Something tells me costs are a bit relative based on location, at least for things like houses. So if my society or nation state is not based off of America it may have different homes and different costs for them. So as I create a society and culture economy is important so how do i figure out the costs of houses for a society? I know the considerations styles and prices are decided by factors such as local area and size but how do i figure out what costs should be? I figured I should stick with housing costs due to housing costs being a laege percentage of spent income and the stack exchange's rules about broadness.
closed as too broad by JBH, Confounded by beige fish., Cyn, Gryphon, user535733 Mar 22 at 17:04
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There are so many factors determining the cost of housing that there is no generally consistent way to figure it out. My listg of factors is only an overview and by no means complete. If you want to worldbuilding cost of housing for fictional countries in our time just look up costs for housing for real states and pick one similar to your nation.
The value of land is going to be an important factor. How much demand is there? (population density, compare Singapure to Russia) Who owns the land? (in England few big landowners controll property prices) Is the land desirable? (compare land in the well build up and environmentally mild Germany to land in the middle of Greenland or Siberia.)
Construction cost will be influential, too. Is there industry to construct houses in the area? Is there a culture of having craftsmen? (the Sovjets purged craftsmen culture for example) What matetials are used/avaliable for construction? (tents for nomads, clay and bush huts in rual Africa, paper in Japan, woodhouses in the USA, brickhouses like in northern Germany or concrete like in big cities) Are there standart and regulations? (in Germany there are DIN norms for everything, in a slum noone cares how you build)
Politics will play a role too. Is the country a free market economy, a planed economy or some mixture? (USA free market, Sovjet union planned economy, Germany mixture type (free market, yet government regulated)) Are there progeams to build as affordable housing to help low income families (Germany) or to "convince" voters (Singapure)?
If you're interested in relative difference in cost of living between societies, there is a very informal index known as the Big Mac Index. It's not perfect but because a Big Mac is made to a (sort of) common standard across the world, it serves as a baseline for a commodity across multiple countries and currencies that people can use to get a rough feel for cost of living in different societies.
That said; the most useful statistics are NOT relative cost, but relative earning speed. After all; economics isn't the study of money any more than physics is the study of SI units. Money is merely a common unit of measurement for production within a given economic zone.
Another way of putting that is that the countries where a Big Mac takes less time to earn the money to pay for it are the more affluent, with a relatively lower cost of living by comparison to earnings.
Now, different commodities, goods and services in different economic zones are going to have different relative costs to each other for the simple reason that they'll be in higher or lower demand by comparison to higher or lower supply. Housing in Australia for instance is very expensive because supply simply hasn't kept pace with demand. That said, in Australia for the purposes of your question;
A Big Mac is worth around 5 dollars,
A House is worth around $500k (rough median house price depending on where you live)
That means that a house is roughly 100k times the cost of a Big Mac.
Now, there are approximately 2000hrs in the average working year, and that means that if the average income is approx. 50,000 then the average worker gets around $25/hr, or one Big Mac every 12 minutes. Multiplying that out, a house will cost you 1,200,000 minutes, or 20,000 hrs, or 10 years working income.
So if you need a basic metric, then what ever your currency is, you can use this as a simple rule of thumb as to how many credits / ISK / bottle caps / gerbils your houses will cost. Whatever the average annual salary is in your country, multiply it by 10 and you should get a reasonable median house price.
Where you have an affluent society where resources are plentiful (read as cheap), dial down the ratio. Where you have massive population booms and lower resources, dial it up. If you have full employment, houses will be a little more expensive, but rents will be cheaper. If you have relatively high unemployment, houses will be cheaper but rents will be higher.
To conclude, I must stress this is NOT a precision algorithm; economics is a very complex subject as has been pointed out in several comments already, but this will get your dart on the board at least. It's a shotgun approach to a question that's asking for sniper precision but - it's a place to start.
The main thing that affects the price of anything is supply and demand (unless the government artificially caps the price or provides that thing).
What affects that supply and demand is greatly down to the society/nation you are designing.
If the population is rising, demand goes up. This can be affected by general living standards, level of & access to medical care and levels of emigration/immigration.
If houses are being built in places people want to live, supply goes up. This can be affected by available land, speed of building, availability and cost of materials & labour and transport links.
When demand is greater than supply then prices rise, but only to the point where people are able/willing to pay those prices. Trying to work that out alone gets very complicated, very fast and it's quite easy to start chasing your tail as relevant factors start affecting each other.
Let's just try running through two factors.
- What are the employment rates?
This affects not just what people can afford, but taxes if there are state payments to those not in work, average wages (which also affect labour costs of building houses and the amount people are willing to pay for housing), immigration/emigration (which as previously stated can affect demand), more money should mean better expected living standards (which affects the size, materials and ultimately the cost of new housing).
- What is the cost of everything else?
The other costs of living will determine how much money someone has left over to put into housing, but it is itself affected by employment rates & average wages and can affect immigration/emigration. But as more spending can lead to more jobs being created, we quickly get into circular knock on affects.
And this is all before we start considering credit.
The general takeaway from this is trying to work this out exactly is going to be hard and very complicated. You may just want to find a country with similar characteristics to the nation state you are building and mirror it (if possible).