Jump to content
House Price Crash Forum

Anyone Seen Housing P/e Figures?


Recommended Posts

Been looking at this forum for the past few months, and although I've seen plenty of discussion on the ratio of housing prices vs salaries (wages), I was wondering if anyone has the ratio of housing prices vs rental prices?

In the US we call it the Housing P/E, similar to the Price/Earnings ratios for stocks. Take the median house price for an area, and divide it by median annual rental costs.

After all, rental income is merely the future possible earnings of a house. Just like future quarterly dividends are the earnings for a stock position.

Check out this article at the New York Times (free registration) to see how US real estate is headed in the same direction as the UKs:

The New York Times - Ratios of Home Prices to Rental Prices in Selected Metros

Link to post
Share on other sites
Been looking at this forum for the past few months, and although I've seen plenty of discussion on the ratio of housing prices vs salaries (wages), I was wondering if anyone has the ratio of housing prices vs rental prices?

In the US we call it the Housing P/E, similar to the Price/Earnings ratios for stocks. Take the median house price for an area, and divide it by median annual rental costs.

After all, rental income is merely the future possible earnings of a house. Just like future quarterly dividends are the earnings for a stock position.

Check out this article at the New York Times (free registration) to see how US real estate is headed in the same direction as the UKs:

The New York Times - Ratios of Home Prices to Rental Prices in Selected Metros

We call it rental yield, and I don't have any good figures to hand but I can give you an example where I am (South East England).

Typical price of an 2 bedroom apartment for sale: 150,000 GBP

Typical gross annual rental income for same apartment: 7200 GBP

So that would give a p/e of 20.83 or conversely, a rental yield of 4.8%

Once you've taken into account maintainance costs, and also any vacant periods, you are probably looking at a yield of well under 4%.

It is possible to earn more than this in a cash savings account with most banks, with some banks paying up to 5.5% interest.

Link to post
Share on other sites
A P/E ratio of 21 for the South East doesn't sound too bad. The US average is 17.1 (the highest level in the past 20 years), with San Francisco almost double at 34.1.

The economist magazine has had several articles on the global housing boom and I can remember an article in the past year that had figures on rental yields. Unfortunately I don't have a reference but you can search the archives at www.economist.com.

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.

  • 440 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.