Alex (0:01)

Housing affordability has become one of the most pressing global economic challenges of our time, especially for young people. Despite sky high interest rates designed to cool the real estate markets, housing costs continue to spiral upward, putting the dream of homeownership further out of reach for millions. And we're going to go through the list of this countries in which this has been impacted the worst, where housing affordability has gotten worse over the last 10 years. And number three surprised me quite a bit. So stick around for that great year for real estate. Today we're going to dive deep into the data to explore how housing affordability has evolved across OECD countries since 2015. We'll uncover which nations have seen the most dramatic price increases, analyze the key drivers of these trends, and examine what it means for aspiring homeowners around the world. Stay tuned as we map out one of the most significant economic shifts of our generation, which is the global housing affordability crisis. And Dave, you're going to read this list for me, which is basically maybe we'll do the top 1015 countries and their house price to income ratio and how much it has changed from 2015 to 2024. Great. It's a great explanation. Let's do it. So this is how much worse the metric that you just explained got in the past 10 years. So how much less affordable has housing got in the past 10 years in that country? The worst six. Czech Republic. Yeah, yeah. And I mean like to me it's, it's, it is pretty wild that the US has seen the third worst housing affordability decline in the world. And from my perspective, I think that that's a really big reason why it's not the kind of market you want to be investing in right now. It's hard to really build a thesis around saying, hey, I'm buying this product that I'm hoping it'll produce rent and go up in value, yet nobody can afford to buy it off of me today. If I bought it and then I take it out to the market and I try and sell it, nobody can buy it. Right. There's so many bad data points in the US right now. Right. First time home buyers. That one from NAR that we talked about. Right. Only 27% of the buyers in the US market right now are first time home buyers. I think the lowest they've ever had, if I'm not mistaken. Do you remember that data point here? It's right here. First time homebuyers shrink to historic low of 24% as buyer age hits a record high. So Your first time buyers. Yeah, yeah, you did. You got it. You've got all the data points now. You're like a mini me, except you're way larger. You're jacked. There was a chart though that showed it, which was awesome. I'm gonna try and find that chart. But yeah, I mean, your median home buyer is 56 years of age. Now 50 or it's actually your median age for first time buyers is. It's 56. 38 for first time buyers and it was 35 last year. So basically people aren't able to buy their houses in the US now until they're like in their 40s. And a lot of this, you know, a lot of people talk about this as if it's like, oh, yeah, you know, corporations are buying up all the properties and stuff. It's like, well, that's probably a component, but it's not the component. The component is people have to buy with a 7% interest rate right now. And house prices haven't really come down since COVID in the U.S. right. Yeah, yeah. So I guess the key things that we want to look at here in the global overview is this housing inflation, persistent despite high interest rates. And we touched on this a little bit in the UBS bubble index. But we're seeing continued price growth in a lot of markets, especially in the U.S. canada, not so much, although in certain areas. And Portugal, who's number one on the list more. So the question becomes why? And we just discussed the golden Visa episode, how that's really distorted markets in places like Portugal and Spain. And I think one of the big issues that the Western world is battling right now is you're seeing a lot of flight of capital out of other places on earth that are looking for places to go in the US In Canada, in Europe. And I think we have more. You were talking about divisiveness, right? There's more political divisiveness. People are just leaving the countries they're in in hopes that they can find something better elsewhere and they're taking their money with them. I know a lot of Canadians who have gone to Portugal and Spain. Right. Because they aren't happy with the tax environment or political environment here. I know a lot of Americans who've moved their money to Canada and a lot of Canadians who move their money to Mexico. Right. Like, I don't think like global capital flows. It feels like they're super like. I don't know if I'm wrong here, but it feels like they're like just supercharged right now. Like everyone's moving money somewhere. Am I wrong? You feel that too, right? For sure. Yeah. I think there's some supply constraints as well. Like, you know, we haven't, because of. We've seen so much inflation over the last little bit, the construction costs have gone up substantially and builders aren't building. You know, builders have more expensive lumber, more expensive labor, more expensive interest rates on their, on their projects. And so they're not super compelled to build. Right. And so that's keeping supply tight in a lot of these markets. And a lot of them are growing markets. Right. Populations growing in Canada and Portugal and the US and if, if the markets aren't being supplied, then you're going to be keeping in a state of excess demand and that'll push prices up. Right. And then finally, I think the one piece is like that impact of institutional investors and cash buyers and foreign capital. We discussed this on the Golden Visa episode, but I think you have a lot of. I mean, as soon as you get foreign capital playing in the domestic real estate market, you kind of get to the point where there's a player in the market who isn't fully incentivized to be rational. We saw this in Canada. It's like if you're money laundering or if you're trying to hide your capital from your domestic government, you don't care if your property loses money or if you overpay for it. Right. It just has to fulfill that other purpose for you. Do you want to dive into the top three markets here for me? Crazy. Yeah. I think you saw a lot of. Yeah, you were seeing like a lot of remote work. Like there was a huge, huge, like, similar to what you're seeing in Tulum, a lot of remote work. Folks going to Portugal to, to buy properties because it was a sick place to live. Like, really nice place to live. During COVID you know, when there was lockdowns, it was like, just go. And if you're going to go and post up somewhere, post up somewhere with a beach and a view of the ocean, you know, and cheap. It's like 10, 10 condo units. Yeah, well, it depends on if you're using Treb or Toronto. But yeah, it's record high. Like, we haven't had. We've never had this many condos for sale, as an example. Yeah, yeah, I'll pull up the chart on it. Yeah, for sure. I mean, again, I think that this is, is really, that it's really that thing where the western world is all. They're all playing the same playbook. Right. And the playbook is, hey, we're going to, we're going to increase our population by increasing. Or we're going to increase our, we're going to grow our economies by increasing population. And a lot of people would like, kind of argue that, you know, capitalism sort of like predicated on this, like it needs to be growing to, you know, like the world needs to be growing for the economy to be growing. Inflation, like 2% inflation target is similar to like what your historic targets for population growth would be. But yeah, you've got your, your home buyer sentiment basically falling off of a cliff. There's some other charts basically showing that it's at GFC levels. I would say the same thing in Canada in a lot of these unaffordable markets. And it's not like sentiment isn't bad because people don't believe in the asset. It's because people can't afford the asset. Right. People just can't afford to buy houses in any of these countries. And so when they can't afford to, they're not going to. Right. That's like, it's not rocket science. And so, yeah, so that's kind of, from my perspective, the key, one of the key challenges, I think if we, you know, there's a couple of markets where there's some success stories. Right. If we go to the bottom of that list and look at some of the markets where they've seen improvements in affordability and we can, we can discuss sort of what's going on there. Right. So if we go back to that, that list. Let me just pull it up here. I think at the bottom you've got countries like Romania, Finland and Italy. We could probably kind of look at markets like that. I mean, Italy's a really interesting one simply because of their population's been in contraction. Well, yeah, it's basically they've seen no population growth. Actually, their population's been falling. So again, if we're just going back to the thesis that population growth has been what's been driving these markets up, it's plausible. Let's look at Italy or Japan as an example. Right. Italy and Japan have both seen improvements in housing affordability. Except for in Tokyo, which is like the biggest city in the world, Japan, same thing, aging population. Right. And I guess the bigger question becomes, does this become a trend that we need to watch for globally as we start to see the whole population of the world potentially decline? As you've got China, India now both falling below the replacement rate, right? Yeah, 100%. I mean, you look at countries like Italy. Italy is such a good example, because, I mean, in Italy they have this. I think it's a really fascinating case study on housing affordability. It's a beautiful place to live. It's not hard to convince people to go and live in Italy. Amazing food, beautiful landscape, nice people. And yet in Italy, they have this one Euro house initiative. Right. Where they're basically. Yeah, so. So these programs are in small towns and villages across Italy, typically not in your, you know, waterfront, like it's not on the Amalfi coast. Right. But especially in regions, small villages in regions like Sicily, Calabria and Sardinia, which is, you know, potentially an opportunity, but also a symptom of the big demographic challenges that Italy's seeing. Right. So properties are often offered for these symbolic prices. They're basically free, but they have a symbolic price of €1. Buyers must commit to renovating the properties within three years. So they're trying to bring some industry back, and they're trying to get people to hire local contractors and resurrect the local economy, but also not let these houses sit in a state of disrepair. And you typically would need a security deposit as well of about €5,000. So you're not really getting it for free, per se. But still, I mean, 50 max cost, right? Yeah. So I think Japan has some similar stuff going on. They have a. They have another intriguing case based on. They have these ikea, or empty house phenomena, they call it. So as of 2024, Japan has and has over 8 million abandoned homes in Japan. And Japan's a little bit of a different one. Right, Because. Because, you know, they don't have immigration. Right. Like, Italy is not opposed to immigration, but they, you know, they haven't necessarily been able to grow it because there's not a ton of economy going on there. And so people don't feel good economic prospects. But in Japan, they. They don't allow a ton of people to immigrate there. Right. Like, their immigration basically has been zero. It's very hard to get a permanent residency there. And so, you know, the question becomes, does this do these IKEAs? We'll have to do a whole episode on these because this article is pretty awesome. But it's like they're starting to gain the attention of overseas buyers, according to the CNBC article, where there was a rising trend of inquiries from abroad and people who basically want to buy them, a lot of it because of the pandemic, remote work trends and shifting lifestyle preferences. And Japan's such a beautiful country as well, right? So you've got Italy and Japan, right? Two countries that have in Japan 8 million empty houses. I don't know how many empty houses there are in Italy. I'll look it up. But to me this is just like, like the fact that this is a thing and they've got housing affordability crisis crises in other places on earth is remarkable to me. Nine million empty houses in Japan. Yeah, for sure. I think we should, on, on Italy. We should get like an Italy and Japan expert on to talk about this with us on, on those two markets. Because I think, you know, if you look at like Italy, Italy seen an improvement in housing affordability, right? Housing affordability has gone. Houses have become 13% more affordable. Right. So your house price to income has gone down 13% over the last 10 years. France very similar, down 6%. Right. Finland down 19%. Romania down 44%. Italy is just like the one that fascinates me because it's like, it's warm, you know, you know, like everywhere else on this list it's like, you know, a lot of the ones where it's gone up. I think a lot of that has to do with that covet exodus. Right. Portugal up 50, 58%. Spain up 17%. A lot of those that, you know, Australia up 22%. Canada is obviously an outlier. I don't know what's going on there. We can, we can just ignore them for now. But you know, what is, what is, what are the Italy's and, and Japan's of the world? I guess Japan seen a 12% increase. But 12% is nothing compared, right? Like 12% is nothing compared to 30% increase in house price to income. Like the US South Korean down 17% house price to income. I, I don't know, man. What do you, what's, what's your thought? Yeah, guy's going to go full. Andrew Tate here moved to a Romanian prison. Yeah, yeah, yeah. So I guess we'll have to, we'll have to do some follow up episodes on some of these other countries. What they're doing, I mean, Korea very similar. Actually there was some news out of Korea. Their, their birth rate just went up for the first time in like years and marriages are up. But yeah, yeah, Korea's birth rate just went up. But, but yeah, I mean, but yeah, you're, yeah. Says South Korea's policy push springs to life as the world's lowest birth rate rises. But yeah, I think, you know, a lot of these countries are battling that aging population. I think that's the key thing here. Is you can't really. How do you offset that? I think you just, it ends up being deflation or you replace the population with new people, which a lot of countries have been trying to do. And it doesn't seem to be going very well, to tell you the truth. Like for most of the Western world. Right. Like why isn't Italy, why isn't Italy getting a ton of immigration compared to the rest of Europe? I'm not sure. Yeah, I'm not, I'm not really sure. Yeah, I mean like just quickly looking it up seems like it's a, it's a much more complex bureaucratic process compared to other countries in the eu. So long, longer wait times for residence permits. Um, there's, it's a difficult, it probably has the most difficult path to citizenship and there's pretty complex employment regulations for foreign workers. Whereas you get places like the uk, Germany, France, et cetera, a lot of those places, like there's a lot of illegal immigration. That, that, that kind of just goes unchecked as well. The economic barriers are pretty significant as well. So lower average wages compared to northern European countries like the uk, Germany, et cetera, higher unemployment rates. So you're not going to get the jobs you'd have to have. You'd really have to be like a remote worker. And there are limited job opportunities in the rural areas where, where that, those, those $1 houses. There's basically nothing going on there. Yeah. So I'm down. Yeah, I mean for sure I got everything I need. Like as long as I got my family with me, I'm good. I don't need much. Maybe like a, you know, like a target. Right, that's my, my, my other target. Shout out. Yeah, no, that was like the, that was one of the best real estate blunders ever actually. We should cover that on like that was they, they literally lost like a billion dollars just trying to enter Canada and left within like two years. Yeah, yeah. I think, I think Italy, like another piece too is, you know, you get a lot of like African migrants going to, to Europe because it's close right across the Mediterranean or whatever. And a lot of them are French or British colonies and so they already speak English or French and so they'll go there because the language barrier is, is more simple, whereas Italy is a more distant language and they don't have a ton of English speaking services. For sure. For sure. Anything else you think we need to cover in this one? Yeah, we got to do a whole. And in Japan I think we need to do a Whole episode. We got to find some experts in Japan and Italy to talk to us about these like $1 houses in all these countries for sure and whether or not it's a good idea to buy them. Like there's a whole on it that I had, I had pulled up there. Yeah, you're buying the last 10 minutes. I bought, I bought one on ebay, like just to toss it on the Amex. Like I think I'm. I literally. Yeah, done well. Yeah, I'm down sure. Why not move my whole remote work family over there. Yeah, no, this was good. I think like it's given us a lot of jumping off points for other, for what's going on in other countries. And now like I'm, I'm actually super intrigued on exploring these a little bit more. Like what's going on with these, Akita in Japan? What's going on with these, with these empty houses in Italy? How do we get them? Are they a good investment? Is it actually worth it? Is it too good to be true? Like it sounds? So stay tuned for us to do follow ups on those and until next time, please give us a follow. Hit the subscribe button on whatever platform you're on. Leave us either a comment or a review. Share this with one person if you could. That'd be lovely. Follow us on social media as well. We're on Instagram, TikTok, all that other stuff and we post like lots of videos and whatever. We're on YouTube so if you want to watch, watch us do this. I know it's kind of hard to look at our faces. More audio folk. But we do have these in video on Spotify and YouTube. That's about it. Thanks a lot and we'll see you next week.