Housing affordability: a new data set

BIS Working Papers  |  No 1149  | 
24 November 2023



Housing affordability is a policy concern for many countries around the world. However, there are very few cross-country indicators that can capture the salient features of what makes purchasing a home affordable.


This paper constructs a new housing affordability index. It covers a large number of countries over a long period of time. Housing affordability is defined as a typical household's ability to quality for a mortgage loan as needed to purchase a typical home within a given country. To construct the index, we collect data on house prices expressed in local currency per square meter, median household income, mortgage rates, loan-to-value ratios, term-to-maturity of mortgage loans, average property size, and average household size. These data come from international financial institutions and national statistical offices, among other sources. After validating this new index through within-country and across-time checks, we explore the factors that influence affordability.


Housing in advanced economies is generally more affordable than in emerging market economies. Since the 1990s, housing affordability has improved on average. This improvement is due primarily to a rise in household income and a decline in mortgage rates. More recently, though, housing affordability has worsened owing to the strong increase in house prices during the pandemic and higher interest rates. Government spending on housing benefits appears to improve affordability.


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.

JEL classification: R3, G51, I31

Keywords: housing affordability, real estate markets