House Price to Income Ratio in Pakistan
House price to income ratio is a measure which shows the house affordability level of a certain region. High house price to income ratio is the sign of an unaffordable housing market, whereas low house price to income ratio is the sign of an affordable housing market. In this blog we will discuss the house price to income ratio in Pakistan.
What is the affordable house price to earnings ratio worldwide?
House price to income ratio is measured by calculating the years of income required to buy a house. This formula is widely used by the banks to provide the mortgages. An affordable housing market is one where people can buy houses by spending five years of income. Housing market below this ratio is considered as very affordable, whereas above this ratio is considered as unaffordable.
What is the house affordability ratio in Pakistan?
Pakistan has one of the most unaffordable housing markets of the world. According to the NUMBEO, 2018 house price to income ratio of Pakistan is 1:11. So a person has to pay 11 years of income to buy a house in Pakistan. Whereas for an affordable housing market in Pakistan, the house price to income ratio should be 1:5.
Reasons of high house price to earnings ratio in Pakistan
First reason is the fast rise in inflation as compared to the wages. Second reason is the low purchasing power due to the economic decline. Third reason is the huge influx of black money into reality sector which has artificially increased the house prices. Fourth reason is the lack of affordable housing initiatives in Pakistan.
Measures to increase house affordability in Pakistan
House affordability in Pakistan can be increased; firstly by controlling the inflation, secondly by creating good paying jobs, thirdly by curbing the flow of black money into reality sector and fourthly by starting housing benefits. The Federal Government and Provincial Governments of Punjab & KPK started the affordable housing schemes but scale is very limited.