Here's a chart from Knight Frank's 2019 Global Affordability Monitor that I think you'll find interesting:
It compares real home price growth and real household income growth (after tax) over the last 5 years for 32 world cities. The bolded percentages represent the former and the non-bolded percentages represent the latter.
Consider the variations here.
Amsterdam saw a real home price change of 63.6%, but a household income change of only 4.4% (although the circle looks to be in the wrong spot if this number is correct).
Moscow, on the other hand, saw flat home prices (0.1%) and a 22.7% increase in household income.
Though San Francisco is the star in terms of income growth.
Sao Paulo, unfortunately, saw a dramatic decline in both home prices and incomes. It's in the bottom left corner.
When I look at this chart, I don't see a strong correlation between household incomes and home prices. And the proportions of the chart tell you that the y-axis is moving more than the x-axis.
But if the top number exceeds the bottom number, then you could come to the conclusion that housing affordability has gotten worse over the last 5 years.
In the comments of my recent post about Manhattan real estate prices during the Great Depression, a regular reader of this blog shared this terrific blog post (and corresponding research paper by Piet Eichholtz) about house prices along the Herengracht canal in Amsterdam from 1628 to 1973. Later it was updated to include up to 2008. It’s a long run house price index.
Probably the first thing you’ll notice is that the index is highly volatile. Amsterdam enters its Golden Age, creates the world’s first stock exchange, and becomes the wealthiest city in the western world – house prices go way up. The tulip mania bubble pops – house prices go way down. It’s not until after World War II that prices sort of start to stabilize and increase, maybe, more consistently.
Here's a chart from Knight Frank's 2019 Global Affordability Monitor that I think you'll find interesting:
It compares real home price growth and real household income growth (after tax) over the last 5 years for 32 world cities. The bolded percentages represent the former and the non-bolded percentages represent the latter.
Consider the variations here.
Amsterdam saw a real home price change of 63.6%, but a household income change of only 4.4% (although the circle looks to be in the wrong spot if this number is correct).
Moscow, on the other hand, saw flat home prices (0.1%) and a 22.7% increase in household income.
Though San Francisco is the star in terms of income growth.
Sao Paulo, unfortunately, saw a dramatic decline in both home prices and incomes. It's in the bottom left corner.
When I look at this chart, I don't see a strong correlation between household incomes and home prices. And the proportions of the chart tell you that the y-axis is moving more than the x-axis.
But if the top number exceeds the bottom number, then you could come to the conclusion that housing affordability has gotten worse over the last 5 years.
In the comments of my recent post about Manhattan real estate prices during the Great Depression, a regular reader of this blog shared this terrific blog post (and corresponding research paper by Piet Eichholtz) about house prices along the Herengracht canal in Amsterdam from 1628 to 1973. Later it was updated to include up to 2008. It’s a long run house price index.
Probably the first thing you’ll notice is that the index is highly volatile. Amsterdam enters its Golden Age, creates the world’s first stock exchange, and becomes the wealthiest city in the western world – house prices go way up. The tulip mania bubble pops – house prices go way down. It’s not until after World War II that prices sort of start to stabilize and increase, maybe, more consistently.
This morning BILD and Altus Group released their January 2019 new home sales figures for the Greater Toronto Area.
Here are the highlights:
1,362 new homes sold in January 2019 across the GTA. This is up 14% compared to last January.
Of these, 942 (~69%) were condominiums (includes low, mid, and high-rise, as well as townhouses). And 420 (~31%) were single-family homes (includes detached, semi-detached, and freehold townhouses).
Condominium sales volume is sitting only about 5% below the 10-year average and the benchmark price increased this month to $803,638, which represents a 12.5% year-over-year increase.
On the other hand, single-family home sales are down about 53% from the 10-year average and the benchmark price decreased by about 8.1% compared to last year. It is sitting at $1,130,046.
While there continues to be a bifurcation in the new home market, we are seeing improvements across the board and the data is consistent with Altus' prediction that 2019 will see an increase in overall sales.
It is also important to consider how geography might factor into the above numbers. Here are the January sales numbers for the last three years broken down by region within the GTA:
Just under 80% of the new condominiums sold last month took place in Toronto, whereas only about 1.2% of the single-family homes sold last month took place in the city. You can count them on one hand. There were only 5.
So rather than just look at this in terms of housing type, I think the other way to interpret the data is that it could suggest strong and continued demand for centrally located and transit-oriented communities.
And that just so happens to translate into a condominium.
Photo by Eugene Aikimov on Unsplash
In nominal dollars, the house price index increases 10x over the study period. But in real dollars most of that disappears. The biennial increase (that’s how the study was done) over the same period of time is just 0.5%. That translates into a doubling of house prices, which may seem quite good, except that remember it’s over a 380 year time period.
The Herengracht canal is a particularly good study because it was and has remained (or so I’m told) a desirable part of Amsterdam. This is an attempt to control for the variable that maybe some of the volatility could be explained by the area simply falling out of favor. (As a quick sidebar, the Herengracht was one of the first canals laid and dug out around the original city center of medieval Amsterdam during its Golden Age.)
Generally, this finding is in line with one that economist Robert J. Shiller famously published a number of years ago where he argued that, when you correct for inflation, home prices actually look remarkably stable over long-run forecasts. In one study, he looked at 100 years of US home prices ending in 1990. Real home prices increased about 0.2% a year. What an outstanding hedge against inflation.
This morning BILD and Altus Group released their January 2019 new home sales figures for the Greater Toronto Area.
Here are the highlights:
1,362 new homes sold in January 2019 across the GTA. This is up 14% compared to last January.
Of these, 942 (~69%) were condominiums (includes low, mid, and high-rise, as well as townhouses). And 420 (~31%) were single-family homes (includes detached, semi-detached, and freehold townhouses).
Condominium sales volume is sitting only about 5% below the 10-year average and the benchmark price increased this month to $803,638, which represents a 12.5% year-over-year increase.
On the other hand, single-family home sales are down about 53% from the 10-year average and the benchmark price decreased by about 8.1% compared to last year. It is sitting at $1,130,046.
While there continues to be a bifurcation in the new home market, we are seeing improvements across the board and the data is consistent with Altus' prediction that 2019 will see an increase in overall sales.
It is also important to consider how geography might factor into the above numbers. Here are the January sales numbers for the last three years broken down by region within the GTA:
Just under 80% of the new condominiums sold last month took place in Toronto, whereas only about 1.2% of the single-family homes sold last month took place in the city. You can count them on one hand. There were only 5.
So rather than just look at this in terms of housing type, I think the other way to interpret the data is that it could suggest strong and continued demand for centrally located and transit-oriented communities.
And that just so happens to translate into a condominium.
Photo by Eugene Aikimov on Unsplash
In nominal dollars, the house price index increases 10x over the study period. But in real dollars most of that disappears. The biennial increase (that’s how the study was done) over the same period of time is just 0.5%. That translates into a doubling of house prices, which may seem quite good, except that remember it’s over a 380 year time period.
The Herengracht canal is a particularly good study because it was and has remained (or so I’m told) a desirable part of Amsterdam. This is an attempt to control for the variable that maybe some of the volatility could be explained by the area simply falling out of favor. (As a quick sidebar, the Herengracht was one of the first canals laid and dug out around the original city center of medieval Amsterdam during its Golden Age.)
Generally, this finding is in line with one that economist Robert J. Shiller famously published a number of years ago where he argued that, when you correct for inflation, home prices actually look remarkably stable over long-run forecasts. In one study, he looked at 100 years of US home prices ending in 1990. Real home prices increased about 0.2% a year. What an outstanding hedge against inflation.
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