The 10 most ‘impossibly unaffordable' housing markets in the world—5 are in the U.S.

A recent Chapman University study for Q3 2024 revealed that 12 of 95 major global housing markets, including San Jose, Los Angeles, San Francisco, and San Diego, are "impossibly unaffordable," characterized by a median home price-to-income ratio of nine or higher, with no markets deemed affordable. Hong Kong led the list at 14.4x, alongside several Australian and Canadian cities. This severe unaffordability is largely attributed to policies limiting urban growth, contributing to a significant cost of living crisis for middle and working classes, which prolongs rental periods and impedes homeownership.

Analysis

A Q3 2024 study by Chapman University highlights a severe and deepening housing affordability crisis across 95 major global markets, with none classified as "affordable." The report identifies 12 markets as "impossibly unaffordable," defined by a median home price-to-income ratio of nine or higher. This includes four major California metropolitan areas—San Jose (12.1x), Los Angeles (11.2x), San Francisco (10x), and San Diego (9.5x)—as well as Hong Kong (14.4x) and Sydney (13.8x). The study attributes this structural issue primarily to public policies that limit urban periphery growth and promote high-density developments, which often fail to meet the needs of middle-income buyers. This erosion of affordability is presented as a principal driver of the broader cost-of-living crisis, forcing households into prolonged rental periods, impeding their ability to save for a down payment, and ultimately delaying or preventing homeownership for middle and working-class populations.

Key Decisions for Investors

• Investors with exposure to homebuilders and residential real estate in markets identified as 'impossibly unaffordable,' such as California and major Australian cities, should reassess risk, as persistent unaffordability may cap long-term demand and invite adverse regulatory changes.
• The trend of prolonged renting due to home purchase unaffordability suggests a structural tailwind for the multi-family rental sector; consider increasing exposure to apartment REITs operating in these high-cost metropolitan areas.
• The report's assertion that housing costs are driving a 'cost of living crisis' for the middle class signals a potential headwind for consumer discretionary sectors, warranting a review of positions sensitive to household budget constraints.
• Monitor municipal and state-level housing policy developments in California and other affected regions, as any significant shifts in land-use or zoning regulations could materially impact the outlook for real estate developers and construction-related industries.