Housing affordability and bubble risk: analysis of market trends and home purchase intention among young adults

Purpose This study aims to examine the housing affordability crisis and possible bubble risk, focusing on the period from 2013 to 2024. This study contributes toward the literature on the topic of housing affordability in emerging markets, by combining the longitudinal and integrative perspective offered on the topic. This study previously have typically been implemented either in a macroeconomic approach as price-to-income ratio and risk of bubble or in a microbehavioral approach which focuses on the affordability perception and household financial stress. The study, however, examines the interaction between objective market conditions of the housing market and matter of subjective housing unaffordability perceptions. Design/methodology/approach This paper takes a two-tiered approach, involving a macroeconomic analysis of the market environment and microlevel behavioral knowledge. At the macrolevel, the study evaluates such important economic variables as housing prices, interest rates and household debt and risks of speculative bubbles. At the microlevel, the paper investigates the financial stress, perceived affordability, purchasing power and the intentions of young working populations in the region to purchase a home. Findings The results indicate that although the prices of houses have been on the upswing, there are strong psychological impacts of financial stress that affect how the potential buyers make buying decisions. This combined strategy exposes that the imbalances of the housing market in the form of high prices to income are some of the factors contributing to the affordability and high speculative risks. Research limitations/implications For the primary data, the current study relies on self-reported measures for some fundamental constructs like financial stress and perceived affordability. Though the measures are quite common in behavioral research as well as research in housing, there is always a chance of a response bias or individual over emphases. The analysis in the research has exclusive coverage on young working adults within the Klang Valley and hence the findings are limited to a limited group of people and space. Practical implications The study offers supportive evidence to the policymakers, and this is that the problem of affordability can be tackled by not just intervening in the market but by financial literacy interventions as well to help lessen the impact of financial stress on the intentions of home ownership. Social implications The issues of housing affordability have far-reaching consequences at the societal level, including financial health, social mobility and generational equity. In the younger generation, housing needs is not just an economic decision but also a cultural marker, which is associated with stability, the formation of families and the realization of long-term savings. The inability of financial capability to buy a household may result in financial stress, household formation postponement, and intergenerational inequality. The study illustrates the real-world experience of young adults who are navigating the housing landscape characterized by house price inflation, slow-wage growth and growing household debt. By marrying objective affordability trends and the subjective perceptions of the generation, the paper gives voice to the predicament of meeting the aspiration to become a homeowner while structurally facing financial barriers. Therefore, it will bring to a higher level of sophistication a discussion about the topic of affordability that not only has the statistics as the focus but behavioral and psychological aspects of the society. Originality/value The study is an integrative one. It facilitates an interaction between policymakers, players in an industry and households through associating macrotrends with microperceptions. By making complex relationships available to a wider audience by the integrated findings, the research will have a great image of research and applicability.It is original as it based on both the secondarily obtained data through credible agencies such as the Bank Negara Malaysia and the primary data obtained through conducting a survey, this study brings out the difference between the structural affordability effects and the perceived ones.