As UK House Prices Continue to Rise: These are the Most Unaffordable Housing Markets Worldwide

UK house prices are still on the rise, growing at a rate of 0.2% in the 12 months to August 2023, despite the cost of living crisis and record rises in the base rate of interest. While the predicted price falls have not materialised, the slow-down in the growth rate will come as a welcome relief to potential buyers. On average, sale prices have risen by as much as 25% since the start of 2020 alone. This phenomenal rise in the UK property market has justifiably resulted in a barrage of headlines and parliamentary debates, but the situation here, although far from ideal, is certainly not as bad as it could be.

Jonathan Merry, remittance expert at MoneyTransfers.com, explains:

In the UK, we often think that we have the worst of it when it comes to property prices, but that is quite some way from the truth. There are in fact 27 countries where the house-price-to-income ratio is even more severe than it is here, where our ratio of 115.0% puts us in 28th place, sandwiched between the Euro area (i.e. countries that joined the Euro Zone prior to 2009) and France. On the whole, our experience is very similar to that of our near neighbours on the continent, and things could be an awful lot worse.

Jonathan Merry, remittance expert at MoneyTransfers.com

We at MoneyTransfers.com look first at the ten countries with the unenviable distinction of having the world’s most unaffordable housing markets, where increases in property prices are vastly outstripping increases in income:

The Most Expensive Housing Markets Worldwide

*The ratio measures the development of housing affordability and is calculated by dividing nominal house price by nominal disposable income per head, with 2015 set as a base year when the index amounted to 100. Index value of 120, for example, would mean that house price growth has outpaced income growth by 20 percent since 2015

1. Turkey

While expats might be clamouring to purchase property in Bodrum and the Dalaman Peninsula, for many locals owning property is nothing but a pipe-dream. The average housing cost outpaces income by a staggering 196.6%: a situation driven by the country’s runaway inflation rates, which now stand at 61.5%, and exacerbated by President Recep Tayyip Erdogan’s unorthodox policy of lowering interest rates, rather than increasing them. The move has caused many citizens to invest in property in an attempt to preserve their savings, and with housing in short supply the prices have now soared beyond the reach of most ordinary citizens.

2. Iceland

The island of Iceland has grown substantially over the past decade, and as of July 2023, 375,318 had made the Land of the Midnight Sun their home: a growth of 51,000 compared with the same time a decade ago. Unfortunately house-building has not moved at the same pace, and the HPI ratio for Iceland is the second-largest in the world, at 173%, with the demand far outweighing the supply.

3. Portugal

Portugal is grappling with a severe housing crisis, in part due to the increase in foreign acquisitions of property, but also because of a lack of affordable new homes being built. Unlike Iceland, Portugal has more housing than people, but despite this prices are simply not going down. The house-to-income ratio of 169% has resulted in many local campaigns pushing for affordable housing in the country, but results have yet to materialise.

4. Hungary

The Hungarian construction market is particularly weak at the moment, and this is having a knock-on effect on the housing market. In Q1 2023, the number of new houses built fell short of all expectations, with a dip of 38% by comparison with the same quarter of 2022. A house price to income ratio of 152% means that home ownership is virtually impossible for many within the country’s capital, Budapest.

5. United States

With a house price to income ratio of 151%, the housing crisis in the United States is the product of a 20 year supply-and-demand problem. The US is reported to be short by 6.5 million homes for its vastly growing population, and while the second half of 2021 saw construction projects being both started and completed at the fastest pace in a decade, the trend stalled in mid-2022 when mortgage rates soared as part of the Federal Reserve’s historic bid to rein in inflation.

The Cheapest Housing Markets Worldwide

At the other end of the scale, there are countries where income levels are in fact outpacing house price growth, meaning that the population can find it much easier to get onto the property ladder. On a global basis the average price of a home increased by 3.0% in the 12 months to Q2 2023, and 54 of the 56 countries tracked by the index are still continuing to see growth, but that will be no bar to ownership in the following markets, which are the most favourable in the world:

1. Brazil

Brazil boasts the lowest house price to income ratio in the world, at just 66%. This perhaps explains why 72.5% of the population owned property in 2019, and it seems that things are set to get even better. With low interest rates and favourable credit conditions, Brazilian real estate is making a strong recovery from the Covid-19 pandemic with a buoyant market.

2. Saudi Arabia

Saudi Arabia’s property market is set to boom over the next decade, as investors are drawn to the Kingdom by the government’s liberalisation initiatives and multimillion-dollar economic projects. That said, there is a lot of regional variance, so despite having the house-price-to-income ratio of 74%, an influx of expats and international workers means that villas in Jeddah can still cost over 12 times the average annual income.

3. Finland

When it comes to good and affordable housing, Finland very much leads the charge with affordable social housing provided by municipality-owned companies and a few nationwide non-profit organisations. As a result, the house-price-to-income ratio sits at 91%, with 69.5% of the population on the property ladder.

4. South Africa

South Africa has a house-price-to-income ratio of 92%, but for years the real estate sector has been blighted by high unemployment rates, weak household finances and an undeveloped mortgage market. Nevertheless, property ownership is high with 69.7% owning their own property, a figure which is made possible by the fact that government-subsidised properties make up 31% of the total housing in South Africa.

5. Italy

On par with South Africa, the housing-price-to-income ratio in Italy is 92%, with a slightly higher proportion of the population (72.4%) owning a home. Most Italians are reliant on mortgages, with only 17% considering a purchase without one, and with banks tightening their credit conditions, the housing market is predicted to shrink over the course of the next two years.