Consider a trendy city, beloved by tourists and also home to a thriving economy and plenty of industry. Now its housing market is starting to feel a bit strained. As an academic who grew up there put it, “Prices here began to take off and within a few years were growing at annual rates of over 15%,” after the housing crisis bottomed out.No, it’s not San Francisco – nor Austin, New York, or Washington, DC. It’s Amsterdam.
Knot isn’t just any Amsterdam native. He’s also president of the Dutch central bank, De Nederlandsche Bank, which last summer organized an international seminar on the twin challenges faced by the developed world’s big cities: rising housing prices and falling housing supply. In a 2017 story, MarketWatch cited an economist who commented that the 15 biggest metro areas in the U.S. account for more than half of its GDP.That activity – not just jobs and education, but also what the researchers call “cultural events, creativity, recreational opportunities and of course the presence of other people” – lures people, which reinforces the attraction for people of similar backgrounds. By 2100, academics estimate, 80% to 90% of the population will live in cities.
Those “local factors” present another key takeaway, though. All real estate is indeed local, and when space is scarce, any additional restriction on how it can be developed and used makes it a lot pricier. Importantly, Knot and his co-authors point out that this impacts not just purchase prices but also rental costs. Either way, middle-income households around the world are struggling to afford housing.
Gross... time to buy 10 years ago