Housing (shelter) is a fundamental human need, but its supply poses complex challenges. The manner in which these challenges are dealt with by markets and governments varies widely around the world, and these variations can have a profound impact on consumer behaviour across a range of other goods and services markets. The relationship between the residential housing market and consumer demand is particularly marked in countries where housing equity is an important component of household wealt
Globally, household size is shrinking. Young adults are now living alone for longer, people are having fewer children, life expectancy is rising and divorce rates are rising; all driving demand for single occupancy dwellings.
The “feel good” factor associated with rising home values is rooted in the fact that a home is an asset. For many, their mortgage is their main savings vehicle. As a result, housing values and consumption expenditure have become increasingly intertwined in some markets.
As a result of structural changes caused by the globalisation of economic activity and the liberalisation of labour markets, upward pressure on wage rates remains very weak across much of the developed world. This increases the importance of housing equity as a determinant of consumer expenditure.
In the United Kingdom and some countries, renters are commonly regarded as being socially inferior to owner occupiers. Many governments regard home ownership as an important policy goal. As a result, they incentivise it by making mortgage interest payments a deductible expense for the purposes of income tax.
While, there is evidence to suggest that housing market crashes and attitudes towards home ownership may be changing, especially among young adults, the likelihood is that millennials are merely delaying home ownership, rather than turning their backs on it.
With fertility rates below replacement levels in many countries, population ageing is set to accelerate. This will have a long-term impact on the nature of demand for housing and on associated markets.
The emerging market economic boom has engendered a class of super-affluent consumers who want a second home abroad. This is influencing property markets in such cities as London, New York and Singapore.
In addition, markets with large migrant populations, remittance inflows is driving housing demand; economic conditions in the US are an important determinant of housing demand in Mexico.
The next wave of urban migration will be African
During the 21st century to date, rapid urbanisation has been largely an Asian phenomenon, but in the decades to come, the locus of the urbanisation trend is set to shift to sub-Saharan Africa.
However migration from rural to urban areas is still a significant driver of housing demand globally, particularly in emerging Asia Pacific and the Middle East, where the youthfulness of the population is putting acute pressure on housing supply.
With the Chinese housing market now slowing, India may be poised to take its place as the main driver of global sales growth in a variety of housing-related markets, such as kitchen appliances and home furnishings.
Home owners are likely to increase their investment in green technology, such as solar panels, over the coming years, reducing their utility bills and boosting their discretionary income. Meanwhile, emerging technologies such as 3D printing may reduce construction costs, making housing more affordable.
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