Castles in hot air - The Economist

Castles in hot air - The Economist

THE rapid house-price inflation in many countries over the past few years is clearly unsustainable.

The p/e ratio helps to expose the fallacy that house prices are rising because of growing populations and fixed supply, because these factors should affect the rental as well as the owner-occupier markets. The fact that prices are rising much faster than rents suggests that homes are being bought in the expectation of capital appreciation rather than underlying fundamentals. That is the definition of a bubble.