In this article, we will be navigating through the concept of an overpriced housing market and some of its notable characteristics while covering the 20 most overpriced housing markets in the world.
What is an Overpriced Housing Market?
An overpriced housing market is one where buyers tend to pay more than the expected prevailing price. This difference between the expected home value and average listing price in an overpriced market is the premium buyers have to pay. This implies that the average property is selling above its historical implied price. Since buyers have to pay more to buy a median-priced home, higher prices push many of them out of the market simply because they are unable to afford them. Therefore, an overpriced housing market depicts lower affordability for homebuyers which is often represented by the house price to income ratio which in turn tells us how wages have been able to keep up with the home prices. A higher house price-to-income ratio indicates a severely unaffordable housing market where homes are less accessible to residents. Simultaneously, a lower house price-to-income ratio means a relatively affordable housing market. Some of the affordable and promising cities to buy real estate in 2024 have been previously covered.
Real Estate Price Corrections Since the Pandemic
An important indicator of an overpriced housing market is that the homes in such a market will undergo a price correction in the near future. This is when home prices have escalated so much that the market can’t sustain them for long. An analysis by UBS of 25 global cities reveals that annual nominal price growth in these cities is at a standstill after undergoing a rise of 10% during the pandemic. Let’s analyze some of the major price corrections across the globe.
Home prices were reported to have doubled between 2012 and 2022 in the German cities of Frankfurt and Munich. These are the markets where house prices grew rapidly due to factors including decreasing mortgage rates, strong investment demand, and supply shortages. Although the prices have corrected in Frankfurt and Munich, the cities’ housing markets are still overvalued. Similarly, Vancouver and Toronto saw their real home prices more than triple between 2000 and 2022. Price levels in these cities have undergone a correction of more than 10% in inflation-adjusted terms since mid-2022.
On the other hand, persistent issues such as a sharp increase in mortgage rates, shortage of for-sale inventory, and reduced housing affordability restricted a true price correction in the United States. The relationship between this home price growth and income growth is important to understand in this regard. In a market where houses are overpriced, growth in house prices outpaces the growth in incomes. The United States experienced a transition during the pandemic, from denser urban neighborhoods to larger homes in suburban areas in various housing markets which drove the home prices up. This unprecedented home price growth was reported to be four times the income growth, according to Fortune. You can also take a look at some of the most overpriced housing markets in America. The decoupling between house prices and incomes can be witnessed in other major global cities such as Tokyo, Paris, Tel Aviv, and London which require 10 times the annual income to purchase a 60 square meter flat.
If you are looking to invest in global real estate, you can view our discussion regarding some of the best countries to buy real estate according to Reddit. Now that we have understood the concept of overpriced housing markets and some of their relevant characteristics, let’s rank the most overpriced housing markets in the world.
20 Most Overpriced Housing Markets in the World
Our Methodology:
In order to compile a list of the most overpriced housing markets in the world, we have sourced data from the Demographia International Housing Affordability Report 2023. This report gives us the median multiple which is a price-to-income ratio, the median house price divided by the gross median household income (pre-tax). Since we have already established the relationship between an overpriced housing market and housing affordability in the discussion above, all the severely unaffordable markets have been ranked in order of descending affordability to depict an overpriced housing market. Please note that the Demographia report uses the median multiple to gauge the housing affordability and all markets with a median multiple of 5.1 and above are rated as severely unaffordable. Hence, all markets on our list are so overpriced that their median multiples are above 5.1.
In addition to housing affordability, we have also incorporated the respective median home prices for the markets ranked on our list. This data has been taken from national real estate sources and has been cited as of the latest reference periods.
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Keeping this methodology in mind, let’s take a look at the 20 most overpriced housing markets in the world now.
20 Most Overpriced Housing Markets in the World
20. Riverside-San Bernardino
Median Multiple: 7.0
Median Home Price: $565,500
According to Demographia, Riverside-San Bernardino is a severely unaffordable global housing market. During the fourth quarter of 2023, the market offered a median home price of $565,500 while registering a year-over-year increase of 4.7%.
19. New York
Median Multiple: 7.1
Median Home Price: $825,000
New York is another costly housing market in the United States. The ratio of median house price to median income in New York was recorded at 7.1 in 2022 while its median home price is as high as $825,000.
18. London Exurbs
Median Multiple: 7.3
Median Home Price: $654,977
London Exurbs has been ranked as a severely unaffordable market since it recorded a median multiple of 7.3 in 2022. Wages have not been able to keep up with the rising home prices in the market. Therefore, the 20 most overpriced housing markets across the globe rank London Exurbs on the 18th position.
17. Brisbane
Median Multiple: 7.4
Median Home Price: $924,498
Brisbane serves as the capital of the state of Queensland in Australia. The city ranks among the 20 most overpriced housing markets in the world. The city boasts a median home price of $924,498 as of March while the price increase during the past 12 months has been reported to be 12.5%.
16. Bristol-Bath
Median Multiple: 7.5
Median Home Price: $419,298
In 2022, the median home in the United Kingdom’s Bristol-Bath was priced at 7.5 times the median annual income. Therefore, the local housing market is overpriced and ranks 16th on our list of the most overpriced housing markets globally.
15. Bournemouth & Dorsett
Median Multiple: 8.0
Median Home Price: $456,324
Bournemouth & Dorsett is another overpriced housing market in the world. While the median home price in the market is $456,324, it offers a median multiple as high as 8.0 thereby reflecting lower housing affordability for homebuyers.
14. Adelaide
Median Multiple: 8.2
Median Home Price: $902,332
Adelaide is one of the largest cities in South Australia. The city has a severely unaffordable and overpriced housing market to offer. As of March, homes in the market have a median price of $902,332. Home prices in Adelaide have increased by 15.8% since last year.
13. Miami
Median Multiple: 8.5
Median Home Price: $620,000
The coastal city of Miami is located in the US state of Florida. With a year-over-year rise of 8.1%, the median home price in Miami was recorded at $620,000 in April. The city’s median home is priced higher than the average home in the United States thereby ranking Miami 13th on our list.
12. Greater London
Median Multiple: 8.7
Median Home Price: $654,771
The 20 most overpriced housing markets in the world rank the United Kingdom’s Greater London as well since it records a high median multiple of 8.7. Furthermore, the median home price in the market is $654,771.
11. San Diego
Median Multiple: 9.4
Median Home Price: $970,000
San Diego is situated on the Pacific Ocean coast in Southern California. The city’s housing inventory has declined by 46.5% since 2023 while the current median home price in the city is $970,000. Therefore, the city’s housing market is overpriced and out of reach for many American homebuyers.
10. Toronto
Median Multiple: 9.5
Median Home Price: $1,275,000
Toronto is the capital city of Ontario, Canada. The median price for single detached homes in Toronto was $1,275,000 in the first quarter of 2024, as reported by the Canadian Real Estate Association. The city’s median multiple also exceeds 5.1 which deems its housing severely unaffordable. Toronto ranks 10th on our list.
9. Melbourne
Median Multiple: 9.9
Median Home Price: $777,250
Melbourne is a populous city located in the Australian state of Victoria. As of January, the median home price in Melbourne is $777,250. Home prices in the market have climbed 10.9% from the onset of the pandemic to 2024’s January. Thus, Melbourne is another overpriced housing market in the world.
8. San Francisco
Median Multiple: 10.7
Median Home Price: $1,400,000
San Francisco is positioned in Northern California. While recording a 3.7% year-over-year increase, the median home price in San Francisco is $1.4 million which significantly exceeds the median US home price. Thus, the city is overpriced and unaffordable for many. Hence, San Francisco ranks 8th among the most overpriced housing markets globally.
7. Auckland
Median Multiple: 10.8
Median Home Price: $1,050,000
With a median multiple of 10.8, Aukland ranks 7th on our list of the most overpriced housing markets in the world. Auckland is a large metropolitan city in New Zealand. As of March, homes in the city sell for a median price of $1,050,000 after experiencing a price increase of 2.16% since 2023.
6. Los Angeles
Median Multiple: 11.3
Median Home Price: $1,040,000
Los Angeles is a populous city in the US state of California. Among other US metros, home prices in Los Angeles are among the highest. In April, the median home price in the city was $1,040,000 which has experienced a rise of 12.4% year-over-year. The housing inventory in the city has also not recovered since the pandemic which has driven higher home prices.
5. San Jose
Median Multiple: 11.5
Median Home Price: $1,500,000
San Jose is situated in Northern California and is known to be one of the most costly and overpriced housing markets in America. The median price for homes in the city was as high as $1.5 million in April. The city has witnessed a rapid price appreciation.
4. Honolulu
Median Multiple: 11.8
Median Home Price: $625,000
Honolulu is a populous city in the US state of Hawaii. While the home prices in Honolulu have gone up by 22.9% since last year, houses sold for a median price of $625,000 in April. The city ranks as the fourth least affordable housing market in the world.
3. Vancouver
Median Multiple: 12.0
Median Home Price: $1,575,032
The city of Vancouver in western Canada is another overpriced global housing market. Based on the city’s median multiple of 12.0, it becomes evident that the house prices are unaffordable when compared to the incomes of the locals.
2. Sydney
Median Multiple: 13.3
Median Home Price: $1,145,931
Sydney is the capital city of the state of New South Wales. The city comes second among the most overpriced housing markets in the world. In 2022, the city recorded a median multiple of 13.3 which is an indicator of a severely unaffordable housing market. As of May, the median house price in Sydney was as high as $1,145,931
1. Hong Kong
Median Multiple: 18.8
Average Home Price: $1,250,000
Hong Kong is the most overpriced housing market in the world with a median multiple of 18.8. Real house prices in Hong Kong increased fourfold between 2003 and 2018. Inflation-adjusted house prices in the city witnessed a decline of 7% between mid-2022 and mid-2023. An analysis of the local housing market reveals that the housing crisis is rather deep-rooted. The city saw a real estate hegemony in the early 2000s with a concentration of wealth among some property tycoon families. The government suspended subsidized housing and regular land auctions which made the property prices recover. However, the suspension of subsidized housing under the Home Ownership Scheme moved the market from private to public. Continuous surge in prices in the private market made the dream of home ownership in Hong Kong a lost case. Shortage of public housing remains an issue while the average waiting time for public housing allotment was as high as 6.1 years in March 2022. As of now, the city’s housing market is so unaffordable that a skilled service worker has to dedicate more than 20 times the average annual income to purchase a 60-square-meter flat. Additionally, the current median home price is $1.25 million.
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