Portugal, Canada, and the United States were the countries with the highest house price to income ratio in 2024. In all three countries, the index exceeded 130 index points, while the average for all OECD countries stood at 116.2 index points. The index measures the development of housing affordability and is calculated by dividing nominal house price by nominal disposable income per head, with 2015 set as a base year when the index amounted to 100. An index value of 120, for example, would mean that house price growth has outpaced income growth by 20 percent since 2015. How have house prices worldwide changed since the COVID-19 pandemic? House prices started to rise gradually after the global financial crisis (2007–2008), but this trend accelerated with the pandemic. The countries with advanced economies, which usually have mature housing markets, experienced stronger growth than countries with emerging economies. Real house price growth (accounting for inflation) peaked in 2022 and has since lost some of the gain. Although, many countries experienced a decline in house prices, the global house price index shows that property prices in 2023 were still substantially higher than before COVID-19. Renting vs. buying In the past, house prices have grown faster than rents. However, the home affordability has been declining notably, with a direct impact on rental prices. As people struggle to buy a property of their own, they often turn to rental accommodation. This has resulted in a growing demand for rental apartments and soaring rental prices.

House prices capture the financial burden of purchasing a dwelling, and their development over time is measured by a (real) house price index. The evolution of rental prices can be monitored over time by the (real) rent price index. Alternatively, house prices can be compared to income (price-to-income ratio) as a measure of the affordability of owning a dwelling. If the price-to-income ratio is above (below) their long-term average, house prices are considered to be overvalued (undervalued). Meanwhile, the OECD database on regional house price indices shows how house price developments vary across regions and cities within countries (for further discussion, see the OECD National and Regional House Price Indices Database, as well as OECD, 2020a).

In this paper, the authors construct a unique data set of Internet offer prices for flats in 48 large European cities from 24 countries. The data are collected between January and May 2012 from 33 websites, where the advertisements of flats for sale are placed. Using the resulting sample of 750,000 announcements the authors compute the average city-specific house prices. Based on this information they investigate the determinants of the apartment prices. Four factors are found to be relevant for the flats’ price level: income per capita, population density, unemployment rate, and income inequality. The results are robust both to excluding variables and to applying two alternative estimation techniques: OLS and quantile regression. Based on their estimation results the authors are able to identify the cities, where the prices are overvalued. This is a useful indication of a build-up of house price bubbles.