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Housing affordability: a new data set

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  • Nina Biljanovska
  • Chenxu Fu
  • Deniz Igan

Abstract

The rapid increase in house prices in the past few years, including during the COVID-19 pandemic, raises concerns about housing affordability. The price-to-income ratio is a widely-used indicator of affordability, but does not take into account important factors such as the cost of financing. The aim of this paper is to construct a measure of housing affordability that takes these factors into account for a large set of countries and long period of time. The resulting dataset covers an unbalanced panel of 40 countries over the period from 1970Q1 to 2021Q4. For each country, the index measures the extent to which a median-income household can qualify for a mortgage loan to purchase an average-priced home. To gauge the performance of the constructed indices, we compare them to other readily-available measures of affordability and examine the evolution of the indices over time to understand the relevant drivers, including in a regression analysis to assess the extent to which government housing programs could contribute to improving affordability.

Suggested Citation

  • Nina Biljanovska & Chenxu Fu & Deniz Igan, 2023. "Housing affordability: a new data set," BIS Working Papers 1149, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1149
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    References listed on IDEAS

    as
    1. Cerutti, Eugenio & Dagher, Jihad & Dell'Ariccia, Giovanni, 2017. "Housing finance and real-estate booms: A cross-country perspective," Journal of Housing Economics, Elsevier, vol. 38(C), pages 1-13.
    2. Francesco Beraldi & Mr. Yunhui Zhao, 2023. "The Pricing-Out Phenomenon in the U.S. Housing Market," IMF Working Papers 2023/001, International Monetary Fund.
    3. Ms. Deniz O Igan & Mr. Prakash Loungani, 2012. "Global Housing Cycles," IMF Working Papers 2012/217, International Monetary Fund.
    4. Dennis R. Capozza & Patric H. Hendershott & Charlotte Mack & Christopher J. Mayer, 2002. "Determinants of Real House Price Dynamics," NBER Working Papers 9262, National Bureau of Economic Research, Inc.
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    Keywords

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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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