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Section 4 Outcomes Outcomes Section 4 Section 4.6.1 above highlighted the lack of serviced building land as one of the most important disequilibrating factors in the Slovakian housing market. In order to address this problem, since 2001 the operational area boundaries of local authorities then made available to the housing market. In addition, the Housing Development Administration also contributes to increasing housing construction and finance by supporting the production of housing units through providing loans to housing co-operatives, local 4.7 Costs This Section examines the various issues that impact on the affordability of housing including: housing construction costs, mortgage interest rates and lending Luxembourg, construction costs per m 2 for apartments are lower than for single-family houses. This may be related to the more widespread use of industrial building methods in apartment construction. where all building land has been used up have been extended. Since real demand for housing is limited by the purchasing power of households and the supply of housing is limited by the availability of finance to developers, the government has recently initiated a number of reforms to the aspects of economic policy relevant to the accumulation of savings and the granting of mortgage loans. In addition loans are now available from the State Housing Development Fund authorities and key target groups who are in particular need. The key policy Statement relevant to equilibrating the housing market which has been produced by the UK government in recent years is: Sustainable Communities: Building for the Future. This Statement, published in 2003, aims to stabilise housing demand and supply in England by increasing the supply of high volumes and trends in house prices and rents. 4.7.1 Construction Costs Collating comprehensive data on housing construction costs across all European countries raises a number of difficulties. In several countries, data of this type are not collected, in others construction cost information is only available for State-subsidised housing, while the Where disaggregated data were available in relation to the construction costs of private and social housing, dwellings in the latter category cost less to build. This difference is the result of limits in the funding available for constructing social housing which usually results in ceilings on acceptable tender prices or some other cost control mechanism. 4.7.2 Mortgages for the construction of dwellings for rent and for the quality and affordable housing in areas of high methodology used to calculate construction costs also servicing of land for development. demand, addressing the shortage of housing in London varies internationally. The information that is available Details of mortgage interest rate trends in European and the South East of England by providing for major on housing construction costs in European countries is countries in recent years are provided in TABLE 4.7.2. The Turkish government’s five-year development plan, growth in new housing construction in the 4 growth summarised in TABLE 4.7.1. Variations in the banking systems and arrangements covering the period 2001 to 2005, involves a number areas and the regeneration of declining communities. for monitoring of lending by governments mean that of proposals intended to expedite the supply of In addition, measures also include addressing housing In several countries, including Belgium, the interest rate data for all of these countries may not be housing in this country. The plan includes the market decline, low demand and housing Netherlands, Finland and Sweden, annual house strictly comparable. Nevertheless, some significant following elements – the development of alternative abandonment in parts of the English Midlands and construction inflation has increased at a much stronger trends in mortgage interest rates in the countries under financing to encourage new house building and home North, improving the standard of social housing, rate in recent years than general consumer price review can be deduced from this table. owners and to address the housing needs of low- enhancing the efficiency of the planning system, inflation. Sweden provides a particularly acute example income groups, the formulation of plans to improve decentralising housing policy and planning by of this phenomenon. Building costs for new multi- For instance, in the vast majority of European land supply and the quality of residential developments empowering local and regional government and the family housing in this country increased by almost countries the average mortgage interest rate has in urban areas, the reorientation of public resources to protection of the countryside and improvement of local 70% between 1995 and 2002 while the consumer reduced substantially in recent years, to the extent that ensure more development land is serviced and the environments. This policy Statement is supported by price index only increased by 7% over the same in many cases it now stands at an historic low. In introduction of measures to prevent squatters and substantial resources of STG£22 billion over 3 years. period. However, Ireland and Germany are an Luxembourg interest rates have fallen from 7% in illegal housing. Additional measures include the exception to this trend. Building costs in Germany 1994 to 3.85% in 2003, while in some other countries control of construction materials to ensure high have declined in recent years, while in Ireland their this fall has been even more dramatic. For example, in building standards, reforms to educational systems to rate of increase was significantly below the general rate Ireland the interest rate on a standard variable ensure the availability of qualified construction of inflation. mortgage stood at 14% in 1994, whereas at the end of personnel and the introduction of measures to improve 2003, rates ranged from 3.3% to 3.6%. Similarly, the quality of the built environment and to protect the In most European countries there are significant between 1992 and 2003 interest rates in Portugal fell natural environment and historic structures. regional differences in house construction prices, with from 18% to 4.4%. Romania has not enjoyed such a prices in areas of expanding population and economic marked fall in interest rates as most other European In order to help achieve these objectives the Turkish growth (which are usually urban areas) rising at a countries. Interest rates in this country remain Housing Development Administration plans to build much faster rate than in declining areas (usually rural comparatively high, and more prone to fluctuation 100,000 houses for low and moderate income areas). Countries in the category include: Cyprus, the than is the norm in the rest of Europe. households by the end of 2004. Furthermore, in order Czech Republic, Finland, Germany and Sweden. to address the lack of availability of mortgages and Regional price differences are particularly marked in It is interesting to note that the timing of the period of finance for housing, highlighted in Section 4.6.1 above, Germany. Building costs in the federal States within the falling interest rates varies around Europe. In most of the Housing Development Administration has been former German Democratic Republic (GDR) are the countries which were EU members prior to 2002 developing alternative financing policies including substantially lower than in the rest of the country. interest rates started to fall in the early or mid 1990s. buying mortgages from financial institutions which are In many European countries, including Cyprus and As was mentioned in Section 4.5 above, in these 152 European Union Report Regular National Report on Housing Developments in European Countries 153
Section 4 Outcomes Outcomes Section 4 Table 4.7.1 Housing Construction Costs in European Countries, Various years Table 4.7.1 (continued) Country Year Category of Housing Cost Austria 2000 All dwellings €138,000 per dwelling; €1,402 per m 2 of floor area Belgium 1980 Cost of construction index for all dwellings (base 1980=100) 100 1985 111.6 1990 129.1 1995 145.9 2000 157.6 2002 168.8 Cyprus 1992 Average costs of all houses 147.60 CY£ per m 2 Average cost of all apartments 67.78 CY£ per m 2 Czech Republic 2000 Price per m 2 of floor space for all types of dwellings and extensions 23,040 CZK 2001 Price per m 2 of floor space for all types of dwellings and extensions 23,839 CZK 2002 Price per m 2 of floor space for all types of dwellings and extensions 24,705 CZK Denmark 2003 Land, labour and construction costs for non profit housing 14,302 DKK per m 2 Land, labour and construction costs for co-operative housing 13,940 DKK per m 2 Country Year Category of Housing Cost Spain 2001 Building cost index (Base 1990=100) Weighted consumption and labour: 141.50; labour prices:169.31; Materials and sundry consumables: 125.42 2001 Building cost index (Base 1990=100) Weighted consumption and labour: 143.82; labour prices:174.27; Materials and sundry consumables: 126.18 Sweden 2002 Average building cost for apartments nationally SEK 19.314 per m 2 Turkey 2004 Construction costs per m 2 4 storey apartments without elevators and/or heating system: US$215 per m 2 ; Apartments with an elevator and/or heating system of up to 150 m 2 : US$222; Single family houses between 150 m 2 - 450 m 2 : US$275 Single family houses of 450 m 2 : US$415 USD United Kingdom 2003 % annual change in the tender price index of social housing by the 3rd Quarter 9.5 Note: Data for the following countries were not available: Bulgaria, Greece, Hungary, Latvia, Malta, Poland. Estonia 2002 Total housing construction costs for all dwellings 1951 million kroons Finland 2003 All social housing €1 470 per m 2 France 1996 Cost of construction index (annual variation) 1.77 1997 2.39 1998 0.12 1999 11 2000 2.38 2001 3.57 2002 2.53 Germany 2002 Building costs for the construction of all new residential buildings €1,1800 per m 2 of gross floor space Ireland 2003 Average cost of construction for all dwellings €1,262 per m 2 excluding Value Added Tax (VAT) % annual growth in the house building cost index (all dwellings) 2.75 Italy Nav Building costs for all dwellings €214 per m 2 Lithuania 2003 Average cost of housing construction for all dwellings 2000LT- 2400LT per m 2 % annual construction price inflation rate 114 Luxembourg 2000 Price per m 2 Single family houses: €1,541; Apartments: €1,492 2001 Price per m 2 Single family houses: €1,597; Apartments: €1,489 Netherlands 1995 Housing construction costs per m 2 Social sector: €149; Private sector €155 2000 Housing construction costs per m 2 Social sector €165; Private sector €181 2002 Housing construction costs per m 2 Social sector €202; Private sector €219 Portugal Nav Cost controlled housing sector €366.03 per m 2 of gross area Romania Nav Cost of constructing dwellings under the rental housing for young people programme administered by the National Housing Agency Nav Cost of constructing owner occupied dwellings under the mortgage loans programme administered by the National Housing Agency Slovakia Nav Average acquisition costs for a social (local authority) rented dwelling SKK 20,000 per m 2 €200 per m 2 excluding Value Added Tax (VAT) €350 per m 2 excluding Value Added Tax (VAT) Nav Average acquisition costs for a privately owned dwelling SKK 30,000 – 40,000 per m 2 Slovenia Nav Building costs as a% of the total dwelling price 66.9 countries low interest rates have underpinned strong demand in the housing area. Greece is an exception to this rule as mortgage interest rates in this country only fell below 10% in 2000. In contrast, in the new EU members and the applicants for membership, the reduction in interest rates did not commence until the late 1990s. Between 1997 and 1998 mortgage interest rates from commercial banks in Poland averaged 25%, for example. They declined significantly in 1999 to between 16 and 18%, before falling again in 2001, when the Central Bank of Poland decreased interest rates further. In addition in several CEE countries, mortgage loans are commonly denominated in foreign currencies – in Romania for instance, US$ and € denominated mortgages are common. TABLE 4.7.2 demonstrates that, where this is the case, the interest rate levied on foreign currency denominated mortgages is commonly lower than that charged on mortgages which are denominated in the local currency. In many European countries falling rates and rising demand for housing have in turn contributed to a dramatic increase in the volume of mortgage lending. Trends in this regard are sketched in TABLE 4.7.3. This table indicates that the growth in the volume and value of mortgage lending between 2000 and 2003 has been particularly strong in: France, Ireland, Lithuania, Luxembourg, Poland, Portugal, Slovakia, Spain and the United Kingdom. In addition, information provided by the Estonian government indicates that the value of new housing loans issued in this country grew from 165 billion EEK in March 2000, to 808 billion EEK in September 2002. Similarly in Finland, the total amount of outstanding mortgages has been increasing annually by 10–16 percentage points since 1998. Despite this growth in mortgage lending in several of the Central and Eastern European countries examined in this review, specifically: the Czech Republic, Poland and Romania, and also in Greece, households have until recently faced significant difficulties in accessing mortgage finance. In the Czech Republic the number of households able to obtain a mortgage is limited, mainly by the high cost of new housing. Another restricting factor is the unwillingness of households to assume long-term debt in view of the uncertainty of their future household income. However, this latter factor is slowly changing and this, coupled with the decrease in interest rates, helps to explain why the volume of mortgage lending in this country has begun to grow in recent years. Poland has also seen a recent growth in mortgage lending. In 1998, credit accounted for 10% of total housing financing in this country. By 1999 the figure had risen to 15% while in 2002 it reached just under 26%. However, during the early and mid 1990s housing construction in this country was financed almost exclusively with cash and there was very little 154 European Union Report Regular National Report on Housing Developments in European Countries 155
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REGULAR NATIONAL REPORT ON SYNTHESI
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Regular National Report on Housing
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Table of Contents Table of Contents
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Definition of Terms New Member Stat
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Section 1 Introduction and Summary
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