Comparing home prices and wages worldwide

 

Paul Hoffman

This is Paul from BestBrokers, Chicago, IL: 

As home buyers worldwide are struggling with high property prices and mortgage rates, I am reaching out with our latest report, comparing home prices and wages across 62 different countries. We found that despite the increased cost of living and elevated real estate prices in the United States, homes in the country are among the most affordable around the world, second only to those in South Africa.

The team at BestBrokers checked the average prices of real estate from the price comparison website Numbeo and did extensive research into the net salary employees earn on average in 62 countries.

 We also took the inflation into account and applied the projected inflation percentage for the third quarter of the year to the monthly wage. This allowed us to see the current situation income-wise in these countries and estimate the real affordability of homes. To do the comparison, we then converted all prices and wages into U.S. dollars.

The calculation shows that the United States ranks second in the world in terms of home affordability. To purchase a 1,076.4-sq.ft. home (100 sq. meters), Americans need to save 76 real monthly wages. In South Africa, which ranks first on this list, a home of this size costs only 71 wages.

Here are a few key takeaways from the report:

·                                 Considering the average net salary in the United States is $4,246 per month and the projected inflation for the third quarter of the year is 2.8%, the “real” wage we get is $4,127.11.

·Meanwhile, the average price for a 1,076.4-sq.ft. home stands at $313,240, which means that it costs roughly 76 average real wages. In other words, the price of a home of this size is equivalent to 7 years and 4 months’ worth of salaries.

·                                 With a nominal net wage of $1,362 and a price of $91,582.50 for a property of the same size, South Africa ranks first for home affordability. Homebuyers there need only 71 monthly wages or around 6 years and 11 months' worth of average salaries to afford a purchase.

·                                 Bahrain, Denmark, and Ireland follow with homes costing 99, 114, and 123 monthly wages, respectively.

·                                 According to the data we collected, Nepal is the least affordable country in the world to buy a home on an average income. People there need to save 684 monthly wages or their earnings for exactly 57 years to be able to purchase a home. Other countries where homes are expensive relative to the average salary are Turkey (631 wages), India (578 wages), Indonesia (563 wages), and Armenia (520 wages).

We calculated the “real” mortgage interest rates for 62 countries and found that the cost of borrowing money is surprisingly low in places such as Argentina and Turkey. 

Due to the hyperinflation in the past year, Argentina has the lowest real mortgage rate in the world, -175.89%. The nominal rate, of course, is not negative and is currently 24.11%. 

The country where banks have the highest interest rates on home loans is currently Russia. There, mortgage rates are 12.3% on average but are expected to increase even more in the coming months.

More information about the mortgage rates, prices and salaries can be found in the full report here. It also includes the full methodology we used in calculating the so-called "real" interest rates, whereas the complete data on all 62 countries is available in Google Drive via this link. Feel free to use any data or graphics from the report by providing a link attribution to the original work.