Global House Price Bubble
The bubble in house prices around the world was illustrated once again by an article in the Economist this month. The article includes graphs of the ratio of house prices to annual rents. It shows Spain currently at double the ratio's average over 1975 to 2000 and Australia (1.7) and UK (1.6) not far behind.
Given that renters can only pay rents if their wages allow, a similar ratio is the ratio of house prices to annual wages. FinDem plotted has plotted this ratio in a Miscellaneous Chart in Research Centre. The ratio peaked at 7.9 times annual average wages in March quarter 2004, and has since eased off a little to 7.3 times at December quarter 2004. The average over 1975 to 2000 was 4.3 (i.e. the ratio is now 73% above the average).
The recent Economist article can be found at http://www.economist.com/finance/displayStory.cfm?story_id=3722894 .
Posted Sunday, 20 March 2005
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