April 6, 2023
March 30, 2023
The housing crisis is still an actual topic. Many people are struggling to afford or find adequate housing. The problem has been fueled by a combination of factors, including rising home prices, stagnant wages, a shortage of affordable housing, and the economic impacts of the COVID-19 pandemic. In many cities around the world, housing prices have skyrocketed in recent years, making it increasingly difficult for people to buy a home or afford rent. This has led to a growing number of people experiencing homelessness or living in overcrowded or substandard housing.
In today’s article we’ll have a look at some actualities in two opposite parts of the world and how Proptechs are solving major paint points in those markets.
The housing situation in Latin America (LatAm) varies by country, but in general, the region faces significant challenges in terms of providing safe, affordable housing for its populations.
One of the main issues LatAm is a shortage of affordable housing.
The cost of housing in LatAm can be up to 30 times higher than the average annual income. In Buenos Aires, property prices in certain areas have increased by 500% in recent years. This makes it very hard to find affordable housing.
In Brazil, there is a deficit of >7.8 million housing units, while in Mexico, the shortage is estimated to be approximately 9 million units. According to the United Nations, 104 million people in Latin America and the Caribbean lack adequate housing, and 54 million live in inadequate or overcrowded conditions.
Rapid urbanization, population growth, and a lack of investment in social housing have contributed to this (ever growing) problem. As a result, many people live in informal settlements or slums, which lack basic services such as running water, sanitation, and electricity, and are often at risk of eviction. In Brazil, approximately 11.5 million people live in favelas, while in Mexico, over 60% of the population live in informal settlements. Those numbers are incredibly hard to imagine and the problem keeps getting bigger...
Overall, the housing situation in LatAm is complex and multifaceted, requiring a range of solutions, including investment in social housing, urban planning, and policy changes to address the needs of the most vulnerable in our societies. As an example, in São Paulo, Brazil, the city government recently passed a law that requires developers to include a percentage of affordable housing in new residential projects. In Mexico, the government's National Housing Policy includes a program that provides subsidies to families to help them purchase or improve their homes, and in Peru, the government has launched a program to formalize land titles for residents of informal settlements.
Another issue in the LatAm housing market is that so far there has not been any solid tech infrastructure, making it very hard to buy or sell properties generally. But, we are starting to see some very promising Proptechs coming into market, building AVM’s and MLS platforms, with smart tech aggregating 1000s of disparate and unstructured data and structure it. Due to poor data quality this has not been done before, but we have seen companies making exponential growth across the continent. This has resulted in property transaction times falling from 6 months+ to less than a week. These solutions result in some of the fastes growing Proptechs across the entire continent!
Solutions like these are badly needed and we expect these technologies to keep taking market share and disrupt inefficient processes.
Similarly in this region, availability of affordable housing is one of the main challenges. In many Southeast Asian countries, the majority of the population is low or middle-income earners, and they struggle to afford decent housing.
According to the United Nations, around 200 million people in Southeast Asia are currently living in informal settlements or slums, which are often characterized by poor living conditions and a lack of basic services.
A factor contributing to the housing crisis in Southeast Asia is the lack of government support and regulations. In many countries, the government has not implemented effective policies to ensure that everyone has access to affordable housing. For example, the Philippines are often criticized for their inadequate response to the housing crisis. Lack of funding, lack of coordination and insufficient land use planning are all contributing to the worsening of the crisis. Additionally, there are issues with corruption and a lack of transparency in the housing sector, which further exacerbate the problem. A bad example of corruption is the "ghost projects" in the government's housing program of the Philippines. In 2015, it was discovered that around PHP 900 million (approximately USD 18.6 million) of funds from the government's housing program for the victims of Typhoon Yolanda (Haiyan) had been allegedly misused. An investigation revealed that several housing projects had been approved and funded by the government, but no actual construction had taken place, leading to "ghost projects."
Pakistan is one of the countries in Southeast Asia, where the housing crisis is a significant problem. The country has a rapidly growing population, which has led to an increase in demand for housing. Additionally, property prices in Pakistan have increased significantly in recent years. For example, property prices in Karachi, the country's largest city, increased by 67% between 2015 and 2020.
Pakistan has one of the lowest housing-finance to GDP ratios in the world (0.25%).
Only 1% of housing supply caters up to 68% of the population who have a monthly income of max $188. A small 9% of the total banking loan book is earmarked for consumer lending, and only 3.8% of that is allocated for housing finance. 30% Of the population facing housing shortages, which translates into 10 million homes.
Also in Pakistan (and India) we see Proptechs coming in to improve the situation with innovative solutions solving real world problems. Companies like this, give a spark of hope to the Pakistani housing crisis and are bound for robust growth this upcoming decade!
We can conclude that the world needs proptech. Proptech can make a real difference in making affordable housing available to a growing population.