A recent report from Knight Frank International Residential Property shows Australian homes in the overvalued category, led by Norway, Canada, Belgium and New Zealand. Home values are computed against household incomes, and it’s no surprise why the nation came in fifth on the list.
The property market is appropriately valued if the household income is sufficient to pay for purchasing or renting a property. 15 of the 27 countries tracked are well above the long term averages for both the Price to Rent and Price to Income ratios. It was expected to show more than 20 countries on the overvalued list had this been done at the height of the GFC in 2008. Balanced countries on the list include the US, Italy, Austria and Iceland.
Providing Australians with adequate means to earn a living is easier said than done, but this has to be addressed in order for us to close this gap. Otherwise, affordability will hinder us from purchasing, and home ownership will remain a dream.
Read more about this on the Property Observer website.