Article 17 of the United Nation's Universal Declaration of Human Rights states that 'everyone has the right to own property alone as well as in association with others' (UNO, 2024). Yet many who dream of buying a house can scantily afford just that: dream of buying a house. Several factors have contributed to this situation yet not enough solutions are being proposed and/or enacted further damping the situation.

Some of the world's leading economies' housing market is frozen. Extremely high demand from immigration and millennials (now the largest cohort worldwide) (World Economic Forum, 2021) entering the 'commitment' life stage en-masse, combined with insufficient supply of accommodation (Financial Times, 2024) and lastly high interest rates mean that houses are neither being bought nor sold (existing home owners wouldn't be able to buy a replacement if they sold now) as few can afford mortgages (IMF, 2024).

Let's break this down.

The main alternative to buying your own property is renting. Higher interest rates are meant to lower inflation and in turn bringing down the cost of rent, right? Wrong! Demand-pull inflation combined with many renters effectively paying their landlords' buy-to-rent variable interest rate mortgages (e.g. in the UK) means prices have soared (The Guardian, 2023).

What about commercial real estate? While brick-and-mortar isn't completely dead this market faces significant headwinds: tighter credit conditions, income pressure and elevated refinancing needs over the next two years. While the risks are acute for owners of office properties, commercial real estate remains a diverse asset class and pockets of resilience can be found (Goldman Sachs, 2023), i.e. at your own risk.

Diversifying housing zoning could help with increasing the number of individual units in specific areas as well as providing different housing options along the spectrum of affordability for the same location, effectively reducing single-family zoning. However, existing home owners, wield huge political power and have been known to block any changes they believed could hurt their property value (CNN, 2023).

What about taxing second home owners? On one hand this could lead to many selling said homes all at once, increasing supply, lowering prices, and meeting demand. Not only are you forced to sell property at a lower value, but on the other side the only buyers are likely to be first time buyers not affected by the tax. On the other, this solution is likely to push owners into the arms of tax avoidance (not evasion) as they purchase property through limited companies and therefore benefit from more advantageous fiscal policies (The Times, 2023).

How do we escape this rut?

Interest rates are bound to lower. Will we see a sudden rush towards cheaper mortgages effectively keeping demand high? Hopefully rent'll get cheaper at least. Will the same problem present itself again in the long-run? Potentially. Home sellers may just relent to lower (more realistic) sales prices.
Higher taxes for existing owners and developers are likely to be ineffective however, help-to-buy schemes may be necessary particularly for first time home buyers.
People might simply relocate to new, more affordable locations. In such event foresight and infrastructure investments are crucial to permit areas to grow at a competitive rate without running into issues such as property speculation bubbles. A great example of this is Texas' up to par city and housing planning when compared with locations such as San Francisco's Bay Area and London (Financial Times, 2024).

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