It seems that we're slowly heading to a place where salaries are going to be much lower, because of less working hours and loss of the kinds of jobs that paid a good living wage. Or those same jobs will just pay a lower salary. It could be good or bad. The good part is, less buying. Less shopping. Smaller homes. Lower needs. etc. The bad part, all of that part of the economy that was depending those incomes is going…
House prices not necessarily. House prices are driven by demand and by ability to borrow. If everyone takes a pay cut, everyone can pay less and house prices should go down. The only reason house prices have gone so silly recently is insanely cheap credit has let everyone bid against each other to drive house prices up.
Just an example: In Berlin you will pay around 850.000EUR for a newly-built single family home of around 160qm on a 600qm plot. With realistic interest rates of around 1.5 to 1.8% it will take you around 4.8% per year to pay this off in the (roughly) 25 to 30 years you have left of working years if you are a mid-thirties professional. This (conveniently) gives you a factor of 0.004 per month to pay for this house. That's a whopping 3400EUR per month.
Now normally you should not pay more than 33% of your net income for living. That means, such a house is affordable, even with the relatively low interest rates, for families with a net income of 10kEUR per month. How many mid-thirty families have that kind of income?
So what drives these prices is actually inherited wealth. Inherit real estate and you can cut that price easily in half. 1700EUR a month is much more reasonable and that does not even account for the even better interest rates you will see. Notably you just transfer your inherited wealth, you do not lose it.