Affordable housing gap across the world has reached US$740 billion

SINGAPORE –  Knight Frank, the independent global property consultancy, today launches its inaugural Urban Futures report.

According to the report, the affordable housing gap – as measured by the difference between house prices and income – reached an estimated US$740 billion globally in 2018.

Nicholas Holt, Head of Research for Asia-Pacific, says, “With high levels of urbanisation over the last few years, Asia-Pacific has witnessed house price growth outstrip income growth in the majority of the region’s cities. A major objective for policymakers around the region is to address concerns around affordability. Some measures that can ease pressure on homebuyers include increased support for first-time buyers, along with supply-side measures and lending restrictions.

“As cities’ economic prospects improve, the importance of supporting affordable housing provision will come to the fore. Innovative solutions, coupled with new ways of city planning, can help to address some of the longer-term issues surrounding affordability.”

Pebble Bay, Condo. Picture: iProperty

Factors influencing housing affordability globally include:

  • Rapid urbanisation: According to the UN, 55% of the world’s population lived in urban areas in 2017, up from 42% 30 years ago. This is expected to rise to 68% by 2050
  • Housing as a commodity: Since the financial crisis, housing has shifted to become a complex investment vehicle attracting huge sums from funds and corporations
  • Politics: The need to create more affordable housing is matched by governments’ desire to raise revenues
  • Supply: Land supply issues resulting from regulatory constraints

As part of the report, Knight Frank has also launched the Global Affordability Monitor, which analyses affordability across 32 cities. It takes into consideration three key measures: house price to income ratio, rent as a proportion of income and real house price growth compared to real income growth.

The data reveals a growing global disparity between house prices and income. Across the 32 cities covered, over the past five years, average real house price growth outpaced average real income growth by 16%.

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Results from Knight Frank’s Global Affordability Monitor:

Least affordable:

  • Amsterdam
  • Auckland
  • Hong Kong
  • Los Angeles
  • San Francisco
  • Sydney
  • Toronto
  • Vancouver
Second least:

  • Bangkok
  • Berlin
  • Dublin
  • London
  • Melbourne
  • New York
  • Singapore
  • Tokyo
Second most:

  • Brussels
  • Cape Town
  • Madrid
  • Miami
  • Moscow
  • Mumbai
  • Paris
  • Stockholm
Most affordable:

  • Dubai
  • Istanbul
  • Jakarta
  • Kuala Lumpur
  • Lisbon
  • Manila
  • Rome
  • Sao Paolo

Key findings:

New York, USA. Picture: pixabay

Some cities bucked the growing disparity trend; New York saw its income growth exceed real house price growth by 3%. Moscow, Singapore, Mumbai and Paris also saw their average real income over the last five years grow faster than real house prices.

Moscow saw the largest difference where real income growth outpaced real house price growth by 22%.

Amsterdam, Vancouver and Auckland saw real house price growth outstrip real income growth by 59%, 46% and 32% respectively making these cities some of the least affordable.

Kuala Lumpur landscape, Malaysia. Picture: Vincent Lew / Pexels

Affordability in Jakarta and Kuala Lumpur remains a key issue, despite the cities falling into the ‘most affordable’ quadrant. Developers are reducing the size of new residential units to maintain maximum capital value at accessible levels.

Liam Bailey, Global Head of Research at Knight Frank says, “The growing pressure on housing affordability is changing the development landscape. It is influencing the types of product on offer; the locations developers are focusing on and even the organisations becoming involved in the development process.”

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