This is often treated as a “how long is a piece of string?” question, but The Economist has performed a great public service by allowing an easy comparison of the length of this piece of string across many countries and over time.
Check it out yourself. For Australian readers, house prices today are almost 2.5 times what they were in real terms in 1986; and our price bubble (in CPI-deflated terms) turns out to be smaller than some countries (notably Belgium’s) but larger than the USA’s and UK’s.
Like all such exercises, it is limited by the time series from which the data is taken: the earliest data shown here is for 1975, which is after the second major financial crisis of the post-WWII era (the first was in 1966) but at the end of what was, for its time, a very large property bubble. So the reference point of 1975 could itself represent a “highish” point for house prices, rather than “fair value”.
The data is also short for some countries, and with a difference reference date (say 1987 rather than 1976) the relative ranking of countries changes substantially. A quick look at the Herengracht Index–which shows the CPI-deflated value of housing along a wealthy canal in Amsterdam between 1628 and 1972–shows how important the starting date can be in working out whether housing is “expensive” or “cheap” at any point in time:
The important macroeconomic issue which this data alone doesn’t address is the level of debt that house price inflation has led to. It is probable that a higher real house price reflects a bigger ratio of mortgage and other private debt to GDP, but this isn’t necessarily the case. That ratio is the key indicator of whether a country is going to experience a debt-induced recession.