The views expressed in this presentation are the views of the author

and do not necessarily reflect the views or policies of the Asian

Development Bank Institute (ADBI), the Asian Development Bank
(ADB), its Board of Directors, or the governments they represent.
ADBI does not guarantee the accuracy of the data included in this
paper and accepts no responsibility for any consequences of their
use. Terminology used may not necessarily be consistent with ADB
official terms.

The Housing Unaffordability

Crisis in Asia & Pacific

Comments on Session 1:
Economic bubbles and financial
stability in Asia

Matthias Helble, EREA/ERCD

8TH OECD-AMRO-ADB/ADBI-ERIA
Asian Regional Roundtable on
Macroeconomic and Structural Policies
ADB, 13 February 2020
THE REGION’S
HOUSING CHALLENGE
• Every day 130,000 people move to cities in Asia.
• Access to affordable and adequate housing one of most urgent
needs.
• Yet, housing prices reportedly high in many cities across Asia.
• Unaffordable and substandard housing undermine economic
growth and development prospect of cities and of countries.
I. Affordable Housing
 Motivation

• Anectodal evidence of high housing prices in many cities.

• Some studies on housing affordability in individual countries, e.g.
PRC (e.g. Chen et al. (2006); Cai et al. (2017); Yin et al (2019)).
• Scant cross-country analysis on housing affordability in
developing Asia:
• UN Habitat (2001): PIR 11.3 for Asia-Pacific region
• UN Habitat (2011): PIR for selected cities: 25.0 Vientiane, 16.7 Dhaka,
14.6 Jakarta, 10.0 Bangkok

Objective: Provide an up-to-date estimate on housing affordability

in across many cities in developing Asia.
 Definition: Affordable Housing

• Defined in terms of a certain threshold of total

household expenditure spent on housing (narrow vs.
wide definition).
• Most common threshold used: 30 %.
• Most commonly used: Price-to-income ratio
• Demographia cut-offs: PIR
Affordable ≤3
Moderately Unaffordable 3.1-4
Seriously Unaffordable 4.1-5
Severely Unaffordable ≥5.1
Source: Demographia (2019)

• Unaffordable often means inadequate (Bertaud, 2018)

 Data
Housing price data:
• Notoriously difficult to collect as prices vary within city, neighborhood, street,
building.
• Collected data from official and private sources.
• Main source: Numbeo (world’s largest database on housing prices). Data on
housing price per sqm in and outside city center.
• Combined with other available sources. Equal weights.
• Total sample: Housing prices for 211 cities in 27 countries for 2018

Other variables:
• Household income data (HIES by city or closest administrative unit for India,
Indonesia, Pakistan and the Philippines; for other countries regression-based
estimation using the national World Bank Povcal data)
• Household size by city (adjusted by economic growth and urban)
• Average home floor area: 50 m2
 PIR in cities by ADB subregion
Price-to-Income Ratio in 211 cities in 27 countries (2018)

Fiji, PNG, Solomon

Islands, Vanuatu

Mongolia, PRC

Bangladesh, India, Maldives, Nepal, Sri Lanka

Armenia; Azerbajian; Georgia; Kazakhstan;

Kyrgyz Republic; Pakistan; Tajikistan

Bhutan, Indonesia, Lao PDR, Malaysia, Myanmar,

Philippines, Thailand, Timor-Leste, Viet Nam

Source: ADB (2019)

Note: The price-to-income ratio (PIR) was computed as the average house price (50 m2) divided by the mean annual household income.
Source: ADB estimates using data from Colliers International; Global Property Guide; household income and expenditure surveys, various
countries; Knight Frank; Makaan; National Bureau of Statistics, People’s Republic of China; Numbeo; World Bank’s PovcalNet; Zameen.
 PIR in large countries

Source: ADB (2019)

 Housing affordability in 211 cities in 27 countries (2018)

PIR
Affordable ≤3
Source: ADB (2019) Moderately Unaffordable 3.1-4
Seriously Unaffordable 4.1-5
Severely Unaffordable ≥5.1
Source: Demographia (2019)
 India: PIR and city size

PIR

Source: ADB (2019)

 PIR city size

no. of cities PIR

Cities <1M population
PIR (average housing price) 85 16.40

Cities 1>=M population

PIR (average housing price) 126 16.02

Total
PIR (average housing price) 211 16.17

Source: ADB (2019)

 PIR city center vs. outside city center

no. of cities PIR

Cities <1M population
PIR (average housing price) 85 16.40
PIR (city center) 85 23.02
PIR (outside city center) 85 13.23
Cities 1>=M population
PIR (average housing price) 126 16.02
PIR (city center) 126 22.00
PIR (outside city center) 126 11.48
Total
PIR (average housing price) 211 16.17
PIR (city center) 211 22.41
PIR (outside city center) 211 12.18

Source: ADB (2019)

Role of housing affordability for the success of cities

Housing unaffordability affects the competitiveness of cities and

growth through three channels:

1. Less fexible labor market leads to labor misallocation.

2. Capital misallocation as firms invest more in real estate than in
innovation, and banks tend to lend more to firms that have real
estate assets.
3. Lower urbanization reduces the agglomeration-induced
productivity growth and thus aggregate welfare.
II. Adequate Housing

14
 Definition: Adequate Housing

• Minimum standard of housing varies across communities

and countries.

• UN-Habitat’s definition of slums gives a benchmark:

“contiguous settlement that lacks one or more of the
following five conditions: access to clean water, access to
improved sanitation, sufficient living area that is not
overcrowded, durable housing and secure tenure.”

• McKinsey (2014) housing should not be more than a one-

hour commute to the place of employment.

• Policy makers should not limit the best trade-off between

rent, location and housing standards (Bertaud, 2018).
 Demographic and Health Surveys (DHS)

• Nationally-representative household surveys on health, housing

and nutrition funded by USAID.
• Our sample: 750,000 household observations in 10 countries
covering around half of the population of Asia&Pacific.
• Adequate housing definition along four dimensions:
1. Structural quality/durability of dwellings: Roof material (finished)
2. Sufficient living area: Number of persons sharing bedroom (three
or less)
3. Access to drinking water: Water source (piped, protected well or
bottled water)
4. Access to improved sanitation: Flushing toilet; pit latrine
(ventilated); shared by max. 2 HH
 DHS Coverage in Asia
Table: DHS Data Coverage
Country Year Household Cluster Subregion (ADB
observation size observations classification)
Bangladesh 2014 17,696 600 South Asia
Cambodia 2014 16,408 611 South East Asia
India 2015 630,035 28,526 South Asia
Kyrgyzstan 2012 8,327 316 Central West Asia
Myanmar 2015 12,663 441 South East Asia
Nepal 2016 11,073 383 South Asia
Pakistan 2017 15,076 561 Central West Asia
Philippines 2017 28,689 1,250 South East Asia
Tajikistan 2017 8,032 366 Central West Asia
Timor-Leste 2016 11,930 455 South East Asia

Source: Demographic Health Surveys (DHS), ADB (2020)

Covering 47.4 % of the population in Asia & Pacific

 Housing adequacy is low

Source: ADB (2020)

 Housing adequacy by dimension

Source: ADB (2020)

 Housing adequacy inequality

Concentration index measuring wealth-related inequality in adequate housing

Country Rural areas Smaller cities Large cities
Bangladesh 0.029 0.156 0.497
Cambodia 0.304 0.535 0.590
India 0.347 0.562 0.592
Kyrgyzstan 0.212 0.526 0.514
Myanmar 0.292 0.553 0.583
Nepal 0.161 0.479 0.580
Pakistan 0.140 0.120 0.254
Philippines 0.629 0.634 0.551
Tajikistan 0.216 0.806 0.765
Timor-Leste 0.403 0.427 .

Source: ADB (2020)

III. Housing Policies

21
 Housing policies: Lessons learnt

1. Improve data collection and analysis (e.g. using big data).

2. Tackle supply side constraints and offer low cost
developed land with access to social services and to
efficient and affordable transportation system.
3. Incentivize the private sector to come in by de-risking their
investment and providing financial incentives.
4. Promote public and private rental market.
5. Improve efficiency in implementation of policies which
often requires addressing fundamental problems, e.g. land
titles.
Conclusion
• Housing unaffordability and inadequacy linked
• High levels of housing unaffordability across cities in
developing Asia
• More research on the causes of unaffordability urgently
needed
• High housing prices across cities can mean a systemic risk
for the region and beyond
• A healthy housing market is fundamental not only from
macroeconomic perspective, but also from a development
perspective.
Thank you very much for your attention