Considering that the present crisis is likely to burst inflated bubbles, it’s especially relevant to look at overvalued assets now. The first chart below compares the current housing market in various countries around the world. Using data from the OECD Economic Outlook, I estimated how much housing is overvalued in terms of house prices relative to rents and relative to incomes, with ratios rebased in 2008.

In chart 1, we can see that Luxembourg is the country with the most overvalued housing market in terms of rental costs, with an increase of more than 50% since 1 January 2008. In terms of income, Austria’s housing is the most overvalued, with a 60% increase, followed by Luxemburg, Switzerland and Canada. At the other end of the spectrum, southern Europe, central and eastern Europe and the Baltic countries have seen decreases in both house-price-to-income and house-price-to-rent ratios in the past decade. Yet as the coronavirus pandemic continues to pummel economic growth in many countries, the drop in income will render housing even less affordable than before.