Most expensive housing markets

Whether you’re hoping to buy your first home or take the next step on the ladder, rising house prices, mortgage rates, tax increases, and the cost of living squeeze can make for rather bleak reading.

But how does the UK’s housing market compare to the rest of the world?

If you’re looking to buy a home, compare the best mortgage deals with money.co.uk today and find the right mortgage for you and your individual needs.

The mortgage experts at money.co.uk have put together a brief guide to help you get to grips with the housing market and looked at key factors such as home affordability, house price growth, and homeownership rates in 40 different countries to find the world’s top housing markets.

The world’s hottest housing markets

Money.co.uk scored 40 different countries on how they performed on key factors including home affordability, house price growth, and homeownership rates, to find the world’s hottest property markets.

1. Turkey

With a strong performance across the board, Turkey topped our housing market index with a whopping 84.9 points.

While 17.3% annual house price growth and a reported 113% year-on-year increase in sales (TurkStat) might be eye-catching, it’s worth noting that these figures are potentially being compared to a low base after sales fell during the pandemic.

Despite having the second-highest house price growth of any country featured in our study, Turkey also boasts some of the world's most affordable properties with an average affordability ratio of just 4.6%.

2. Montenegro

Working towards meeting the requirements for being a member of the European Union has seen property prices and household incomes in Montenegro increase in recent years, helping to support the housing market and resulting in one of the world's highest homeownership rates of 90.2%.

Relatively affordable property prices and sitting just a short hop across the Adriatic Sea from Italy has also helped to bring Montenegro to the attention of international buyers, which has likely contributed to the annual price growth of 15.3%.

3. Czech Republic

Ranking third in annual house price growth but 20th in affordability, it’s likely that the prospect of homeownership is already starting to feel a little out of reach to some people living in the Czech Republic.

New rules recently brought in by the Czech National Bank have made borrowing particularly difficult for older borrowers who’ll now need to put down a 20% deposit on their mortgage. 

Older mortgage customers will also be unable to borrow more than 8.5 times their annual income, and their monthly repayment must be less than 45% of their monthly income

The world’s coolest housing markets

1. Switzerland

Ranking near the bottom in most categories, and dead last in homeownership rate, Switzerland scored just 26.6 out of 100 in our index.

Switzerland’s relatively low house price growth comes as a result of measures put in place by the Swiss government in an attempt to cool the market after years of rising prices. And it’s those years of rising prices that have contributed to Switzerland’s affordability ratio of 16.8% - ranking as the fifth least affordable country in our study.

2. Japan

While populations are declining in rural Japan, the number of people moving to metropolitan areas for work has fuelled competition for homes in cities like Tokyo. 

The pandemic and the transition to remote work has also increased the demand for larger properties as people search for more space to accommodate both their private and professional lives.

This demand, coupled with high construction costs and a lack of space to build has caused prices in Tokyo to exceed the previous all-time high of 61.2 million yen which was set during the height of the market bubble in 1990.

3. Malaysia 

The Covid-19 pandemic had a significant impact on the Malaysian property market, causing a reduction in both the volume and value of property transactions across the country.

With house prices shrinking by 2.8% in 2021, Malaysia recorded the worst house price growth of any country included in our study while ranking 29th for affordability with a ratio of 11.5%.

The world’s most affordable housing markets

Using average property prices per square metre (m2) and average disposable household income, we found the most affordable countries in the world to buy a home.

1. United States

Despite ranking 16th for cost per metre squared ($2,217), an average income of $51,147 makes the US the most affordable country in our study with an affordability ratio of 4.3%.

2. Turkey

At just $892 per square metre of property and an average net salary of $19,482, Turkey has an affordability ratio of roughly 4.6%. 

However, with annual house price growth at 17.3%, affordability could be worth monitoring should this level of growth continue.

3. Portugal

At just $1,328 per metre squared, average property prices in Portugal are among some of the cheapest in the world, and coupled with an average net income of $24,877, it’s also among the most affordable with a cost per m2 to earnings ratio of 5.3%.

The world’s least affordable housing markets

1. Japan

The demand for property, cost of construction and lack of land on which to build in metropolitan areas, particularly in Tokyo, has resulted in the world's second-highest cost per square metre at $6,784.

Coupled with an average net income of $28,872, Japan has the world’s least affordable property with a ratio of 23.5%.

2. Serbia

While the average property price of $1,482 per m2 is comparatively low, Serbia’s average net disposable income of $7,984 is only slightly higher than that of last place, Macedonia - resulting in an affordability ratio of 18.6%.

3. Luxembourg

Despite being one of the smallest countries in Europe, Luxembourg has become synonymous with wealth thanks to its high GDP and reputation as a tax haven.

While the average disposable income of $44,773 is among the highest in the world, at $7,793 per m2, Luxembourg also has some of the most expensive property. As a result, Luxembourg is among the least affordable places to buy.

World housing market index

Explore the full results of our study in the below to see how your country compares.

What are the signs of a healthy housing market?

Buying a home is a major commitment, so it’s always a good idea to do a little research and make sure you’re buying in the right place and at the right time before pulling the trigger.

But what statistics should you be looking at when doing your research and what do they mean?

While there are many factors that can impact the housing market, here are some common indicators you can use to help make a more informed decision.

Affordability

Generally speaking, the more people that can afford to buy a home, the better the market.

A healthy housing market should have plenty of suitable buyers waiting to snap up available properties, whereas an unhealthy market might have a slower turnover of homes as only a limited number of people can afford to buy.

When it comes to affordability, It’s important to remember that things can vary significantly by location. 

For example, Copeland in the North West of England is one of the UK's most affordable places, with the average house price being 2.7 times more than the average annual salary, according to the ONS.

On the other end of the scale, the same report found Kensington and Chelsea to be one of the most unaffordable places to live with prices being a staggering 36.5 times higher than the average annual salary.

House price growth

If a market is healthy, then asking prices usually go up, sometimes rapidly, as the demand for homes and competition among prospective buyers allows sellers to ask for more money for their homes.

House prices tend to decrease in poor markets as sellers look to attract buyers and avoid their homes sitting on the market for months or even years at a time.

Mortgage rates

While there are a number of factors that can have an effect on mortgage rates, such as the Bank of England base rate, they can also help give prospective buyers insight into the health of the housing market.

Competition among lenders can lead to lower mortgage rates as they look to capitalise on buyer demand, it might also be seen as a sign of confidence in the ability of their customers to continue making their mortgage payments.

If a lender were to anticipate an increase in the number of people struggling to pay their mortgages, then they might decide to price less competitively in order to manage their risk.

Remember that the mortgage rate that you qualify for will be based on your personal circumstances.

Homeownership rate

Quite simply, the homeownership rate is the percentage of people who own their homes.

While affordability and homeownership rates can vary by location, a steady homeownership rate generally means that the market is strong. 

A reduction in ownership rates could indicate that people are struggling to keep up with the cost of owning a home.

Mortgage default rate

Closely linked to homeownership rates, an increase in the number of people in arrears or defaulting on their mortgages would suggest that people are struggling to keep up with the costs of running their homes.

It could also indicate that they were unable to find a buyer for their property which would have allowed them to relocate to a more affordable area, or downsize their home to reduce outgoings.

While repossessed properties can be cheaper than listed homes, it’s important that you do your research and investigate the property with a professional before making any decisions.

Buying a home using this method will generally involve a certain amount of renovation work, so you’ll want to have a good idea of exactly how much work needs doing and how much it will cost.

Buyer's market vs seller's market

As the UK is currently in the midst of a cost of living crisis, the housing market is far from healthy. Our analysis of recent cost of living statistics shows that the average UK property price jumped by £6,000 between June and July 2022.

A buyer’s market occurs when there are plenty of homes for sale but a shortage of people to buy them.

This means that properties tend to sit on the market longer and competing sellers may have to reduce their asking prices in order to attract the few buyers that are out there.

With the balance of power firmly in the hands of the buyer, sellers will often be willing to negotiate on price even further out of fear of losing the sale.

On the other hand, a seller's market is where there are more people wanting to buy than there are homes available.

In this type of market, it’s the seller that has the upper hand as buyers compete against each other, often offering over the asking price in order to secure a home, which can lead to an overall increase in property prices.

When is the best time of year to buy a house?

Spring is generally considered to be a good time to buy a home as the number of listed properties tends to increase at this time of year. This gives buyers more choice and helps to fuel a little competition among sellers.

As the summer approaches and people, particularly families, set their eyes on the summer holidays, the market often cools before picking up again in September as the kids head back to school and parents have more time to focus on finding a new home.

Winter is usually considered to be the worst time to buy or sell a property. As the nights draw in, the lighting often isn’t the most flattering which can make homes feel cramped and gloomy, and the prospect of moving over Christmas can also be a turnoff for many.

While the start of the year isn't generally thought of as a great time to buy, vigilant buyers could always be in with a chance of snapping up a bargain should homeowners make a New Year’s resolution to sell their home or change their lifestyle.

What is a 'housing bubble'?

A housing bubble occurs when house prices rise at an unsustainable rate.

Prospective buyers seeing house prices increase rapidly often stretch themselves to enter the market before prices become even more unaffordable, further fueling the demand.

This phenomenon is called a bubble because at some point the situation will ‘pop’ as prices move from barely affordable to completely unaffordable, demand dries up, and prices decline.