Investor Real Estate Accounts

For real estate investors to keep track of their properties rental performance and tax information in one place.

This blog covers the general topic of real estate markets.

Housing Affordability

first posted: 2017-03-31 17:06:02.269236

The Biltmore Estate: an anecdotal insight of how Times are'a changin

The Biltmore Estate, in Asheville NC is a good example of less affordable housing. Built towards the end of the gilded age by the Vanderbilt, the estate was the birthplace of many of the Vanderbilt heirs for the next 2 generation, but it proved too expensive for them to own and manage.

The family divested parts of it after the introduction of income tax in 1914, opened the main house to the public in the 30s and left the house in the 50s.


Affordability in the world: Demographi Survey

According to the Demographia International Housing Survey, affordability is usually defined as median home price divided by median annual income. The least affordable cities are the following:

  • China, Hong Kong, 18.1
  • Australia, Sydney 12.2
  • Canada, Vancouver, B.C. 11.8
  • N.Z., Auckland 10.0
  • U.S., San Jose, Calif. 9.6
  • Australia, Melbourne, 9.5
  • U.S., Honolulu, Hawaii 9.4
  • U.S., Los Angeles, Calif. 9.3
  • U.S., San Francisco, Calif. 9.2
  • U.K., Bournemouth & Dorset 8.9

While a few US metropolitan areas show up in this ranking, the US is unique as it still features the largest number of affordable metropolitan areas.

The study reports the rise of the condition as interest rates went down and the link between urban containment policies and unaffordable land. For instance, with less constraint on urban growth, Atlanta GA or Charlotte NC are still comparatively affordable despite their rising population.

Affordability in the UBS Global Real Estate Bubble Index

In the 2017 UBS Global Real Estate Bubble Index, UBS looks at 2 measures of overvaluation for real estate:

  1. affordability
  2. price to rent ratio.

While the latter measure directly relates to the profitability of being a landlord and is linked to the availability of financing, the two measures taken together give an indicator of riccardian rent anomaly in that it indicates that the valuation is excessive compared to the income that can be derived from living in a given area.

Update 2019: the 2016 UBS report link became unavailable was replaced by the UBS 2017 report.

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