House prices: countries with the cheapest and most expensive property markets

Authoritative research by the OECD highlights property markets in Australia and France as overpriced - but Portugal's a bargain

Global house prices

House prices in Britain are around 30pc too high, according to a study published by the Organisation for Economic Co-operation & Development.

The figures, included in a wider report on economic prospects, offer a signal as to where buyers might be able to find a property bargain – and the nations where they may be overpaying.

Commonwealth countries, in particular, were found to have the most wildly overvalued property markets among the OECD countries. They include New Zealand, Australia and Canada; prices continued to power ahead in all three last year.

Closer to home, prices in France and Norway remain too high, the report indicated. In contrast, property markets in Ireland, Portugal and Germany are undervalued.

Japan, where prices have been in an on-off 25-year decline, remains the cheapest market within the OECD. Despite an unprecedented stimulus programme deployed last year by Shinzo Abe, the prime minister, prices fell in real terms by nearly 2pc in 2013. The wonders that so-called “Abenomics” worked in creating inflation and sending Tokyo shares soaring failed to work on bricks and mortar.

Much attention is also paid to the Spanish property market, where hundreds of thousands of Britons have holiday homes.

Taking the OECD’s two measures (which are explained below), the market remains around 5pc overvalued, compared with 12pc a year ago. The numbers for Spain have fallen from 108 and 115 a year ago. For more comparisons with a year ago, see the chart at the foot of this article.

What the valuations mean

The OECD research is based on two different measures of valuation. It compares prices with typical wages and then plots the ratio against the long-term average. At 100, it would be in line with that average. At 150, it is 50pc above the average.

A comparison with wages indicates what buyers can afford but the OECD also captures how prices look against rents. This measurement is akin to valuing homes as if they were businesses – not dissimilar to the price to earnings ratio used to value shares. A figure of 84, the number for Greece, suggests prices are 16pc below the long-term average on this measure.

We have created a colour-coded map to capture these differences and give a rough indicator of whether it is worth buying (green), worth avoiding (red) or in between (orange).


Country  Annual rise in real terms  Price vs rents  Price vs wages 
Australia  6.6% (2013)  145  128 
Belgium  0.7% (2013)  158  147 
Canada  5.2% (Q1 2014)  166  131 
France  -2.2% (2013)  129  128 
Germany  5.1% (2013)  91  83 
Greece  -7% (2013)  84  103 
Ireland  4.3pc (2013)  96  92 
Italy  -5.5% (2013)  93  108 
Japan  -1.9% (2013)  62  63 
Netherlands  -1.4% (Q1 2014)  104  117 
New Zealand  8.2% (2013)  170  132 
Norway  -2.6% (Q1 2014)  164  122 
Portugal  -1.5% (Q1 2014)  83  94 
Spain  -4.9% (2013)  104  107 
UK  3.5% (2013)  134  125 
US  6.6% (2013)  104  90 
Euro area  -0.9%  106  107 
Total OECD  2.8%  106  95 



The OECD's assessment of house prices today:


"House prices and housing investment are now rising in over half of the OECD economies. In Europe, strong house price growth is continuing inGermany (based on data from the big cities) and Switzerland, and has also resumed in the United Kingdom, even though UK prices are already above longer-term norms relative to rents and incomes. Markets remain softer in other parts of the euro area, reflecting weak income growth and tighter financing conditions.

"Recent data, however, suggest that the long declines in real house prices in Ireland and the Netherlands may now have started to bottom out.

"In the United States, housing developments are mixed. Prices continue to rise, but new home sales, starts and builders’ confidence have turned down, in part due to adverse weather conditions in the first quarter of 2014, but also because of a moderation in mortgage purchase applications since long-term mortgage rates rose last summer. Existing home sales have also declined, although much of this appears to reflect a welcome drop in the level of distressed sales. Looking ahead, given the likelihood of continued solid income growth, further easing of credit standards and pent-up demand after a period of subdued household formation rates, the housing market recovery should continue through this year and next.

"In Japan, real house prices are continuing to edge down, but land prices have now begun to stabilise and housing investment has been very buoyant, although this has now faded given the temporary boost provided by the demand for sales contracts to be finalised ahead of the consumption tax increase in April."

And its assessment from 2013 for comparison...

How valuations have changed from a year ago when the OECD last published the study (May 2013)...