Who is going to be benefited from increasing house prices?

When a country’s housing prices increase dramatically, people may worry about a widening wealth gap due to this change. However, this depends on the structure of the overall society. Different social classes have different asset structures. Based on people’s different asset structures, those whose real estates are their greatest proportions of assets will be benefitted the most and those who do not have many real estates will be benefitted the least.

In general, the poorest people will always be isolated from the benefits brought by any type of asset appreciation, because they do not hold sufficient assets to take advantage of asset appreciation and some of them may be in debt. Then we need to distinguish the asset structure differences between the middle classes and the wealthy classes who are considered to control the 90% of the overall wealth in the society. The traditional wealthy classes, of course, hold lots of real estates; however, the rising stars from the technology sector hold significantly more equities than real estates in terms of their asset holding. For example, Bill Gates (Microsoft founder), Jeff Bezos (Amazon CEO), Mark Zuckerberg (Facebook co-founder) are well-known wealthiest men in the world, and their wealth is built by the values of the shares they hold. Jeff Bezos surpassed Bill Gates to become the world riches man when Amazon share price rose dramatically at an incredible rate at the time in 2017. Under such circumstance, the housing price increase does not affect these wealthy people’s wealth significantly. However, many middle-class people have a relatively large proportion of real estates in their asset holding. Of course, there are differences between middle-class individuals. Wealthier people tend to have more diversified asset holdings, which mean they tend to hold smaller proportions of real estates in their asset holdings.

Based on a rough and general picture of the asset structures, increasing house prices actually can narrow the wealth gap within the society, especially the gap between the middle class and the wealthy class. However, the poorest people are still left behind and become even more isolated as their distance from becoming middle class is widened.