The Great Housing Split
All global housing markets are splitting into two markets now.
Not houses and apartments.
Not cities and suburbs.
Not owners and renters.
The real split is houses people can still afford, and houses people can’t afford anymore.
A lot of middle-class housing is quietly becoming fake wealth. It still has a price on paper. It still has an owner who thinks it is worth a certain amount. It still appears on property websites with confident asking prices. But if the next buyer cannot finance it from wages, the price is not real. It is just an opinion waiting for a solvent buyer.
Inflation has destroyed the old middle-class affordability model. Food costs more. Energy costs more. Insurance costs more. Maintenance costs more. Taxes cost more. Borrowing costs more. Service charges cost more. Childcare costs more. The buyer who used to stretch for the normal family house has been hit from every direction at once.
So the market is splitting into trophy assets and orphaned assets.
Trophy assets are the houses rich people, global buyers, downsizers, business owners, inheritors, and mobile capital still compete for. Prime city homes, waterfront homes, safe-country homes, tax-haven homes, school-zone homes, scarce homes, lifestyle homes. These are not priced by normal wages anymore. They are priced by capital.
Orphaned assets are the houses that were supposed to be bought by ordinary middle-class families using ordinary salaries and a mortgage. But those salaries no longer clear the monthly payment. The house may still be desirable in theory, but theory does not buy property. Monthly affordability does.
That is why people misunderstand the housing crisis. They say there is a shortage of housing, and in one sense they are right. But there can also be too much housing that nobody wants at the current price. A market can have both shortage and oversupply at the same time, because the shortage is in affordable desirable homes, and the oversupply is in overpriced average homes.
This is the bit owners do not want to hear. Your house is only worth what the next buyer can actually pay. Not what your neighbour listed for. Not what Zoopla says. Not what you need to retire. Not what you emotionally believe it should be worth. If the buyer pool has been destroyed by inflation and interest rates, your wealth is much softer than you think.
The middle-class house was built for a world where middle-class wages could support middle-class debt. That world is breaking. The future housing market is not one market. It is two markets: assets rich people fight over, and liabilities normal people can no longer finance.