Lukas
Created at: Updated at:
The housing crisis is a major concern for many, with prices reaching unaffordable levels for the average person. This blog post will examine the root causes of the housing crisis, its potential impacts on society, and practical solutions to make housing more affordable for everyone.
There are certain factors that make housing prices appreciate independent of the above listed causes. First, population growth and an area becoming more appealing result in higher demand because there are more people wanting to live in a region. Second, a decrease in (expected) new housing developments results in less supply. Those three factors are changing the supply and demand dynamic therefore are expected to change the price. This change is considered natural and not negative because it reflects supply and demand.
A house or a flat should always lose nominal value aside from the natural change, only opposed by inflation until it is renovated. The only part of a property that should stay the same or appreciate is the land. Again, only by inflation or influenced by more strict or lax land use laws in the area.
Almost no average owner gains something if the housing prices go up. People might feel good about their property purchase if their house or flat appreciates from 200K to 500K, but the book price doesn't matter most likely. If you want to buy a different home you will sell and buy at the same inflated price, so if you upsize you will only be able to afford less. The only point in time where it is positive for an average person, is when they downsize when they get older. For example, a person could have been married with kids, the kids moved out and the spouse passed away. At this point they could sell at a huge profit to downsize. But usually, people don't want to sell the house they have lived in for decades or they want to pass the house on to one of the children. Again, leading likely to no upside. The only thing the current trajectory does is bar a growing number of the population from ever owning property.
On the negative side, right now, a sizable portion of income is allocated for rent or mortgages because the excessive quantitative easing increased the general housing cost massively over the last fourteen years and contributed to a jump in inflation in 2022. This increased the monetary strain on the general population, which could provide a breeding ground for social unrest.
On the positive side, affordable housing translates directly to a happy and content population. Housing is a basic need and should be affordable for everybody.
Some of the solutions will severely dampen private housing construction demand therefore those solutions need a strong public housing sector in place, which could provide additional housing if land or building prices fall. If your country doesn't have a good public housing sector, it needs to build it in addition to the above proposed solutions.
In conclusion, while the road to solving the housing crisis may be challenging, it is crucial for the well-being and happiness of individuals and society as a whole.