-->Calculations by The Economist show that home prices are now at record levels in relation to average incomes in America, Australia, Britain, France, Ireland, the Netherlands, New Zealand and Spain; on current trends, Italy will join this group by the end of the year. In other words, houses are more overvalued today than at previous peaks, from which prices typically fell sharply in real terms. Add in China and South Africa, and two-thirds (by economic weight) of the world that we track now has a potential housing bubble.

[img][/img]

America's ratio of house prices to rents is at a record high, 26% above its average over the 25 years to 2000 (see chart). To bring the market back to fair value, prices need to fall; alternatively, if rents continue to rise at their recent pace, prices will have to stagnate for as long as eight years.


<IMG src="http://economist.com/images/20040911/CFN551.gif" alt="http://economist.com/images/20040911/CFN551.gif">
<ul> ~ Never before have real house prices been rising so fast in so many countries</ul>