Mumbai Among Least Affordable Property Markets In the World; Rental Yield Still Low

Developing Asian economies, including India, might be working hard to get the much-coveted tag of being developed, but, the property markets of many of their cities seem to have surpassed their peers in the West when it comes to affordability.  According to an analysis by Oxford Economics, property markets of Hong Kong, Mumbai, Beijing and Shanghai are among the most unaffordable in the world; comparatively, buying a house in London and New York is easier.

Oxford Economics' analysis of price-to-income ratios across the world shows that an average household in these cities has to spend more their 30 years of its local median income to buy an apartment sizing 970 square foot.

However, if you are looking to earn great profits from your property, you might be disappointed. The analysis shows that in cities of Mumbai, Shanghai, Beijing and Delhi, rental yields are remarkably low. In fact, those who had invested in 10-year government bonds earned greater profits in 2016 when compared to those who were earning rent from their property. This is an indicator that the valuations in these cities are "stretched", says the analysis. On the other hand, cities such as Tokyo, Sydney, New York and Seoul offer you better rental yield in comparison.

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The value stretch of properties also gives analysts a reason to believe prices in these property markets will see a correction in future. "We expect housing price increases to moderate in the coming years across Asia, with outright falls possible in some markets," economists Tianjie He and Louis Kuijs wrote in the analysis.

"Low (home loan) interest rates in the last decade have helped fuel house price growth across the world, and the rise in (interest) rates in the US and elsewhere will reverse that trend by making mortgages more expensive. Further rate rises by the Federal Reserve may attract money back to the US, which would affect property prices in Asia," says a Bloomberg report.

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According to media reports, the US Federal Reserve is likely to implement a hike in rates at least thrice this year.