Average household income outpaces home price rise in Mumbai,
amongst more affordable global cities: Knight Frank
- Growth in average income recorded at 20.4% while home
prices rose by 8% in 2014 -18
- Global gap between house prices and income estimated at
US$740 billion in 2018
Mumbai, March 26, 2019:
In the inaugural issue of Knight Frank’s global report, Urban
Futures, Mumbai has recorded the third highest growth in annual household
incomes over a five-year period (2014 – 2018). Mumbai has recorded a rise of
20.4% in annual household incomes in the period of study. The growth in housing
prices in the same period in Mumbai has been estimated at 8% only.
San
Francisco in USA saw the highest rise in annual income at 25% in the five-year
period while Amsterdam at 63.6% (Netherlands) recorded the highest rise in
housing prices between 2014 – 18.
The report evaluates 32 cities across the world to understand the
difference between house prices and income and estimates the gap to be US$740
billion in 2018.
|
Rank
|
City
|
Housing % growth
|
% growth in Income
|
|
1
|
San Francisco
|
41.8
|
25.6
|
|
2
|
Moscow
|
0.1
|
22.7
|
|
3
|
Mumbai
|
8
|
20.4
|
|
4
|
Los Angeles
|
25.5
|
15.4
|
|
5
|
Singapore
|
-2.8
|
14.9
|
|
6
|
Auckland
|
47
|
14.7
|
|
7
|
Kuala Lumpur
|
21.8
|
13.2
|
|
8
|
Dublin
|
61.9
|
13.2
|
|
9
|
Bangkok
|
33.3
|
12.2
|
|
10
|
Vancouver
|
57.6
|
12
|
Source: Knight Frank Research
Despite being India’s most expensive real estate market, Mumbai
emerged among the more affordable cities amongst its global peers. Mumbai has
seen real household income growth outpace real house price growth by 12.4%,
indicating an improvement in affordability. The real house prices in comparison
have grown at a much slower pace of 8% while the real
disposable household income growth was over 20.4% in the five-year period ending
2018. The affordability in the city have improved on account of reduced size of
units with largely stable prices. Consistent reduction in apartment sizes has
also lowered the average ticket price for Mumbai. It is estimated that on an
average, newly launched homes are smaller by 25% between 2014 - 18. Maximum
launches, especially in the last two years (2017 and 2018) have been in the
affordable and mid ranged segment with ticket prices not exceeding INR 7.5
Million (75 Lakhs).
Key findings of the report:
- Mumbai along with Moscow,
Singapore and Paris saw their Average Real Income grow faster than real
house prices.
- Indian government’s initiatives
such as Credit-Linked Subsidy Scheme (CLSS), Pradhan Mantri Awas Yojana
(PMAY), a scheme that aims to ensure 20 million affordable homes by 2022
have worked well.
- Mumbai is one of India’s most expensive housing markets but has seen the affordability of homes significantly increase in the last few years. It is now estimated that a house in Mumbai will cost approximately 7 times the annual household income against 11 times in 2014.
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Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “Mumbai’s residential housing
shortage has been a reason for concern for most urban development agencies
including the government. Similar to other global cities, Mumbai adds many new
settlers every year making it a difficult place to find housing. However,
despite having India’s most expensive real estate, in comparison to its global
peers, Mumbai remains more affordable. This should be viewed positively, as it
indicates a further possibility of growth of Global and Indian organisations in
the city, who are always looking at locations that are strategic and yet within
the affordable range. Mumbai has seen a steady increment in average incomes
based on its economic growth, while the reduction in property prices has
further enhanced affordability. The city has seen a drop of close to 7% in
ticket prices for new launches in 2018. With the recent announcement on
reducing GST on under construction projects, the effective payout by the buyers
is expected to reduce by a further 6% - 7%.”
As part of the Urban Futures report, Knight Frank has launched its
Global Affordability Monitor, which analyses affordability across 32 cities. It
takes into consideration three key measures – house price to income ratio, rent
as a proportion of income and real house price growth compared to real income
growth. Across the 32 cities, there was an average five-year real house price
growth of 24%, while average real income grew by only 8% over the same period. Overall, New York saw its income growth exceed real house price
growth by 3% while Moscow, Singapore, Mumbai and Paris also saw their average
real income over the last five years grow faster than real house prices. Moscow saw the largest difference where real income growth
outpaced real house price growth by 22%.
KNIGHT FRANK GLOBAL
AFFORDABILITY MONITOR:
|
LEAST AFFORDABLE
|
SECOND LEAST
AFFORDABLE
|
|
· Amsterdam
· Auckland
· Hong Kong
· Los Angeles
· San
Francisco
· Sydney
· Toronto
· Vancouver
|
· Bangkok
· Berlin
· Dublin
· London
· Melbourne
· New York
· Singapore
· Tokyo
|
|
MORE AFFORDABLE
|
MOST AFFORDABLE
|
|
· Dubai
· Istanbul
· Jakarta
· Kuala Lumpur
· Lisbon
· Manila
· Rome
· Sao Paolo
|
Knight Frank also took
an in-depth look at five cities (San Francisco, London, Hong Kong, New York and
Mumbai) and the ways in which these markets can look at tackling housing
affordability:
- Co-living: A concept on the
rise in many global cities
- Corporates entering the
development space: Facebook’s Menlo Park development consists of 1,500
housing units
- Public private partnerships:
For example, Transport for London aims to play an integral role delivering
affordable housing that prioritises quick delivery and multi-tenure
options
- Cooling measures: Implemented
to slowdown the property market in cities like Hong Kong. These have had a
limited effect, but the recent implementation of higher interest rates and
a weakening economy led by a falling stock market may change this
- Sustainable micro homes: These
homes, such as the OPod Tube Housing project, are becoming increasingly
popular as a result of affordability pressures, but their impact has been
limited
- Reclaiming land: The Hong Kong
government is actively trying to extend the amount of land it has to build
on by reclaiming land to create new islands
- Floor space regulations: If the
Indian government were to lift floor space regulations in Mumbai,
developers could build vertically, alleviating the pressure for space in
the city, whilst increasing supply
About Knight Frank:
Knight Frank LLP is the
leading independent global property consultancy. Headquartered in London,
Knight Frank has more than 18,170 people operating from over 523 offices across
60 markets. These figures include Newmark Grubb Knight Frank in the Americas,
and Douglas Elliman Fine Homes in the USA.
The Group advises clients ranging
from individual owners and buyers to major developers, investors and corporate
tenants. For further information about the Company, please visit www.knightfrank.com.
In India, Knight Frank
is headquartered in Mumbai and has more than 1,000 experts across Bangalore,
Delhi, Pune, Hyderabad, Chennai, Kolkata and Ahmedabad.
Backed by strong
research and analytics, our experts offer a comprehensive range of real estate
services across advisory, valuation and consulting, transactions (residential,
commercial, retail, hospitality, land & capitals), facilities management
and project management. For more information, visit http://www.knightfrank.co.in/
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