Or, at least, incomes or rents will eventually have to rise. If prices rise faster in the long run than the revenue a property could generate or the earnings that service mortgages, they may be unsustainable. To gauge whether house prices reflect fundamentals or froth, The Economist has compared them with rents and median household incomes. Moreover, according to the IMF house-price inflation in capital cities is increasingly synchronised. But when they started to rise again, they did so on average twice as fast in our cities as nationally. In 14 cities prices are above their pre-crisis peak-by an average of 45%.īefore the crisis, city and national prices broadly rose in tandem. But they have since risen by an average of 56%, in real terms, from their lowest points. Prices in our cities fell by an average of 22% in real terms, peak to trough-in Dublin by 62%, and in San Francisco by 42%. Some of this is a rebound from the global financial crisis, which started with a housing bust. ![]() In seven cities it rose by more than half. The average price of a home in these cities rose by 34% in real terms over the past five years. They are home to 163m people, with an economic output equal to Germany and Japan combined. The Economist’s new house-price index covers 22 of the world’s most vibrant cities (see table). FROM Auckland to Amsterdam, Sydney to San Francisco, house prices in the best locations have gone through the roof.
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