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Section 1 Introduction and Summary Introduction and Summary Section 1 Table 1.4.6 Mortgage Interest Rates in European Countries, Various Years Table 1.4.7 House Prices in European Countries, 1999-2003 Country Year Mortgage Interest Rate (%) Austria 2002 Average 5.13; 1 year fixed rate: 5.16 to 5.92; 1 to 5 year fixed rate: 4.58 to 4.94; more than 5 year fixed rate: 4.86 to 5.39 Belgium 1999 20 year fixed rate: 7.4; 10 year fixed rate: 6.55 2002 20 year fixed rate: 5.62; 10 year fixed rate:6.10 2004 Variable rate: vary from 3.5 to 6.5 Bulgaria 2000 4 2001 4.6 2001 4 Cyprus Recent years From 6 to 8 Czech Republic 2002 6.2 Estonia 2003 Beginning of the year: 7.4 (EEK denominated), 6.8 (€ denominated). End of the year: 4.6 (EEK denominated), 5.3 (€ denominated) Finland 2004 Rate in January: 3.21 (new mortgages), 3.51 (existing mortgages) France 1998 6.60 to 6.10 2000 6.4 to 5.90 2002 62 to 5.89 2003 3.55 to 5.20 Greece 2001 6.5 (standard nominal floating rate) Germany 2003 Rate for 10 year mortgage loans: 5 Ireland 2002 End of the year, standard variable mortgage rate: 3.85 to 4.7 2003 End of the year, standard variable mortgage rate: 3.3 to 3.6 Italy Nav 20 year fixed rate: 5.50 to 6.50; variable rate 3.30 to 4; mixed rate: 4 to 5.50 Latvia Nav 20 year mortgage for 75 to 85% of the property value: 6.5 to 12. Lithuania 2003 3.5 to 4.5 Luxembourg 2003 Interest rate for commercial mortgages in August: 3.85; interest rate for social loans in August: 2.85 Malta 2004 Base interest rate: 3 Netherlands 2003 Interest rate for a 10 year State loan: 4.1 Poland 2002 Central bank discount interest rate: 5.75; Commercial bank interest rates: 7 Portugal 2001 6.1 2002 5 2003 4.4 Romania 2004 ROL denominated mortgages: 17 to 35; € denominated mortgages: 7.5 to 14; US$ denominated mortgages: 7.18 –12.5 Slovakia 2001 Average lending rate of commercial banks: 10.22 Country Category 1999 2000 2001 2002 2003 Belgium Number of dwellings sold 75,469 69,082 68,276 70,893 Nav Average sale price (€) 76,800 79,700 83,600 89,100 Nav Czech Republic Average purchase price per m_ for family homes (CZK) Nav 948 1,006 1,110 Nav Denmark Single family houses (1,000 DKK) 955 1,047 1,105 1,144 Nav Owner occupied apartments (1,000 DKK) 716 810 908 984 Nav Finland Annual nominal price increase (%) Nav Nav Nav 8 6 France Average price per m_ for apartments (€) 1,965 2,025 2,114 2,245 Nav Sale price of single family houses (€) 136,700 154,300 159,600 172,000 Nav Ireland Average sale price of new dwellings (€) 148,521 169,191 182,863 198,087 224,567 Average sale price of second hand dwellings (€) 163,316 190,550 206,117 227,799 264,898 Italy Increase in real estate purchase prices (%) Nav Nav Nav 8 3 Latvia Average apartment price – 1 room, cities (LVL) Nav Nav Nav Nav 9,200 Average apartment price – 2 rooms, cities (LVL) Nav Nav Nav Nav 20,450 Average apartment price, 3 rooms, cities (LVL) Nav Nav Nav Nav 28,150 Luxembourg Price of single family houses (excluding land) Nav 269,200 279,900 Nav Nav Price of apartments (excluding land) Nav 122,000 125,800 Nav Nav Malta Average sale price – all dwelling types (MTL) Nav 67,250 Nav Nav Nav Netherlands Average sale price of owner occupied dwellings (€) Nav 197,000 Nav 223,000 Nav Spain National average price per m 2 – all dwellings (€) Nav 907.2 1,046.9 1,220.9 Nav Sweden Change in index of house prices (base 1990 = 100) 117 130 140 149 Nav United Kingdom Change in index of house prices, first quarter (base Q1 2000=100) 72.1 83.6 92.1 100 123.4 Note: Data for the following countries are not available: Austria, Bulgaria, Cyprus, Estonia, Greece, Germany, Lithuania, Poland, Portugal, Romania, Slovakia, Slovenia and Turkey. 2002 Average lending rate of commercial banks: 9.43 2003 Average lending rate of commercial banks: 8.1 Spain 2001 effective mean mortgage interest rate for all credit institutions: 4.852 2002 effective mean mortgage interest rate for all credit institutions: 4.380 2002 effective mean mortgage interest rate for all credit institutions: 3.458 Sweden 2002 Central bank interest rate for February: 2.5 Turkey Nav 12 months: 2.25; 24 months: 2.45; 36 months: 2.15 United Kingdom 2000 Bank of England Base Interest Rate: 6.0 2001 Bank of England Base Interest Rate: 4.0 2002 Bank of England Base Interest Rate: 4.0 Note: Data for the following countries are not available: Denmark, Hungary, Slovenia. In some countries a significant proportion of mortgages are denominated in foreign currencies. Where this is the case details of the interest rates levied on mortgages of this type are also supplied. A significant number of countries did not specify whether mortgage interest rates were fixed or variable. the data is that the proportion on household income devoted to housing costs is significantly higher in the long-standing 15 EU member States than in the new member States and applicant countries. However, additional information examined in Section 4 of this report indicates that, in terms of housing affordability, these two regions of Europe are converging. Section 4 also reveals that in most European countries lowincome households devote a higher proportion of their income to housing costs than their higher income counterparts. The high levels of owner occupation in a majority of European countries mean that mortgage interest rates and house prices are a key determinant of housing affordability. TABLE 1.4.6 illustrates the recent trends in relation to the first of these issues. It reveals that there has been a substantial reduction in interest rates in many of the long-standing EU member States, to the extent that in some cases interest rates are currently at a historic low. The timing of these reductions in mortgage interest rates is coincident with the adoption 16 European Union Report Regular National Report on Housing Developments in European Countries 17
Section 1 Introduction and Summary of the Euro as a single currency by 12 of the countries under Table 1.4.8 Proportion of State Expenditure devoted to Housing in European Countries, Various Years examination and also with falling interest rates at the global level. This trend has in turn underpinned strong demand for housing and has contributed to a marked increase in the volume of mortgage lending. However, TABLE 1.4.7 reveals that in many cases it has also driven inflation in house prices. A number of countries, including Ireland, Spain and the United Kingdom experienced very high levels of house price inflation between 2000 and 2003. As is explained in Section 4 of this report, despite the growth in mortgage lending, the new EU member States in Central and Eastern Europe are distinguished by an underdeveloped and embryonic mortgage market system, restricting access to private housing for the majority of their Country Bulgaria Denmark Finland Latvia Luxembourg Malta Poland Romania Slovakia Spain Year Early 2000s 2003 2001 Early 2000s 2004 2003 2002 2004 2004 2003 % State expenditure allocated to housing 1 1.9 4.4 5.4 1.3 0.4 0.9 1.3 2.5 2.6 population seeking to enter the housing market. Note: Data for Latvia may not be as comparable to other countries as the categories amenities and environmental protection are included with housing in terms of State expenditure. Data for the following countries are not available: Austria, Belgium, Cyprus, Czech Republic, Estonia, France, Greece, Germany, Hungary, Ireland, Italy, Lithuania, Netherlands, Portugal, Sweden, Turkey and the United Kingdom. Public investment in housing is obviously related to the policy developments discussed earlier in this Section. In recent years, total government expenditure on housing has increased but at the same time, direct State expenditure on housing has declined, in favour of the growth of indirect expenditure, either through Statesecured loans or tax incentives. The recent increase in public investment has been mainly channelled into increasing the supply of social and private rented housing, renovation measures and government intervention in mortgage lending. The proportion of total State investment that is allocated to housing varies considerably between the countries reviewed. TABLE 1.4.8 illustrates the differing proportion of total State expenditure that is directed towards housing in the European countries for which data are available. 18 European Union Report
Page 1 and 2: REGULAR NATIONAL REPORT ON SYNTHESI
Page 3 and 4: Regular National Report on Housing
Page 5 and 6: Table of Contents Table of Contents
Page 7 and 8: Definition of Terms New Member Stat
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Page 19 and 20: Section 2 Context Context Section 2
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Section 3 Policies Policies Section
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Section 3 Policies 3.7.2 Expected M
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Section 4 Outcomes Outcomes Section
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Appendix 1 Members of European Hous
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Appendix 2 Questionnaire 4.4 Housin
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