The 2023 Demographia International Housing Affordability report has been published for the third quarter of 2022. The report measures housing affordability (house prices in relation to incomes) in 94 major housing markets in eight nations, including the UK.
The other seven nations are: Australia, Canada, China (Hong Kong), Ireland, New Zealand, Singapore and the United States.
The report says that households are continuing to move from urban areas in search of larger homes and outdoor spaces in more affordable, rural places. Housing inflation in these areas has driven up prices and resulted in a further decline in the living standards of many middle and low income households who have already suffered a drop in their standards of living.
Median housing affordability is measured by dividing the median house price by the median household income of each nation. A rating is then applied ranging from ‘Affordable’ (3.0 and under) to ‘Severely Unaffordable’ (5.1 and over). Hong Kong is the least affordable housing market, but all the nations covered in the report were rated ‘severely unaffordable’.
2022 Housing Affordability by nation in the eight nations measured:
| Nation | Median by Nation |
| China (Hong Kong) | 18.8 |
| New Zealand | 10.8 |
| Australia | 8.2 |
| United Kingdom | 5.3 |
| Canada | 5.3 |
| Singapore | 5.3 |
| Ireland | 5.1 |
| United States | 5.0 |
A study by the Organisation for Economic Cooperation and Development (OECD) concluded that people in the middle classes faced the highest costs of living and the main driver for this was the increased costs of owning property. It even described the problem as ‘an existential threat’ to the middle classes.
Other research has associated declining populations with the cost and affordability of housing.
In some cases, the less affordable the housing the more likely it is that households will move to more affordable markets. Indeed, there has been a considerable amount of movement between the housing markets of the US and Canada.
Government land use regulations that restrict the construction of housing in urban areas has, certainly, contributed to the cost of living crisis in many countries, including the UK. However, attempting to solve housing affordability by simply making more rural land available for building is not the answer to restoring a competitive or balanced market.
For a start, many regions of the UK do not have the infrastructure in place to support the growing housing sector. To do that, one would have to address: inadequate or poor roads, scant or non-existent public transport, limited hospital beds and school places, poor quality employment opportunities – to name but a few of the problems.
The average mortgage rate now exceeds 6% (far from the high interest rates home owners endured in previous financial crises, when it was less common to have a fixed interest mortgage). Money expert Martin Lewis has dubbed the explosion in mortgage rate renegotiation a ‘ticking time bomb’ that has gone off.
At the same time, the government has said it is not prepared to financially support home owners. While painful for many, perhaps they believe the only answer is for the housing market to find a new equilibrium by resetting itself as it did in 2008?