Introduction
In this document, I will investigate the cost of living for four cities that I am fairly familiar with, Cincinnati, Wenzhou (China), Seoul (South Korea), Detroit. I scraped the data from NUMBEO, which is the largest free cost of living database for personal usage. The collection of cost of living data replies on user inputs and manually collected data from authoritative sources (websites of supermarkets, taxi company websites, governmental institutions, newspaper articles, other surveys, etc.). I will explore the relationship between salary and housing price (specifically buying) in four cities. All prices are represented in U.S. dollars for easier comparison.
Below is a quick city guide.
| City Name | Population | Famous for |
|---|---|---|
| Cincinnati | 301,394 | First baseball team in America; Iconic chili |
| Wenzhou | 9,190,000 | Spectacles industry; Seafood |
| Seoul | 9,776,000 | 50% of total South Korea population; Technologically advanced |
| Detroit | 674,841 | Birthplace of the modern automobile; musical icons |
Data Preview
The data has 56 observations and 5 variables. Since NUMBEO provides information like Average Monthly Net Salary (After Tax) and Price per Square Feet to Buy Apartment in City Centre, I am curious to find out how many square feet average people can afford with monthly salary.
Most Expensive Categories
I sorted the cost of living categories, using Cincinnati as the baseline measure. The three biggest common costs of living categories are transportation(new vehicle purchases specifically), Education(although the international primary school wouldn’t be the top choice for most people), and housing (renting and buying). It is worth noting I believe the international primary school(usually private schools) estimated cost for Cincinnati is much lower than the actual. Despite lower monthly net salaries, both Asian cities have more expensive apartments in the city center, especially Seoul.
Least Expensive Categories
I then sorted the least expensive cost-of-living categories and noticed Seoul’s produce prices are relatively higher than other cities. This is mainly due to its relatively limited agricultural potential, forcing the country to rely quite heavily on imported foods (around 70% of its needs).
Why I am Curious about Housing Prices
The reason why I wanted to look into the sq ft. average people can afford monthly is due to the low fertility rate in China and South Korea. The lack of affordable housing is a critical factor directly contributing to the super-low fertility rate (0.64) in Seoul and large cities in China. I selected the rows of data needed, then calculate the result of monthly salary divided by Price per sq ft. Overall, we can see a trend of higher housing prices within the city center than outside across these four cities.
| Sq.ft average people can afford monthly | Cincinnati | Wenzhou | Seoul | Detroit |
|---|---|---|---|---|
| Apartment in City Centre | 16.31 | 2.48 | 1.33 | 28.42 |
| Apartment outside of centre | 49 | 3.44 | 2.71 | 54.93 |
How about renting?
If buying is not a feasible option, how about renting? 1 bedroom apartments in the city center take about 35% of one person’s monthly salary among four cities, while apartments outside of city center take about 25% on average. Assuming there are two income earners for 3 bedroom apartments, the rent to income ratio is also similar - 36% for the city center, and 25% for outside of city center. The highest rent-to-income ratio is from 3 bedroom apartments outside Seoul, which is 45%, assuming there are two breadwinners in the household. In recent years, South Korea has taken various types of approaches to fix the demographic crisis, from subsidized housing and even free rent for two children.
Further Validation
I would like to find out to what extent rent/housing price can influence the overall cost of living index for different cities. First of all, I will need to acquire more cost of living data for more cities, then a simple linear regression will be helpful to see the effect of housing on the overall index.