November 2, 2010

By comparing rental prices to sale prices of properties, The Economist has created a list of which housing markets are the most over-inflated.

This comparison therefore reflects what the cash flow is on an investment property vs. the asset value. If you property does not make much money, the property purchase will makes less senses.

According to The Economist:

“Our analysis of “fair value” in housing, which is based on comparing the current ratio of house prices to rents with its long-run average, suggests that China has less to worry about than the likes of Australia, which is again the most overvalued of the markets we track. That makes it all the more surprising that Australia’s central bank opted not to increase its benchmark interest rate this month.”

Check out the list below from The Economist:

1. Australia

2. Hong Kong

3. Spain

4. France

5. Sweden

6. Britain

7. Canada

8. Netherlands

9. Belgium

10. New Zealand

11. Denmark

12. Singapore

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