DECOUPLING OF ASSET PRICING FROM INCOME FUNDAMENTALS: A CROSS-CONTINENTAL ANALYSIS OF RENTAL YIELD COMPRESSION, SPECULATION, AND STRUCTURAL HOUSING INEQUITY

Standard financial models suggest that property values should align with rental income, yet global residential real estate consistently exhibits gross rental yields falling well below mortgage financing costs. This paper investigates why gross rental yields vary dramatically across global markets and examines the structural mechanisms distributing housing risk and return across income groups. Utilizing cross-national data from Numbeo across a 57-country national income dataset and a 339 - city continental dataset (spanning Asia, Europe, and North America), we evaluate rental yield spreads alongside key affordability and inequality indicators-including Price-to-Income Ratio (PTI), Price-to-Rent Ratio (PTR), Mortgage-as-a-Percentage-of-Income (MAPI), and Loan Affordability Index (LAI). The empirical analysis reveals four primary findings. First, gross rental yields do not vary significantly by national income classification, remaining between 5% and 6.7% globally; rather, outcomes are governed by underlying market structures and speculative orientations. Second, North American urban markets demonstrate rent-calibrated dynamics with high average yields (9.52%) where asset prices tightly track carrying costs. Third, European cities reflect policydriven yield compression (4.38%) enforced via strong tenant protections and rent controls.