Tuesday, Jan 12, 2010
What housing recovery?
MoneyWeek: What housing recovery?
One way of gauging whether property is at 'fair value' is by looking at the ratio of house prices to the income they produce, ie, rents. It's like the price/earnings ratio used by stock analysts. So the latest Economist round-up of global house prices and rents has produced more ammunition for UK property bears. Despite falling some 12.5% from their peak, British house prices are still almost 30% overvalued on this basis. Indeed, houses look good value in very few countries around the world, as the table shows. As The Economist says, with the notable exception of Germany, "Europe's housing correction seems far from over".
Posted by doomwatch @ 11:34 AM (1373 views) Add Comment
3 Comments
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1. will said...
Good for moneyweek for telling it as it really is.
2. Neilb said...
"One way of gauging whether property is at 'fair value' is by looking at the ratio of house prices to the income they produce, ie, rents."
...actually thats a measure of how profitable an investment is
3. 51ck-6-51x said...
Neilb said "...actually thats a measure of how profitable an investment is",
- Yes over an historical time frame this is yield... but at this very moment, it is P/E.
Good luck with your long high P/E, short low P/E strategy.