In America, Britain, Spain New Zealand and Australia, average net rental yields have fallen to 3.5% or less, well below mortgage rates. Landlords are nowhere near covering their true costs, but many still hope to make their profit from capital gains says the Economist Magazine.

According to calculations by The Economist, house prices are at record levels in relation to rents (ie, yields are at record lows) in America, Britain, Australia, New Zealand, France, Spain, the Netherlands, Ireland and Belgium.

Americas ratio of prices to rents is 32% above its average level during 1975-2000. By the same gauge, property is "overvalued" by 60% or more in Britain, Australia and Spain, and by 46% in France.

The Economist concluded that to bring the ratio of prices to rents back to equilibrium, either rents must rise sharply or prices must fall. Yet central banks cannot allow rents to surge as this would feed into inflation.