Rising real estate prices are forcing people around the world to give up the idea of buying a house in the near future. This problem is evident in all countries of the world, and governments of all political persuasions are trying to work on their solution.
It is a phenomenon that the pandemic has given wings to, and it is not just a matter of buying real estate, but also growing rents in many cities. The long-standing issue of housing costs has become one of the acute housing inequalities, and an entire generation is in danger of falling behind.
“We are witnessing that parts of society have been cut off from parts of our city because they can no longer afford apartments. This is the case in London, Paris, Rome, and now, unfortunately, more and more in Berlin, ”said Berlin Mayor Michael Mueller.
Politicians come up with a number of ideas to solve the problem, from rent restrictions to special taxes on landlords, the nationalization of private property or the conversion of vacant offices into apartments. Nowhere is there evidence of an easy or viable solution.
Asia Real Estate Market
In South Korea, President Moon Jae In’s party was under attack this year after failing to address the problem of lowering the average price of an apartment in Seoul. The opposition’s leading candidate for next year’s presidential election warned of a potential collapse of the housing market with rising interest rates.
China has tightened restrictions on the real estate sector this year and is speculating about raising real estate taxes to bring down prices. The price of an apartment in Shenzhen was equal to 43.5 times the average salary of residents in July.
Canada Real Estate Market
Canadian Prime Minister Justin Trudeau has promised, if re-elected, a two-year ban on foreign buyers. Trudeau’s liberals promise to revise escalating prices in markets including Vancouver and Toronto to curb speculation. Conservative Erin O’Toole promises to build a million homes in three years to cope with the housing crisis. New Democratic Party leader Jagmeet Singh wants a 20 percent tax on foreign buyers to fight the crisis. Faced with a surprisingly tight race, Trudeau will have to attract young city voters if he wants to have any chance of regaining his majority.
With annual inflation of around 50 percent, price increases are not unknown to Argentines, but for Buenos Aires residents, the increase in rents adds economic pressure, and thus political dissatisfaction. Legislation passed by President Alberto Fernandez’s coalition aims to give greater rights to tenants. Under the new rules, contracts that were traditionally two years have now been extended to three. And instead of landlords setting prices, the central bank has created an index that determines how much rents will rise in the second and third years. This has proven to be extremely controversial, with evidence that some property owners increased prices too soon to later counter the uncertainty of regulated increases. Others simply take real estate off the market.
Advertisements for renting apartments in the city of Buenos Aires are 12 percent lower this year compared to the 2019 average, and in the surrounding subway area by 36 percent, according to the real estate website ZonaProp. Rents in Buenos Aires are growing much faster than prices or wages.
Effects Of COVID-19 On The Market
The pandemic has led the world real estate market to a record in the last 18 months due to mutually low interest rates, lack of production, changes in family consumption and fewer homes for sale. While this is a boon for existing owners, it is becoming increasingly difficult for potential buyers to come into ownership of a residential building.
Housing affordability is getting worse. In many OECD countries, the price-to-income ratio has risen dramatically since 1995.
The result is, in America, as in other countries, a growing generation gap between Baby Boomers, who are statistically more likely to own a house, and millennials and Generation Z – who watch their shopping dreams go up in smoke.
Existing housing debt could sow the seeds of the next economic crisis if borrowing costs start to rise.
Europe Real Estate Market
The Swedish government collapsed in June after proposing changes that would abandon traditional controls and allow the market to set higher rents.
In Berlin, a court overturned an attempt to tame a rent increase. In the campaign, they collected enough signatures to hold a referendum on confiscating property from large private landlords. The city government announced on Friday that it would buy nearly 15,000 apartments from two large corporate landlords for 2.46 billion euros ($2.9 billion) to expand the offer.