Why has the unaffordable property crisis happened in all developed countries at the same time?

Question

Or to put it another way, why didnt it happen 20 years ago or 50 years ago or 100 years ago? It seems like the underlying reasons for property being so expensive have been around, well, forever? Landlords accumulate wealth, buy property, use property to generate more wealth, property stock declines and property prices go up? I realise thats a 5 year old’s view of capitolism but i dont have any background in economics. Id love to have it explained in more detail

In: Economics

Answer 1

There are many reasons and I will add just some to the mix now.

One is buying property as investment. It never happened before in this volume that the wealthy previous generation bought places. These places are either just stay empty or exit the housing market and enter the hotel market (think Airbnb). Either way , it’s not available.

Also, in many countries there’s a further concentration of the cities, so people basically want to leave villages and try to move to cities. Technically these ghost villages have a lot of houses just nobody wants them. So practically as if they were non-existent but for each abandoned house, you need another one in the city.

There is also a lot of rehabilitation programs of rust areas especially in Europe where very old, bad, moldy (but therefore cheap) houses are demolished and replaced by new, shiny usually bigger apartments. In a way it’s of course good that people don’t have to live in moldy, hardly liveable places, but they didn’t choose that for fun, that was what they can afford. So for every such rehabilitation program, you create people who need to move to cheap outskirt areas but then you create a competition between them and the young ex-village people who just wanted to set foot in the city and were happy with the outskirts.

On top of that, building a cheap apartment is almost as expensive as building a mid or high end apartment. The structure costs the same, the time and labor is the same, the only difference is that you use expensive tiles and luxury taps and shit. This is a small extra cost compared to a total but you can sell at a higher margin. So developers are incentiveized to build high end apartments because the return on investment is much better.

So if you put it all together and surely things that others will add, almost every trend in the equation point towards crisis.