"A Seoul apartment goes for 1 billion won." "Tokyo's a bit cheaper, I hear." Such statements leave out one crucial fact: how much people in that city earn in a year. The same 1 billion won weighs very differently on a household making 100 million a year than on one making 30 million. That is why the most common unit for comparing home prices across cities is the Price-to-Income Ratio (PIR).
What PIR is
PIR is exactly what its name says: home price divided by annual income. The formula is simple.
PIR = median home price / median household annual income
If a city's median home price is 600 million won and the median household income is 60 million won, the PIR is 10. You can read that number as "saving every penny of income with nothing spent, it would take about 10 years to buy a mid-range home." In reality living costs make the felt period far longer, but as a one-line summary of relative burden across cities, it is quite useful.
PIR is helpful because it aligns the units. Comparing a Seoul price in won with a New York price in dollars is confusing because of exchange rates. But PIR is a multiple — price divided by income — so the currency cancels out. That lets you measure different countries and currencies with one ruler.
A worked example
Let's follow some illustrative numbers. In City A the median apartment costs 800 million won and the median household income is 80 million won.
In neighboring City B the median home price is 500,000 dollars and the median household income is 100,000 dollars.
- PIR = 500,000 / 100,000 = 5
Comparing the two prices directly would require an FX conversion, and even then the income gap stays hidden. With PIR, City A is 10 and City B is 5, so it is plain at a glance that relative to income, A is about twice as burdensome as B. No currency, no exchange rate to worry about. That is the heart of aligning units.
What the Seoul–New York–Tokyo–London comparison suggests
When you look at city PIR tables from statistics sites or international bodies, a common pattern is that the inner-city PIR of major Asian cities tends to run relatively high. Dense, land-constrained centers like Seoul, Hong Kong, or central Tokyo easily push the price-to-income multiple upward. By contrast, sprawling U.S.-style metros, where prices fall quickly toward the outskirts, show large PIR spreads within a single city.
The lesson is clear: the feeling of "expensive" comes not from an absolute amount but from its relationship to income. By nominal price alone, Tokyo might look cheaper or pricier than Seoul, but placed alongside local incomes the ranking of burden can shift. The first step in price literacy is exactly this instinct — to compare, you must first align the units.
The limits of PIR — the same number isn't the same meaning
Stopping here is risky. PIR is powerful but full of traps. The same figure can mean very different things depending on how it was built.
1. "Median income" is defined many ways
Whether that median annual income is pre-tax or after-tax, household-level or individual, adjusted for household size or not, makes the value swing. Some sources use disposable income, others gross income, so placing PIRs from different sources side by side can be comparing apples to oranges.
2. Sample and price basis
"Median home price" also depends on the sample. New builds only or all transactions, apartments only or single-family homes included — the number changes. In low-transaction periods the sample can skew one way and distort the result.
3. The city-vs-nationwide trap
The most common mistake is mixing inner-city home prices with nationwide average income. Put an expensive downtown apartment price in the numerator and a national median income in the denominator, and PIR is inflated. Conversely, comparing a whole-metro average price against downtown incomes understates the burden. Always check that the "home" and the "income" cover the same geography.
PIR also fails to capture context like mortgage rates, dwelling size, and household structure. When rates are low, the same PIR may carry a lighter monthly payment, and when sizes differ, the premise of comparing "the same home" breaks down. PIR is a starting point, not a conclusion.
Wrap-up — align the units and you finally see
PIR turns the vague feeling of "expensive" into a single, comparable number, erasing currency and FX to measure with the shared ruler of income. But unless you know which income, which home, and which geography produced that number, a tidy-looking comparison can deepen misunderstanding instead. When reading city PIRs, always first ask: "did the numerator and denominator come from the same world?"
This article is educational and is not a recommendation to buy, sell, or hold any asset; figures reflect public records at publish time.
