Housing Blues Continued

Housing is one of the most sensitive issues around. The general perception is that flats are becoming increasingly unaffordable for many residents.

Housing is one of the most sensitive issues around. The general perception is that flats are becoming increasingly unaffordable for many residents. In particular, this problem seems to impact the younger generations strongly, representing an obstacle to more independent lives, and to creating or enlarging new families. Most official or semi-official rationalisations can be grouped into three categories, not always fully compatible.

First, it may take the form of a denial of sorts. Typical takes go along the lines that declare or somehow imply that the problem is not meaningful if it exists at all. The second line of approach is to blame speculation, often associated, explicitly or implicitly, with non-resident economic actors. To address this ‘ill’ restrictions to credit or higher taxes on short-term transactions were set at different moments. Finally, there is the continuous and limitless promise of public housing. Statements of commitment project tens of thousands of new units for a long time to come, combined with less stringent criteria for eligibility.

How fitting are these explanations? For different reasons, they all seem to have serious shortcomings. In some cases, they are hard to reconcile with the evidence. In others, they appear to be barking up the wrong tree, we might say. What can the available figures tell us? That is where we should start. A few factual snippets should help us navigate these waters with greater assurance.

Except for two limited slowdowns – the international crisis in 2008/9 and the 2015/6 cross-border jolt – the trend for housing prices has always been uphill. For any timeframe that we can reasonably select, the figures are brutal. Since the new era of gambling kicked off the average price per square metre has increased twelve-fold. The price of sold units followed, with the average transaction jumping ten-fold. Further, let us take a common index for affordability, the ratio between the average cost of flats and the median income. Simply put: how long will it take for an average salary to ‘pay’ for an average apartment? The figure just tripled, from less than 12 years to about 36 years in the period.

At the same time, however, the transaction figures tell us that both the number and the average area of the units sold are following an unmistakably downward trend. Even allowing for the rise of average income in the same period it is difficult to avoid concluding that there is indeed a conspicuous price pressure and a severe reduction in home affordability.

As for external speculators, the evidence looks flimsy. More detailed information about the buyers and sellers would be needed to gauge correctly how significant or substantial their role is. Further data and analysis from the appropriate public institutions on this matter would, therefore, be very welcome. Anyhow, existing data on sales and credit by local institutions suggest that the speculators are possibly among us and that the policy measures put into place likely hurt more than help those in whose name they were taken.

Finally, what about public housing? This subject alone would require a more extended examination than can be pursued here. It seems fair, however, to suppose that it is unrealistic to think that it can be the primary policy tool.

The subject that is (almost) never mentioned is what appears to be a chronic undersupply of housing with the characteristics required by the increasing population that lives and works here. And yet this is an area where the policy tools and land resources the government can mobilise could have a distinct and positive impact.