Forget NY, Mumbai is among top four most expensive cities in the world

For all the talk of how expensive it is to buy a house in London or New York, the most expensive major cities in the world are all in Asia.

In Hong Kong, Mumbai, Beijing and Shanghai, it now takes more than 30 years for a household with the local median income to buy a 90 square meter (970 square foot) apartment. That's according to Oxford Economics examination of price-to-income ratios across the world.

And the return from rents in Mumbai, Shanghai, Beijing, and also Delhi are "remarkably low," which could be an indicator that the valuations in those cities are "stretched." 

In all four cities, gross rental yield was lower than 10 year government bond yields in 2016, unlike places such as Tokyo, Sydney, New York and Seoul.

"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 report. 

In addition to rising supply and efforts in some places to cool red-hot markets, changes in interest rates will also put downward pressure on prices.

Low interest rates in the last decade have helped fuel house price growth across the world, and the rise in 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. 

In the long term, rising prosperity and demographic factors still point to strong demand in many large Asian cities, especially those in the less developed economies, which should continue to support house prices there. However, the population of Tokyo and Seoul will likely shrink over the next eight years, which would reduce demand for housing.