the UK.
They are much cheaper in the US, Germany, Japan, and Ireland.
Okay, as long as interest rates are so low, maybe house prices could be affordable in the countries where they are apparently overvalued.
But what will happen if interest rates rise?
If interest rates go up because the economy is doing well, then that may be fine.
But supposing they rise because of external factors, for example because of rising wage costs in China, or because there’s less money sloshing around global money markets, or rates rise because as the baby boomers retire, they draw down savings. See: the Great Reset
© Investment & Business News 2013