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Around the world, there is a growing demand for affordable housing units. From Asia Pacific to Europe and North America, the trends are similar across different markets. Despite the massive demand for affordable housing units, the supply gap is very high, especially in countries like India. For instance,
With the surging inflation and interest rates on housing loans, consumers are inclined towards purchasing units that are priced below INR 3.5 million, which has subsequently driven the demand for affordable housing units in the Mumbai Metropolitan Region.
Over the next five years, the demand for affordable housing can only be met, if both the private and public sector, focuses on affordable housing programs in the peripheral areas of the city, which needs to be backed by robust infrastructure.
In Canada, homebuyers are experiencing the least affordable real estate market in decades. Driven by higher interest rates and rising building material prices, prices of housing units have surged significantly. Amid these rising prices, the Canada Mortgage and Housing Corporation (CMHC) projects that the country needs to produce a total of 3.53 million housing units between 2021 to 2030 to restore affordability.
Taking into account the expected population growth during the decade as well as driving affordability, Canada also requires a growing investment in the residential sector from both the public and private sectors. Notably, the Canada Mortgage and Housing Corporation (CMHC) has also urged the Canadian government to work with for-profit and non-profit developers to generate the housing supply needed in the country.
In Europe, the housing industry has been seen as an attractive market for large investors such as BlackRock, Blackstone, and Patrizia. The favorable regulations in the region, have led many private equity firms and pension funds to increase their investment in buying houses in European cities. This has sparked fears of rent increases as well as unfair access to housing.
In search of safe assets, an increasing number of investors, including institutional buyers, are entering the European urban housing market. With housing becoming an asset class, affordable housing has come under threat in the region. Notably, the billions of dollars invested by institutional investors in the region have driven the demand for affordable housing units. The European Union, along with the individual governments, need to reassess their regulations, which have so far made it simpler for investors to boost their presence in the housing market in Europe.
Furthermore, it is also important for the governments to make the regulatory system more efficient and faster, which can assist the development of affordable housing units. For instance,
There is a need for a coordinated approach from the private and public sectors to reduce the demand-supply gap in the affordable housing segment. With the surge in population over the next few years, the demand is expected to further increase from the short to medium-term perspective. Consequently, the investment in the sector, from the private and public sectors, will assist the growth of the residential construction sector from the long-term perspective.
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