House price crisis and underground housing alternative
…Will underground housing solve the housing problems of Toronto, New York, Hong Kong, London and the likes?
By the time you finish reading this article, the population of the world would have increased by over 4,000 people. The global population is now around 7.5 billion, with almost 200,000 new births added every day and a staggering 80 million per year. According to UN figures, by 2025, over 8 billion people will be jostling for space on the face of the earth.
The greatest challenge posed by this dizzying population growth is housing, which is also one of the basic needs of the human race. This challenge is far greater in highly developed hubs such as Tokyo, New York, Hong Kong, New Delhi, Toronto, Lagos and Mexico City.
The jet speed rise in housing prices in these cities has been much trumpeted. The search for solutions is almost becoming desperate.
With house prices at record levels in most big cities, the option of underground housing as a viable alternative is no longer just a topic of science fiction or property technology day dreaming.
Beijing has one most expensive housing markets in the world, where the average home price is hovering around $5,820 per square meter, jumping up by almost 30% in one year in Shanghai. Also China saw an even higher increase of 40% in housing prices last year.
London is known not only for its rich history; it is also famous for its sky high housing prices. Average home prices in the city have shot up by 84% - from £257,000 in 2006 to £474,000 in 2016.
Whatever goes up, may not always come down!
The high house prices are fueled by commercial development, real estate investors and urban migration. The UN reported that every year, around 70 million people relocate to the big cities from rural areas, creating a massive urban planning challenge.
The urban migration does not show any downward trend. The world’s urban population is estimated to far exceed six billion by 2045.
The bigger the population, the greater the pressure on infrastructure and housing prices. It is simple economics. Tokyo has a record 38 million residents, making it the world’s largest city. It is closely followed by Delhi with 25 million. Third placed Shanghai has 23 million. Mexico City, Mumbai and São Paulo each have around 21 million people. 18.5 million People are squeezed into the New York big Apple.
These massive numbers put enormous pressure on housing. The prices and the buildings are both rising up, given the natural limitation of the land resource. Most highly developed cities also have strict urban planning laws that makes land a lot scarcer. Toronto, for example, has the Ontario Green Belt policy which protects almost 2 million acres of land from being commercially developed so all that zone remains green.
Underground housing is becoming an attractive option in a growing number of locations. A BBC Future report estimated close to 2 million people already living underground in China. Another city in Australia also has over 80% of the population dwelling underground.
In London, over 2000 massive underground basement projects have been built over the last 10 years. More than three million tons have been dug up in the process. The billionaire basements are rapidly becoming part of the architecture in core central London.
Bill Seavey, Head of the Greener Pastures Institute and author of How to Never Become Homeless (formerly Home Dreams for Hard Times) and U.S/Canada relations, is a strong advocate for underground and alternative housing. Bill stated that, "Underground housing is technologically sound, especially from an insulation point of view, but still requires a building site--however, it could be smaller in a big city since a yard or gardens could be right overhead. That might cut the building site requirements in half. But most officials probably would resist it. Most urban planners are not thinking innovatively, and builders are usually only interested in the highest end housing and eschew ‘affordable’ homes in general--too much red tape, not enough profit."
Bill remarked: "Interestingly, alternative construction techniques are often thought of as inferior to stick frame housing, yet they are among the soundest and most affordable housing out there."
Will underground housing then be the final answer to the high housing prices dilemma?
The good & the bad of underground housing
Hitesh (Jags) Jagatia, CEO of Property.ca, Realty Inc., Brokerage., Condo.com, and MrLoft.ca, as well as the well-known Condo Pro, has a different viewpoint about underground housing and does not see this as a viable option. He stated that, "land value is land value. When owning land you own the surface land and air space above your land as well underground. In order to build underground you would still be paying the land price regardless on top of which the value of the existing building. Unless you are also looking to build above ground."
He added “that though the urban planners generally encourage re-development of existing land rather than new land development, the up-front costs for land surveys, planning permission, tear down and digging deep would make underground housing development unrealistic. I do not see this as an alternative to the very hot Toronto real estate market."
Roman Oseghaele, an international architect and Global Business analyst, looks at the environmental and economic aspects. He said, “Underground housing might give people psychological feelings of isolation since they are not too common and are mostly buried underground without a full view of the outside world. It may also cost more during the winter months to heat the house as it gets very cold underground. There is also the special construction effect to reduce dampness.”
On the economic aspect, Roman explained, "the Estate market is driven by demand and supply. Not too many people like the idea of underground housing so there will obviously be limited buyers for the houses, if it’s not in high demand the prices might not appreciate the way it should hence it might not be a good investment option.”
However, he noted, "Toronto is Canada’s fastest growing city and one of the most desirable cities in the world. The demand for housing so far is incomparably above supply. The Condo completions in Toronto could not keep up with the pace of demand in the first three quarters of 2015, sales increased by 22% in October 2016 compared to October while new listings dropped 13% in the same period and average price increased by 9.6%. With the land zoning policy in force in Toronto, going underground may soon be an attractive proposition."
Jeryz Makarczyk, President of Hermes Realty Brokerage and owner of Condominium.com, clarified that when the property market is sizzling the way it is in cities like Toronto, Hong Kong, Singapore and others, alternative underground housing will not have much of a cooling effect. He, however, cautioned, "We should not be too quick to dismiss the concept. Basement Wars are already being reported in London, and the mega rich are not just building up, they are digging down."
The Economist Intelligence Unit in its latest report has confirmed Singapore as the world's most expensive city for the fourth year running. The Economist Intelligence Unit's Worldwide Cost of Living 2017 survey, was carried out in 133 cities around the world.
Singapore was 20% more expensive than New York and 5% more than third place Hong Kong. Tokyo, Paris, Geneva, London, Toronto, Sao Palo and many other top urban cities remain pricey.
With the unprecedented pressure from population growth and rapid urbanization, house prices in big cities are tilted upwards. As house prices go up, new housing developers may need to dig down deeper.