Looking at house prices from the last 50 years.
As someone that currently doesn’t own my own home, one of my current favorite hobbies is complaining about the ever increasing house prices. It’s like the old saying, “What goes up, can keep going up for decades”.
Some of the victims of these complaints are my parents and grandparents. My parents bought a house around the year 2000, and their mortgage ended up being somewhat below 20% of their combined monthly salary. (They did renovate large parts of their house themselves though).
My grandparents don’t exactly remember how large their mortgage was, but grandpa’s single wage was sufficient to pay off the house and raise four kids at the same time.
So, without looking at any statistics, houses seem to have become more expensive on a relative basis. The rest of this article does look at some statistics to see if I’m statistically allowed to keep complaining or not.
Looking at house prices
For simplicity, I will only look at statistics for “gewone woonhuizen”, which translates roughly to “normal houses”. Real estate transaction data can be found on Statbel from the period 1973–2018. This data shows for example that in 1973 there were 53866 transactions for a total price of €780.953.786 and a total area of 34.810.865 m2. This translates to ~€14.498 per house, with an average area of ~646 m2. Nowadays (2020), the cheapest town is Hastière, with an average price of €110.216, which is about 7.6x times higher than the average house in 1973.
The following graph shows the house price evolution from the last 45 years. The fancy colors don’t paint a pretty picture. House prices have increased from €14.487 in 1973 to €222.081 in 2018. This translates to a 15x price increase.
Another interesting graph is the price per square meter. This shows a similar increase, but has increased by a factor of ~20.5x.
The gap between the increase in average house prices and average price per m2 is reflected in the average house size.
But wages have gone up, right?
This is the point in the complaint that someone would remark that wages have also gone up significantly. While the following figure shows that this is certainly true, the wages follow a linear pattern, whereas the house prices don’t.
Small note, I could only find wages going back to 1990, while house prices go back to 1973. From now on, only house prices from 1990 will be taken into account.
This next figure shows the relative increases in house prices and wages since 1990. Both start at a value of 100. Wages increase relatively to 213, while house prices increase to 488.
The final graph looks at the ratio between the relative increase in house prices with the relative increase in wages. This figure excludes any taxes on real estate purchases. A crude calculation based on the personal income tax rate learns that the average wage earning would have to pay about €17847 in taxes, which is a solid tax rate of ~38%.
While you needed 3.36x the average after-tax wage to purchase a house, this number has increased to 7.77x in 2018.
Conclusion
There are a few ways to overcome this issue. Polyamory is an obvious one. Monetizing your pets on Instagram is also an obvious one. Google informs me that you can sell a kidney and still have a normal life for the people that would like to try more exotic options.
Or I can always go live in Hastière (no offense).
Data sources
Real estate transactions: https://statbel.fgov.be/nl/nl/themas/bouwen-wonen/vastgoedprijzen/op-basis-van-de-aard-op-het-kadastrale-plan
Belgian wages: https://stats.oecd.org/viewhtml.aspx?datasetcode=AV_AN_WAGE&lang=en#
Income tax rate: https://taxsummaries.pwc.com/Belgium/Individual/Taxes-on-personal-income
