House Prices Versus Earnings: Spain Still Expensive

21/10/2014 – El Economista

Spain’s housing values still post above the historical average, states latest Global House Price Index update on ‘House Price to Income’ by the International Monetary Fund (IMF).

The indicator applied by the organization (Q2 2014) shows that prices in Spain remain 15% above the average corresponding to its historical series. The Price to Income ratio is calculated by dividing mean home value in an area by disposable income of a household.

Looking closely at the ranking by countries, the cheapest housing is found in Japan, if compared to the wages of its population, with a  price deviation of -40%. Similarly, South Korea reflects the deviation at -37%.

On the other hand, Belgium, Australia and Canada have the most expensive properties marking a deviation ratio of more than 30%. Due to such high prices, these countries and France have been warned by the IMF about a possible housing bubble.

Also, in case of the United States, as the country had lived through a housing bubble before the financial crash, now its prices post 10% below the historical average.

Compared to rent, house prices are expensive in Spain. Buying a property in Japan is much more reasonable than renting, while just the opposite happens in Canada, New Zealand or Norway.

 

Graph source: IMF

Original article: El Economista 

Translation: AURA REE

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