The impact of financialisation and inequality on housing affordability: Evidence from a Panel of Countries

Housing affordability has emerged as a key topic of discussion in the literature. However, most studies on this topic focus on country-specific analyses utlising metropolitan-level data. There are no studies that address the causes of affordability from a cross-country perspective. This paper makes a contribution to this gap in the literature. Using a panel data of 37 countries covering various regions around the world, for the period 2010-2022, the following findings are reported. First, inequality induces a signifcant effect on affordability. Second, financialisation had a relatively weaker impact on affordability. The effects of financialisation on affordability exhibited significant threshold effects. In countries with more financialisation, the impact of financialisation on affordability was noticeably larger. This study provides evidence that the deterioration in housing affordability resulted from worsening income inequalities.