Hong Kong and Singapore have topped the global house price index, as home values in both countries recorded the highest increase.
Based on The Economist’s latest quarterly global house price index, home prices in Hong Kong climbed 20.1 percent in Q4 2010, while house prices in Singapore rose 17.6 percent. Home values increased 6.4 percent in China, 5.8 percent in Australia and dropped 3.6 percent in Japan.
Meanwhile, Hong Kong also ranked the second most overvalued market at 53.7 percent. Australia took the top spot, with 56.4 percent. Singapore’s homes were overvalued by 18.1 percent, while China’s homes were overvalued at 12.9 percent and Japan’s homes were undervalued by 35.2 percent.
The Economist calculated overvaluation and undervaluation of homes by comparing the price ratio to rental rates.
“In theory, the price of a home should reflect the value of the services it provides. People who choose to rent their homes buy those services on a monthly basis. Home prices should therefore reflect the rents that tenants pay,” it said.