A Short Story About Why You Cannot Buy A House

0:00 For most of the 20th century,

0:01 a typical house cost about 3 times the typical households income.

0:05 People could buy a place with 3 years of pay and that used to be normal.

0:08 But of course, it's changed.

0:10 A global study looked at 95 major cities and found that not

0:14 a single one is considered affordable anymore.

0:16 Even the so called normal cities have slipped

0:19 out of reach.

0:20 Across these centres,

0:20 the average home now costs more than 5 times what a typical

0:24 household earns and in places like Hong Kong,

0:26 Sydney and Vancouver, that number isn't 5,

0:28 it's 9, 10, even 14 times income.

0:31 And they aren't even the worst.

0:33 In Beijing and Shanghai,

0:35 price to income ratios routinely exceed 20 or even 30 times,

0:39 showing just how far the

0:41 gap can stretch in the world's most pressured markets.

0:43 So yes, it's official.

0:44 The dream of owning a home is dying, not in one country, but in all of them.

0:49 And when that dream disappears,

0:50 a lot of other things start disappearing with it.

0:53 As homes turn into investment opportunities

0:55 instead of places to live,

0:56 people put off having kids because they can't afford the space,

0:58 they turn down better jobs because moving costs too much,

1:01 and younger generations stop

1:02 saving altogether,

1:03 because what's the point of saving for something that you'll never be

1:06 able to afford anyway?

1:07 The result of this shift is a strange economy where the people who build

1:11 our cities teach our kids and keep everything running

1:13 can't afford to live in the very places

1:15 they keep alive.

1:16 So how did we get into this mess?

1:18 If people can't afford to populate these cities,

1:21 can prices really get any worse?

1:23 And finally, what would it actually take to fix it?

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2:27 Every year, Chapman University releases the Demografia International

2:30 Housing Affordability Report,

2:31 one of the most detailed looks at living costs anywhere.

2:35 It compares house prices to household incomes across 95 cities like Sydney,

2:39 Toronto, London and San Francisco,

2:40 and it shows where the dream of home

2:42 ownership still exists and where it's completely gone.

2:45 Researchers use something called the Median Multiple,

2:47 the price of a typical home divided

2:48 by a typical household's yearly income.

2:50 In a healthy market, that number sits around

2:53 three, but this year something unprecedented happened.

2:55 For the first time in the report's

2:58 21-year history, not a single market was considered affordable.

3:02 While conditions vary, most of the 95 cities now fall

3:06 into the seriously or severely unaffordable categories,

3:09 meaning a typical home costs more than four

3:11 to five times what a typical household earns.

3:13 And in 12 of them, things have gotten so bad, they added a new label.

3:19 Impossibly unaffordable,

3:20 where the median home costs more than nine times the median income.

3:23 At the top of this list is

3:25 Hong Kong at 14.4 times income, and Sydney isn't far behind at 13.8.

3:30 Then comes San Jose, Vancouver

3:32 and Los Angeles.

3:33 And once you start looking beyond those cities,

3:35 you realise the same pattern repeats

3:37 across entire countries.

3:38 Homes in Australia's average city are now near 10 times median income,

3:42 even small markets like Perth or Brisbane are now less affordable than New York.

3:47 In Canada, affordability has been collapsing since the mid-2000s.

3:50 Vancouver has ranked amongst the

3:52 fourth least affordable cities on earth for 18 years straight,

3:55 and Toronto isn't far behind.

3:57 Greater London homes now sit at nine times median income,

3:59 while the UK average has crept to 5.6,

4:02 which is roughly double what it was in the 1990s.

4:05 Even the United States,

4:06 one known for its sprawling suburbs and cheaper housing,

4:08 has climbed from 3.9 before the pandemic

4:10 to 4.8 today.

4:11 For context, Pittsburgh, the most affordable city on the list, sits at 3.2.

4:16 That used to be normal, now it's a miracle.

4:19 Just 30 years ago, nearly all these cities were affordable.

4:22 Home prices rose roughly in line with incomes,

4:24 but today they've completely split apart.

4:26 The report's authors call this an

4:28 existential threat to middle income households,

4:29 and you don't need

4:30 to be a researcher to see why.

4:32 When home prices rise faster than wages, the effects spread far

4:35 beyond the housing market.

4:37 Families delay having kids, workers turn down better jobs because they

4:40 can't afford to move,

4:41 and younger generations lose access to what used to be the cornerstone

4:44 of middle class life, owning a home.

4:46 Which raises the bigger question, if this wasn't a problem

4:49 30 years ago, what changed?

4:51 30 years ago, a house was a shelter, it was a basic need.

4:55 Today, it's part of a global investment strategy,

4:58 but this isn't just about housing.

5:00 Over the last few

5:01 decades, almost everything that counts as an asset has shot up in price.

5:05 Not just homes, but

5:06 land, stocks and even art.

5:07 Why?

5:08 Because rich people, corporations and big funds have more cash than ever,

5:12 and they all want a safe place to park it.

5:14 When the wealthy get more money, they don't buy more

5:16 groceries.

5:17 They buy assets.

5:18 Housing got hit the hardest because it's both essential and one of

5:21 the easiest assets to own, rent out or borrow against.

5:25 It became the perfect target.

5:26 This artificially boosted demand,

5:28 while at the same time we were arbitrarily limiting supply.

5:31 It began with good intentions,

5:33 protecting green space, controlling sprawl, preserving

5:35 neighborhood character, but over time,

5:37 those good intentions turned into zoning limits,

5:40 height caps, parking minimums, endless approvals,

5:42 all of which slow construction and drove up the

5:44 cost of land that could be developed.

5:47 As those restrictions tightened, housing stopped behaving

5:49 like a normal market.

5:51 Prices no longer reflected the cost of bricks and labour, they reflected

5:54 policy-made scarcity.

5:55 As interest rates fell and global cash supplies surged, more capital

5:59 chased the same limited number of homes.

6:01 Investors, funds and even pension systems realised that real

6:04 estate offered steady returns and safety from inflation.

6:07 If you could borrow at 3%, your property

6:09 rose 7% a year, you didn't need to live in it, you just needed to own it.

6:14 This shift turned homes

6:15 into financial products,

6:16 institutional buyers started purchasing single-family homes in bulk,

6:19 foreign investors traded a property as a storehouse of wealth,

6:21 and even regular households began to

6:23 see real estate as something that always went up.

6:25 That wave of money flowed straight into the

6:27 cities already at the top of Demografia's list,

6:30 where limited supply sent prices through the roof.

6:32 In markets like these,

6:33 the more valuable housing became, the more capital attracted,

6:36 creating a feedback loop between scarcity and speculation.

6:39 Meanwhile, wages stopped keeping

6:41 up.

6:41 For most of the 20th century, income and house prices moved together.

6:44 As workers became more productive, they earned more,

6:47 and as cities grew, they added more homes.

6:49 But in the 1990s,

6:50 those trajectories diverged.

6:51 Trade, automation and offshoring put a lid on middle-income wage

6:55 growth, even as living costs rose.

6:57 In the US, median real wages have risen only around 10% in

7:00 the last 20 years, while home prices have doubled,

7:04 tripled or even quadrupled in the same period.

7:06 A few decades ago, a single income could buy a family home,

7:09 and if a second earner joined the

7:11 workforce, that meant a bigger house or a better neighbourhood.

7:14 But once everyone had two incomes,

7:16 sellers knew it and prices climbed to keep pace.

7:19 Instead of making homes more affordable,

7:20 dual incomes just made the same homes cost twice as much.

7:24 And as prices rose faster than pay,

7:26 something else happened.

7:27 People stretched further into debt.

7:28 People would end up spending more of

7:30 their income on a mortgage,

7:32 banks would keep lending because rising prices made the market

7:34 look safe, and every time lenders approved bigger loans,

7:37 buyers could bid higher, pushing prices

7:39 up again.

7:39 It created a feedback loop that kept feeding itself.

7:42 But then the pandemic hit and

7:44 the whole system started to wobble.

7:45 Remote work scattered demand into smaller cities,

7:47 but it didn't fix the core problem.

7:50 Construction costs exploded, supply chains broke, inflation

7:53 sent material prices soaring, and labour shortages slowed projects everywhere.

7:56 When interest rates finally rose, borrowing got expensive,

7:59 but prices didn't crash because nobody wanted to sell.

8:03 Millions of homeowners were locked into

8:05 ultra-low-rate mortgages and refused to move,

8:08 so supply froze.

8:09 Governments tried to help, but mostly in the wrong way.

8:11 They rolled out even more tax breaks,

8:14 grants and subsidies to first home buyers.

8:15 The problem is that when you can't build more homes,

8:18 giving people more money doesn't make prices fall,

8:20 it just makes buyers fight harder over the

8:23 same ones.

8:23 So, if you trace it back,

8:25 the answer to what changed isn't one thing, it's a chain

8:28 reaction.

8:28 We restricted land, we flooded the system with cheap money,

8:31 we let wages stagnate while

8:33 asset prices took off,

8:34 and when the foundations of that whole system started to crack, we doubled

8:37 down with short-term fixes,

8:38 piling bricks on top and just hoping gravity would take the day off.

8:42 That's how we ended up with impossibly unaffordable places to live,

8:45 and why today, the world's richest cities now top the list

8:48 of the least affordable places on earth.

8:50 So, what does that actually mean for the people living in them?

8:53 For millions of middle-income families,

8:55 it means home ownership is no longer part of the plan.

8:57 In cities like Los Angeles, Sydney and New York,

9:00 a large share of renters now spend about 30 to

9:02 35% of their income just keeping a roof over their heads,

9:05 right above the threshold economists

9:07 unaffordable.

9:07 The average first-time home buyer is now in their late 30s or early 40s,

9:12 a full decade older than their parents were,

9:14 and when the people can't afford to live where their jobs are,

9:16 they stop moving for opportunity.

9:18 In the US and Canada, people are leaving major cities for small

9:21 towns, a trend economists call counter-rebonisation.

9:23 And while that might sound like a good thing for

9:26 regional growth, it often means the most productive cities lose

9:28 the very workers that keep them running,

9:30 teachers, nurses, tradespeople, hospitality staff.

9:32 A locked housing market becomes a locked

9:35 labour market.

9:36 Productivity slows, innovation spreads more slowly, and inequality deepens.

9:41 Because while renters and first-time home buyers are falling behind,

9:44 existing homeowners keep getting richer.

9:45 Every year their homes gain value, not because they

9:48 worked more hours or invented something new,

9:50 but because scarcity made their property worth more.

9:53 Globally, the total value of real estate now sits at

9:55 around three and a half times the world's annual

9:57 GDP.

9:57 And even for people who are lucky enough to grab onto the ladder,

10:01 buying in at such elevated

10:02 prices feels like a gamble, high debt, high risk,

10:05 and the constant fear that one economic shock

10:07 could knock everything off balance.

10:09 So, is there any way to stop this?

10:11 Some countries are starting

10:12 to try.

10:13 New Zealand launched a plan called Going for Housing Growth in 2023,

10:17 which forces major

10:18 city councils to zone enough land for 30 years of housing demand.

10:21 Their goal is simple– make

10:23 land supply predictable so prices can't spiral out of control.

10:26 In the US, cities like Minneapolis

10:28 and states like California have begun loosening single-family zoning.

10:31 That means duplexes and

10:33 small apartment blocks can be built in neighborhoods

10:35 that once allowed only one house per lot.

10:37 This opens up supply where people actually want to live.

10:40 Singapore is taking a completely different

10:42 approach.

10:42 There, nearly 90% of households own their homes thanks to massive public housing

10:47 program managed by the Housing and Development Board.

10:49 The government buys land, builds at scale,

10:51 and sells apartments directly to citizens at subsidized prices.

10:53 So yes, this shows that if you

10:56 treat housing as infrastructure, like roads or schools,

10:59 you can achieve near-universal ownership.

11:01 Then there are countries tackling speculation instead of supply.

11:03 Hong Kong and Wales both

11:05 tax second homes heavily.

11:06 In Wales, local councils can charge up to 300% council tax premium.

11:11 Taiwan packs its property sold within two years at up to 45%,

11:14 discouraging fast flips and speculative buying.

11:17 And in the Netherlands, some municipalities

11:19 have banned investors from buying in certain

11:21 neighborhoods to keep homes for locals.

11:23 The US is now exploring a similar idea with

11:25 the End Hedge Fund Control of American Homes Act.

11:28 This act would stop hedge funds and other

11:30 big real estate firms from owning single-family

11:31 homes altogether.

11:32 So yes, to fix this crisis, we need more homes.

11:35 But we also need to rethink

11:37 who's buying them, where they're built,

11:39 and what kind of economy they're fueling.

11:41 Because at its core, it's the same old story.

11:43 A tidal wave of money flowing into a handful of

11:46 assets and drowning the middle and low-income classes in the process.

11:49 And unless certain balance changes,

11:50 no amount of zoning reform or new construction will make homes truly affordable.

11:55 If you want to understand why inequality is now

11:56 reaching a tipping point and how we got here,

11:58 we've already made an entire video on that exact

12:00 topic and you should be able to click

12:01 that on your screen now.

12:03 Thanks for watching mate, bye.