Think your clients and/or yourself, for that matter, have trouble finding affordable housing here in the US? Check out the latest Bloomberg Global Housing Affordability Index and you’ll quickly see that affordable housing is a worldwide concern.
This particular Bloomberg Index calculates the affordability of renting or buying in city centers and suburbs. Done annually, this Index is based upon self-reported data that includes net salary and mortgage rates compiled by Numbeo.com, an online database of city and country statistics.
The general rule of thumb prescribed by this Index, and other major industry resources, is that people are to spend no more than 28% of their net income on housing costs, be those costs renting or mortgage payments.
In today’s worldwide economy, only 12 cities are considered affordable if people spent 50% of their net income.
Emerging economies in today’s world have the least affordable housing. Among the bottom 20 cities for least affordable housing, 7 cities are in Asia and 6 cities are in Latin America. The two least affordable cities for housing are Caracas in Latin America and Kiev in the Ukraine. The city in Western Europe with the least affordable housing is London where the average monthly rent/mortgage payments equal 135% of monthly net income.
Since 2012, 28 cities are now less affordable and 51 cities have improved a bit. In 9 out of 10 of the least affordable cities for housing, the average net income fell. In 8 of the top 10 affordable cities, net income rose as rental and mortgage costs declined.
Here is a list of the least affordable cities in the world and their respective housing costs as a % of net incomes:
Caracas 3,848.2%
Kiev 372,3%
Hanoi 334.1%
Mumbai 283.7%
Buenos Aires 253,5%
Bogota 244.2%
Moscow 243.0%
Rio de Janiero 236.4%
Beijing 226.9%
Shanghai 218.8%
Four Chinese metro areas including Hong Kong are among the 20 least affordable cities for housing. Simultaneously, two cities in China with the greatest improvement in housing affordability are Shenzhen and Guangzhou.
During the last five years, six of 10 cities with the greatest deterioration in housing have occurred in Latin America.
As an example, Rio de Janiero, Brazil’s second largest city, the average monthly net income of $640 doesn’t allow access to rental property on the outskirts of town. Rio’s city center average monthly mortgage payments approach $2,000. The disparity between net incomes and rental/mortgage payments obviously contribute to increasing numbers of multi-family households in Rio and also accounts for 1 in 5 people living in informal shanty towns called favelas.
On the other hand, 7 of the 10 cities with most affordable housing are in North America with four in the US and three in Canada. The least affordable metro area with these two countries is Vancouver where the influx of foreign cash has spiked house prices.
Here is a list of the most affordable cities in the world and their respective housing costs as a % of net income:
Riyadh 31.4%
Houston 31.6%
Philadelphia 40.0%
Calgary 40.5%
Chicago 45.1%
Ottawa 46.1%
Montreal 46.9%
Portland 48.2%
Basel 48.2%
Cape Town 48.6%
And speaking of New York City, it ranks near the middle of “affordable” cities in the Bloomberg Global City Affordability Index
