Is a region with a House Price to Income Ratio of 10 too much?

If a region, in Ireland, has an average house price to income ratio of 10 times, would you think this is probably an over-valued area?

That is, an area where the average house price is ten times the average income...

Re: Is a region with a House Price to Income Ration of 10 too much...?

Not really - it could be a high income area, all buyers could be dual income, most owners may have lived in the area since before it became unusually desireable.

Really expensive areas of Dublin might sell at 50 times average earnings.

Totally disagree with previous post... Average house price to earning of 10 or even 50???? I'll like to know where that's coming from...


Over the past 50 years, average house price to earning averages in around 3.5. At the moment, it is just below 6, highest ever, while it was below 3 in the mid-90s.. Lending institution will not give people mortgage more than 5 times salary. That's set a limit to the market.

What do you mean by house price to income ratio? Do you mean house price to gross or net income? Also - taking averages may not be meaningful because individual high or low house prices or incomes may skew the results. What might be a better measure of affordability is the percentage of disposable income that goes on mortgage repayments.

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the fact your asking answers your question doesn't it.

THe thing you have to look to is the cash flows that the house will generate, be that the annual rent and/or the realisable sale price at some horizion point in the future.

At 10:1 this would give an indication that the rents would be quite low to value, so would you earn more money in a bank atzero risk, or put money into stocks/bonds with a similar risk coefficient.

Personally, asset classes are overvalued worldwide, and if its irish property, I'd run the other way.