Why might a rapid increase in property prices lead to affordability issues?

A rapid increase in property prices can lead to affordability issues primarily because housing prices often outpace wage growth. When property values rise significantly, it becomes increasingly difficult for potential buyers to afford homes. If wages do not keep pace with the rising costs of housing, individuals and families may find it challenging to manage mortgage payments, property taxes, and other associated costs of homeownership. This disparity can limit the purchasing power of buyers, pushing many out of the housing market or necessitating potentially unsustainable financial decisions, such as taking on larger debts.

Furthermore, as housing becomes less affordable for many, the demand for more affordable housing options may increase, but without corresponding wage increases, those options remain limited. This situation can exacerbate the affordability crisis, leading to a cycle where fewer people can secure housing that meets their needs, thereby increasing demand for rental properties instead, which may also see price increases as a result.