The conventional idea is simple: expensive cities have unaffordable housing. However, our latest global affordability analysis shows that the real gap is not simply between cities with high or low rents, but between those where incomes have evolved at the same pace as housing costs and those where they have not. The affordability matrix, which combines the burden of rent and the remaining disposable income, reveals a more nuanced picture of urban affordability.
Take Singapore, Dubai, Abu Dhabi, Sydney, and San Francisco as examples. None of these are cheap cities to live in. However, households retain significant spending power after paying rent, as strong labour markets and high incomes offset the cost of housing. Singapore tops the ranking, while Dubai and Abu Dhabi also achieve exceptionally good results, despite their status as global cities.
As Martin Lippmann, Head of Real Estate Research for Europe at DWS, points out: “The key question is no longer how much households pay for rent, but how much income they have left afterwards. High rent does not automatically make a city unaffordable if income growth keeps pace”.
The contrast is evident in New York, Hong Kong, Beijing, Shanghai, Mumbai, and Manila. These cities are engines of growth and opportunity, but many households allocate an exceptionally high proportion of their income to housing and have much less financial flexibility after paying rent. Economic dynamism has been strong, but wages have struggled to keep up with the rising cost of housing.
The implication is significant. Housing affordability is not just a rental issue. It is also a problem of income and, in many cases, supply. Cities like Dallas, Austin, Helsinki, Kuala Lumpur, and Dubai have absorbed their growth through increased housing construction, rising incomes, or both. Others have become victims of their own success, attracting population and capital at a rate exceeding the capacity to expand housing supply.
For investors and public policy makers, the lesson is clear. The winners of the future will not necessarily be the cities with the lowest rents. They will be those that successfully balance economic growth, income generation, and housing supply. Increasingly, housing affordability is becoming an indicator of whether prosperity is shared among those living in a city, rather than merely a measure of housing costs in themselves.
