The UK has the second most overvalued housing market in the developed world, according to Fitch Ratings.
The domestic economy is also rated as the third most vulnerable to shocks in interest rates, income and asset prices out of the 16 most developed nations.
Although the UK is ranked seventh in terms of household debt vulnerability, its high scoring on housing overvaluation means that it is one of the countries most at risk from house price movements and household balance sheet deterioration.
France has the most overvalued housing market. Nordic and Anglo-Saxon countries are also named as the most at risk in terms of household debt vulnerability, with New Zealand, Denmark and Norway topping the list. Japan, Germany and Italy are the least vulnerable.
The report says: “Economies where housing looks overvalued and households are overstretched will be more vulnerable to shocks to interest rates, income and asset prices.”