My own armchair economics theory of why housing is so expensive is that places where housing is not expensive tend to wither economically and people move elsewhere.
Let me elaborate. We have made pretty much everything else than housing cheap. In places with cheap housing, people don't have an incentive to work and contribute to the economy anymore, which drives the economy down in those places. As a result, people have to move elsewhere (since the jobs will also disappear with the economy), driving housing prices up there. There is a feedback loop between housing prices and overall economic activity and people have to live in places with at least some sort of functioning economy, and thus all of the world gets partitioned into parts with cheap housing and no jobs and expensive housing with jobs.
Hard to disagree. Housing is essential, the rest is a luxury. However, in the UK we are slowly running out of places to move to for cheaper housing and maintain our ability to do the work we can do in the cities while maintaining current levels of income. Yes, there are cheaper places, but there are no jobs there or employers who notice you live there offer you substantially less money. People gravitate towards London and other large cities and he property prices follow. But there is a cruel twist to that story. In terms of income, London-based IT salaries and contract rates have gone back and below 2010 low levels. At least that's what I see on LinkedIn and in my inbox. The property prices did not adjust and even worse, the quality of newbuilds has gone through the floor (often literally) further exacerbating housing shortage. This is not going to end well for the UK.
Let me elaborate. We have made pretty much everything else than housing cheap. In places with cheap housing, people don't have an incentive to work and contribute to the economy anymore, which drives the economy down in those places. As a result, people have to move elsewhere (since the jobs will also disappear with the economy), driving housing prices up there. There is a feedback loop between housing prices and overall economic activity and people have to live in places with at least some sort of functioning economy, and thus all of the world gets partitioned into parts with cheap housing and no jobs and expensive housing with jobs.