US rentals returning to health, Eurozone shaky
Friday, July 23rd 2010
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The latest house price indicators from The Economist offer some very encouraging reading for the US vacation rentals market, with signs that property prices across the States have fallen to values that are starting to look very attractive.
The latest data shows a small rise in US house prices of 2%. When measured over the long term against rental rates, property prices are looking undervalued by 6.5%.
This will be good news after a torrid couple of years for US homeowners who have seen property values plummet. The good news is that this index shows that purchasing a property, especially for high yielding vacation rentals, is starting to look attractive again. With investors looking for places to put their cash, this could stimulate the market and see homes moving again.
| NATIONAL HOUSE PRICES | Latest annual change | 1997-2010 | Under(-)/over(+) valued* |
|---|---|---|---|
| United States | +2.0% | +58% | -6.5% |
| Canada | +4.0% | +69% | +23.0% |
| Britain | +8.7% | +185% | +33.8% |
| Spain | -4.7% | +162% | +50.4% |
| France | -4.5% | +133% | +39.4% |
| Italy | -4.1% | +96% | +13.1% |
* Against long-run average of price-to-rents ratio
Conversely the situation in Europe looks pretty bad.
All our favourite western European destinations are showing very frothy prices, with this data indicating that prices in France are overvalued by up to 39%, while Spain shows an even grimmer 50% overvaluation.
For owners with no plans to sell and a full rentals calendar, this shouldn't worry you in the slightest. Keep doing what you're doing.
However if you were planning to sell in the medium term, this data could be very scary.
Housing markets across Europe remain stagnant and if you bought recently it could be very tough indeed to sell without taking a loss. Low interest rates are the only shining light right now.
Spain's ex-housing minister, María Antonia Trujillo, recently came in for strong criticism when she said she expected a further fall of 30-50% in Spanish house prices. She may have proved to be worringly right.
For the latest global house price figures go to Economist.com/houseprices
(To calculate your own house price growth, use our AAGR Calculator)
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