The Unaffordable Reality of Modern Housing Markets

As we navigate the complexities of modern economies, it's hard to ignore the elephant in the room: unaffordable house prices. It's a phenomenon that's affecting people from all walks of life, from first-time buyers to seasoned investors. But what's driving this trend, and what are the consequences for our economies and societies?

One key factor is the way we think about capital and its relationship to productivity. Traditionally, capital was invested in businesses and industries that generated goods and services, creating jobs and driving economic growth. However, in recent decades, we've seen a shift towards investing in assets, such as real estate, stocks, and bonds. This has created a disconnect between capital and productivity, where the focus is on accumulating wealth through asset ownership rather than generating value through innovation and hard work.

The housing market is a prime example of this trend. In many countries, housing prices have skyrocketed, making it difficult for people to afford homes. This is partly due to the fact that housing is no longer just a place to live, but also a lucrative investment opportunity. Real estate companies and investors are buying up properties, driving up prices, and making it harder for ordinary people to get on the property ladder.

Take Singapore, for instance (where I live). Here, we are increasing looking at real estate companies owning plots of land for 999 years, which they then use to build and sell houses on 99-year leases. This creates a cycle where the company can repeat the process multiple times, generating massive profits without adding any more productivity for the rest of the economy. However, it's worth noting that Singapore has implemented measures to mitigate the effects of this system on its citizens. The Housing and Development Board (HDB) scheme, for example, provides subsidized housing options for young people and first-time buyers, allowing them to purchase homes at significantly lower prices than those offered by private developers. This initiative helps to level the playing field and gives young people a chance to get ahead in life, despite the challenges posed by the city's high housing costs. Nevertheless, the private real estate market in Singapore remains a significant contributor to the city's unaffordable housing landscape.

The consequences of this trend are far-reaching. When housing prices become unaffordable, it can lead to a range of social and economic problems. For example, it can force people to live in smaller, more cramped spaces, or to commute long distances to work. It can also lead to a lack of social and economy mobility, as people are stuck in a never-ending cycle of renting, especially if the person is working on an average income in an expensive city.

Moreover, the focus on asset ownership can create a culture of speculation, where people are more interested in making a quick profit than in investing in businesses and industries that create real value. This can lead to economic instability, as asset prices become detached from their underlying value.

So, what's the solution to this problem? It's not easy, but one possible approach is to rethink the way we think about capital and its relationship to productivity. We need to find ways to encourage investment in businesses and industries that create real value, rather than just accumulating wealth through asset ownership. This might involve policies such as tax reforms, regulations on speculation, and incentives for entrepreneurship and innovation.

Ultimately, the unaffordable reality of modern housing markets is a symptom of a deeper problem – a problem that requires a fundamental shift in the way we think about capital and its role in our economies.