A Price-to-Rent ratio of 45 is indeed crazy. Implied total return only slightly above 2% with quite some downside risks AND running costs + depreciation.

Rents are also quite high and it would still take 45+ years to have it paid off!

Any reasonable person would want to rent in such a situation.

There are two options here:

1. People value owning a home irrationally, the price is disconnected from fundamentals

2. People are pricing in future growth. With interest rates being low, this growth can be fairly long-term. The growth is primarily in future rent increases, but also potential interest rate decreases or irrational future growth (as in point 1).

Now, for point 2, we can actually calculate implied future growth, and then try to decide whether it is rational or not - e.g. given the market future interest rate expectations.

It would also be interesting to know who owns these houses. Did they buy them by really stretching themselves, and any downturn in the area would result in loads of forced sells, temporarily collapsing the market? Or are the owners in no danger of having to sell?

> Any reasonable person would want to rent in such a situation

If both the ratio and the prices were expected to be stable (or, for prices, declining) in the long term, sure.

But would a reasonable person expect that?