This article covers 30 Countries with Most Affordable Housing in the World and provides an in-depth overview of the housing markets in various countries that have been facing a decline in demand due to high mortgage rates. For a quick overview of the top 10, read our article 10 Countries with Most Affordable Housing in the World.
Buying a home has been one of the most sought-after life goals around the world. But it’s becoming harder to own a house lately amid rising costs. Housing prices vary widely across the globe, with some markets charging substantially more than others. However, there are also countries with affordable housing.
Recently, housing prices have been falling in many OECD countries, mainly due to central banks raising interest rates, which has made it more expensive to borrow money to buy a home.
As a result, countries such as Australia, New Zealand, and Canada, are seeing a decline in housing demand due to increased mortgage rates. In Europe, Luxembourg, the Netherlands, and Norway are also experiencing rising mortgage prices.
Since the pandemic, the global cost of construction has increased by 28%. As of December 2022, there also has been a reported increase of 32% in the costs of primary construction materials, with copper and cement prices rising by 3% and 9% respectively.
On the other hand, it is believed that by the end of 2023, interest rates will stabilize, causing the fluctuation in mortgage rates to come to a stop. The US housing market could be headed for a positive change in the long term. Warren Buffet has injected an investment of more than $700 million into three major housebuilding companies: D.R. Horton Inc., NVR Inc., and Lennar Corp.
The Changing Landscape of the Housing Market in the US
Warren Buffet’s company Berkshire Hathaway (NYSE:BRK.A) made a sizable investment of more than $700 million in homebuilding stocks. adding D.R. Horton Inc. (NYSE:DHI), NVR Inc. (NYSE:NVR), and Lennar Corp.(NYSE:LEN) to his portfolio.
The three companies that Warren Buffett recently invested in are all players in the US housing market, with D.R. Horton (NYSE:DHI) being the largest residential builder in the country. Meanwhile, Lennar (NYSE:LEN) sells single-family and detached homes, with a market capitalization of $36.23 billion. NVR (NYSE:NVR), a supplier of structural building components, is valued at $20.04 billion.
As of the end of June 2023, Berkshire Hathaway owned 5,969,714 shares of D.R. Horton, 152,572 shares of Lennar, and 11,112 shares of NVR.
Methodology
We created a list of the 30 Countries with Most Affordable Housing in the World by evaluating two metrics: affordability and profitability of ownership. We collected data from the OECD Housing Prices report to rank each country on these two metrics.
Affordability is a measure of how easy it is for people to buy a home, calculated by comparing the average home price to the average income per person.
Affordability = nominal house price index / nominal disposable income per head.
A lower affordability index indicates that it is more affordable to buy a home in that country. For example, Romania has an affordability index of 66.46, which means that it is the most affordable country to buy a home in.
Profitability of ownership is a metric that measures the financial benefits of owning a property, such as the potential for appreciation and rental income, compared to the costs of ownership, such as mortgage payments, property taxes, and maintenance. It is calculated by dividing the nominal house price index by the housing rent price index.
Profitability of Ownership = nominal house price index/housing rent price index.
A higher profitability of ownership index indicates that it is more profitable to own a home in that country. For example, Finland has a profitability index of 94.16, while South Korea has a profitability index of 102.81. This means that owning property in Korea is more likely to be a profitable investment than owning property in Finland.
We initially assigned ranks from 1 to 30 to each country on our list, with 1 indicating the most affordable country and 30 indicating the least affordable. This was done to streamline the evaluation process.
Next, we assigned equal weights of 0.5 to each metric to calculate a single ranking for each country. This resulted in a composite weighted average, which was used to determine the final list of the most affordable countries in the world.
Finally, the countries were ranked in descending order from 30 to 1, based on the composite results. A ranking of 30 indicates the country with the least affordable housing, while a ranking of 1 indicates the country with the most affordable housing.
Countries with Most Affordable Housing in the World
30. Hungary
Affordability Index: 119.54
Profitability of Ownership Index: 163.61
Average Score: 29.5
By June 2023, the Hungarian housing market had seen a 30% year-on-year decline in property sales, with only 7,120 homes changing hands. In the first half of 2023 alone, there were more than 43,000 house sales, a 41% decrease from the same period in 2022.
29. New Zealand
Affordability Index: 126.73
Profitability of Ownership Index: 140.11
Average Score: 28
Housing prices in New Zealand have been on a downward trend for the past eight months, with the national average value of a house decreasing by 13.3% from October 2022 to June 2023. In February 2023, a standard home in the suburbs was valued at NZ$971,668.
28. Greece
Affordability Index: 120.49
Profitability of Ownership Index: 149.4
Average Score: 28
Greece is one of the cheapest countries to live in Europe, even though home prices increased by 2.8% in 2023. The median home price in Greece is currently around $200,000.
27. Slovak Republic
Affordability Index: 118.49
Profitability of Ownership Index: 161.02
Average Score: 28
Housing prices in the second quarter of 2023 decreased by 2.26% from the previous quarter, from $2,556 to $2,498. In the second quarter of 2022, the average price of property rose by around 25%, to $2,662.
26. Australia
Affordability Index: 120.68
Profitability of Ownership Index: 141.48
Average Score: 27.5
Australian housing prices fell sharply in 2022, the most since 2008. The national average home price fell by 5.3%, with Sydney and Melbourne seeing the biggest declines. Sydney’s home prices fell by 12.1%, while Melbourne’s fell by 8.1%.
25. Germany
Affordability Index: 120.81
Profitability of Ownership Index: 137.38
Average Score: 26
Germany is one of the cheapest countries to live in Europe, with house prices falling by 6.8% in the first quarter of 2023 to $3,687. This is mainly due to inflation, rising interest rates, and slow economic growth.
24. Spain
Affordability Index: 123.09
Profitability of Ownership Index: 133.96
Average Score: 25
Home prices in Spain increased by 7.6% in 2023, compared to 2022. The average home price in Spain is now $406,000, or $203 per square foot.
23. Latvia
Affordability Index: 102.97
Profitability of Ownership Index: 174
Average Score: 24.5
In 2023, house prices in Latvia took a sharp tumble as demand fell. In Riga, the capital, apartment prices dropped 8.42% to a current value of $971.52. In contrast, house prices had risen 14.45% in 2022.
22. Switzerland
Affordability Index: 126.44
Profitability of Ownership Index: 126.45
Average Score: 22.5
House prices in Switzerland have increased by 1% from June 2022 to June 2023. The asking prices for around 80% of homes in the country range from $490,000 to $3,500,000, with the median price being $1,340,000.
21. Chile
Affordability Index: 108.33
Profitability of Ownership Index: 135.37
Average Score: 20.5
The average home price in Santiago, the capital of Chile, is $350,000. Prices can range from $250,000 to over $1 million, depending on the specific location within the city. Outside Santiago, the average house price is typically $200,000.
20. Croatia
Affordability Index: 103.65
Profitability of Ownership Index: 148.99
Average Score: 20.5
In August 2021, the average price of homes in Croatia rose by 6% from 2020. This follows a 9% increase from 2019 to 2020. During the COVID-19 pandemic, the average price per square meter ranged from $4.10 to $4.50.
19. United Kingdom
Affordability Index: 117.22
Profitability of Ownership Index: 128.22
Average Score: 19
The UK is known for its low cost of living and high quality of life. In May 2023, the average house price was $360,000, a 1.9% increase from May 2022 but a decrease from the 3.2% growth recorded in April 2023.
18. Japan
Affordability Index: 115.14
Profitability of Ownership Index: 128.64
Average Score: 19
The residential property price index in Japan increased by 7.5% in 2022, up from 6.3% in 2021. This means that a condo or small apartment in Tokyo can now cost an average of $686,000, while a similar property in Sendai can be acquired for around $312,000.
17. Slovenia
Affordability Index: 119.82
Profitability of Ownership Index: 119.58
Average Score: 18
The average price of newly constructed dwellings in Slovenia increased by 8% in 2022 to $143,000. The total value of housing transactions for new homes sold in the year exceeded $135 million.
16. France
Affordability Index: 106.31
Profitability of Ownership Index: 128.56
Average Score: 16.5
The French real estate market saw a 0.2% decrease in prices at the national level in 2023, marking the first decline since 2014. As of now, residential property in France is priced at around $3,400 per square meter.
15. Norway
Affordability Index: 112.18
Profitability of Ownership Index: 121.08
Average Score: 15.5
In Norway, housing prices fell by 1.7% by the end of 2022, but still increased by 4.9% in 2022 to an average of $4,400,000, or $51,200 per square meter.
14. Lithuania
Affordability Index: 105.74
Profitability of Ownership Index: 124.57
Average Score: 14.5
In Lithuania, all major cities saw either a decline or a slight increase in housing prices in the second quarter of 2023 compared to the same period in 2022. The median price of a home in Kaunas is currently $1,876.
13. Bulgaria
Affordability Index: 79.09
Profitability of Ownership Index: 140.29
Average Score: 14.5
Despite rising housing prices, Bulgaria remains one of the most affordable countries for homebuyers. Home prices in the country increased by an average of 9.4% between 2021 and 2022, with typical home prices ranging from $50,000 to $100,000.
12. Colombia
Affordability Index: 105.27
Profitability of Ownership Index: 123.86
Average Score: 13.5
In Colombia, homes typically sell within 20 days and receive at least two offers. The median price of a home in the country was $246,000 in June 2023, a 1.7% decrease from 2022.
11. Ireland
Affordability Index: 115.23
Profitability of Ownership Index: 115.47
Average Score: 13
After a year of declining prices, housing prices in Ireland increased by over 4% in the second quarter of 2023. The median asking price rose by 4.3% in the last quarter of 2023 to $350,000.
Click to continue reading and see 10 Countries with Most Affordable Housing in the World.
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Disclosure. None. 30 Countries with Most Affordable Housing in the World is originally published on Insider Monkey.