How did they get so ridiculously pricey?
It’s a phenomenon that virtually every working professional is keenly aware of: Take any city where there are career opportunities and a strong concentration of culture, services and talent, and you can guarantee that the cost of living there is going to be astronomical.
But it wasn’t always like this. Throughout much of the twentieth century, cities that are now synonymous with astronomical price tags like New York, Hong Kong, and London were easily within the reach of people with even the most modest salaries. However, things have changed.
Those exact same cities now have average home prices of over $1 million, and you’ll struggle to even find a cup of coffee for less than $6. But what exactly is it that makes these global cities such expensive places to live? Let’s take a closer look at the factors at play.
Jobs and Salaries
The most obvious contributor to the high cost of big city living is jobs. Throughout history, good jobs with major career prospects have accumulated in large cities, where employers can depend on a rich and diverse local talent pool to get the people they want. This creates a cycle where more employers and more jobseekers congregate in the same city, pushing salaries up as those employers compete for the best workers. In addition, well-paying public sector jobs also tend to be highly concentrated in a handful of cities, making those places attractive to ambitious and talented graduates.
Real Estate Premiums
One of the hardest things about living in a big city is real estate costs. Big cities are by definition crowded most of the time, which drives up the cost of real estate. This is then aggravated by the slow pace at which the building of new homes tends to take place, which rarely keeps up with the actual population growth of a city. Of course, there are ways to keep mortgage costs down when attempting to pursue the dream of homeownership in a large city. For example, the free online mortgage advice platform Trussle offers city dwellers advice on how they can secure lower interest rates on their mortgage, potentially saving thousands. Solutions such as this will likely become increasingly common in the future as more and more people attempt to buy in the biggest cities.
Virtually every product that you buy in a big city is likely to be affected by higher taxes that are imposed on a local level. Local governments know that providing services to a very large population, including healthcare, education, sanitation, and transport, is very, very expensive. Therefore, taxes need to be high enough to actually pay for those services. In addition, people living in expensive cities almost always earn more for their work than they would somewhere smaller, meaning that the government is able to stipulate higher taxes than they would elsewhere. All of this affects the cost of your food, coffee, alcohol, deodorant, bus tickets, and just about anything else you can think of.
Although big cities can be crushingly expensive, the people that live in them clearly understand that the cost is worth it.