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Section 4 Outcomes Outcomes Section 4 Table 4.7.5 Regional Variations in House Prices In European Countries Country Category Region Price Belgium Average sale price of owner occupied dwellings (€ million) 2002 Brussels Capital 130,756 Flanders 95,770 Wallonia 74,191 Czech Republic Average purchase price per m 2 of dwelling (CZK) 2002 Nationwide 7,663 Prague 24,150 Finland Average sale price per m 2 for apartments, 2003 (€) Helsinki metropolitan area 2,309 outside the Helsinki metropolitan area 1,118 Germany Average sale price per m 2 for owner occupied apartments, 2003 (€) Regions in the former Federal Republic of Germany 2,076 Regions in the former Germany Democratic Republic 1,400 and 1,500 Ireland Average sale price of second hand dwellings, 2003 (€) Whole country 264,898 Dublin 355,451 Italy Average weighted prices per m 2 , 2003 (€) City centres 2,260 City suburbs 1,190 Small towns Spain Average sale price of dwellings per m 2 2002 (€) National average 1.220.9 Madrid region 2,001.6 Barcelona region 1,838 Note: Data for the following countries are not available: Austria, Bulgaria, Cyprus, Denmark, Estonia, France, Greece, Hungary, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Sweden, Turkey United Kingdom. prices in Sweden increased by just 10 points between 1999 and 2002. House price inflation did not impact evenly on all sectors of the housing market in these countries, but varied on a regional basis. As would be expected, in most European countries residential property prices are significantly higher in cities than in rural areas. In addition, prices vary significantly between the west and the east of Germany. The available information on this issue is summarised in TABLE 4.7.5. 4.7.4 Rents Information on trends in residential rents are available for only a minority of the countries examined in this review. In particular, relatively few of the new EU member States and applicant countries collect data on rents. The countries for which data on rent inflation are available fall into two distinct categories: those where rents have increased significantly in recent years and those where rent inflation is moderate at the current time. Particularly detailed data on regional variations in rents are available for Austria. These data clearly indicate that Austria is in the low rent category. Rents countrywide increased by 1.7% between the beginning of April 2001 and the end of March 2002, which is less than the general rate of price inflation. During this period Burgenland was the region with the highest rate of price inflation, as rents here increased by 2.1%. The available information indicates that the majority of European countries also fall into this moderate rent inflation category. For instance, in Ireland the rate of increase in private sector rents had fallen in recent years and in Finland rents have increased between 3% and 4% annually in recent years. The average rent in the free market sector in this country is currently €8.5 per m 2 per month (€11.26 per m 2 per month in the Helsinki metropolitan area and €7.57 per m 2 per month in the rest of the country) and in the social housing sector it is €7.16 per m 2 per month (€8.13 per m 2 per month in the Helsinki metropolitan area and €6.8 per m 2 per month elsewhere). The pace of rent inflation in both the private and the social rented sectors in France has also slowed considerably in recent years. Rents in this country grew by 6.7% in the private sector, and by 6.2% in the social sector between 1985 and 1986. Rent inflation then fell steadily over the following decade, reaching a low of 1.2% in the social sector and 1.4% in the private sector in 1999/2000. This decline reversed somewhat between 2002 and 2003, as during this period rents increased by 3.3% in the private sector and 2.9% in the social sector. As would be expected in view of the falling demand for rented housing in Germany, rents in this country have been increasing only moderately in recent years and in some areas have decreased slightly. The principal exceptions to this trend are the expanding cities in the west of the country such as: Munich, Frankfurt and Cologne. At the same time, like most other aspects of the German housing market, rents vary between the regions located in the former German Democratic Republic and the rest of the country. Data collected in April 2002 found that the ‘gross cold rent’ per m 2 (net rent plus running costs but excluding heating and hot water costs) paid by households in the former GDR region was €5.29, which is 88% of the equivalent figure for rest of the country. Gross cold rent for the country as a whole was approximately €5.93 per m 2 at this time. Greece saw very significant rent inflation in the early 1990s. The real price index (adjusted for inflation) indicates that rents in urban areas grew by 23.2% between 1990 to 1994. However, falling demand reduced the pace of rent inflation in the mid to late 1990s, and as a result urban rents grew by 36% in real terms between 1990 and 2000. In Spain, rents grew by 4.25% between 2000 and 2001 and by 4.36% between 2001 and 2002. Similarly in the Netherlands, social rents grew by 7% and private rents grew by 5% between 2000 and 2002, while house price inflation during the same period was 13%. In a minority of European countries rents have increased at a much more substantial pace in recent years. In Belgium, for instance, between 1999 and 2002, the index of consumer prices in this country rose by 25% while the rent index rose by 38%. Data from the Czech Statistical Office indicate that between December 1999 and January 2004 regulated rent increased by approximately 18%. Despite the fact that in Italy the number of families who live in rented accommodation continues to decrease, the amount paid in rent has risen to €279 per month. In Latvia apartment rents have also increased significantly during the 1990s – from an average of US$12.7 per month in 1993 to US$27.4 per month in 2001. Rents in Sweden have increased at a much faster pace than house prices over the last decade. Between 1990 and 2002 the index of rents increased by 83 points, while the house price index increased by only 49 points over the same period, which is likely related to the low output of housing for rent. In the UK the average rent has increased from STG£40 per week in 1990, to STG£79 per week in 1997/1998 to STG£110 per week in 2002/2003. In the case of a number of other countries, data on rents are only available for a single year, although these data reveal some interesting variations in the rents paid in different segments of the housing market and sections of the population. In the case of Luxembourg, for instance, in 2001 the average monthly rent was €475, or €4.80 per m 2 , which constitutes 22% of household income on average. In the same year average rent paid for houses in this country was €490 or 4.50 per m 2 per month, which is slightly higher than the average monthly apartment rent of €448 or €4.50 per m 2 . In Malta 51.35% of the population paid between 1 and 50 MTL in rent per month in 1995, while a further 28.63% paid between 51 and 100 MTL and only 5.23% paid more than 300 MTL. These very low average rents reflect the high proportion of rent-controlled dwellings in the Maltese housing market. Data collected in the third quarter of 2000 indicate that the average rent in Slovakia was 114 SKK per month, which constitutes only 1.6% of the average income during the same period. This phenomenon is due to the relatively low proportion of unregulated private sector tenancies in the Slovakian housing market. 160 European Union Report Regular National Report on Housing Developments in European Countries 161
Section 4 Outcomes Outcomes Section 4 4.8 Affordability Section 4.7 above examined the various expenses associated with the acquisition of housing including mortgages, rents and construction costs. This Section compares these various expenses to household incomes in order to assess the extent of housing affordability in European countries. In addition, it highlights any significant affordability problems in particular housing tenures or for specific groups within the populations of the countries under examination. 4.8.1 Macro-Level Affordability Trends Table 4.8.1 The available information regarding the percentage of household income of expenditure which European households devote to housing costs is detailed in TABLE 4.8.1 and summarised in diagrammatic form in FIGURE 4.81.. As is evident in this table, the different countries under examination employ a range of methodologies to assess housing affordability – some compare expenditure on housing to total household expenditure; others compare it to household income. In addition, definitions of what constitutes housing expenditure vary across Europe. This raises obvious problems in comparing housing affordability levels in different European countries. Nevertheless, one clear trend is evident from the information presented in the table. This is that the proportion of household income or expenditure devoted to housing costs is significantly higher in those Country Category Year Average % Austria Share of total expenditure devoted to housing costs (including heating) 2003 24.5 Belgium Share of total expenditure devoted to housing costs (including heating and light) 2001 26.6 Czech Republic Housing expenditure as a% of net income for average households 2001 17.2 Denmark Housing as a % of total consumption costs 1999/2000 22 Estonia Share of total household expenditure devoted to housing Nav 16 France % of total household income devoted to housing 2002 22.5 Germany % of household income devoted to rent and running costs, excluding heating and hot water supply 2001 21.7 Italy Housing expenditure as a% of household income 2002 24.7 Lithuania % of household net income devoted to housing costs Nav 18 Malta % of household income devoted to housing and energy costs 2000 8.4 Netherlands Net rent as a % of household income 2002 24 Net mortgage payment as a % of household income 2002 16.8 Poland % of household expenditure devoted to housing, water, electricity, gas and other fuels 2001 24.8 Portugal % of household expenditure devoted to housing, heating and lighting costs 2000 19.8 Slovakia % of household income devoted to rent, maintenance and repair and housing services including electricity, heating and hot water 2004 19.6 Slovenia % of net household income devoted to housing costs Nav 10.8 Spain % of gross household income devoted to housing expenditure 2002 18.31 Sweden Share of Household Income or Expenditure Devoted to Housing Costs in European Countries, Various Years Net expenditure on housing (= minus subsidies, housing allowance and tax reductions) as % of household disposable income 2002 22 United Kingdom Mean household expenditure on rent and mortgage as a percentage of disposable income Nav 9.64 Note: Data for the following countries are not available: Bulgaria, Cyprus, Finland, Greece, Hungary, Ireland, Latvia, Luxembourg, Romania and Turkey. countries which were EU members prior to 2004 than in the new member States and in the applicant counties. In Austria, Belgium, Denmark, France, Germany, Italy and Sweden, households devote between 22 and 26.6% of their total income or expenditure to housing costs. Similarly, in the Netherlands, in 2002 net rental costs accounted for 24% of household income, although net expenditure on mortgage payments was less than this – 16.8% of household income. Housing affordability levels in Spain and Portugal are slightly better than the norm among the longstanding EU members. In 2002, Spanish households devoted 18.31% of their gross household income to housing expenditure, while In 2000, expenditure on housing, heating and lighting costs accounted for 19.8% of the total expenditure of Portuguese households. TABLE 4.8.1 indicates that the United Kingdom is unusual amongst the long-standing EU members in terms of the low proportion of mean household expenditure devoted to housing costs. Similarly, Malta and Slovenia are distinguished by the particularly low percentage of household income devoted to housing – which is below 11% in both cases. In addition, in the Czech Republic, Estonia, Lithuania and Slovakia, households have devoted an average of between 16 and 19.6% of their income or expenditure to housing costs in recent years. Compared to their counterparts in the rest of Central and Eastern Europe, Polish households are unusual in terms of the high proportion of household expenditure which is devoted to housing costs – in 2001 24.8% of their expenditure was devoted to this area. 4.8.2 Micro-Level Affordability Trends The available information regarding the percentage of household income or expenditure which European households in the different income categories devote to housing costs is outlined in TABLE 4.8.2. Although the difficulties inherent in comparing housing affordability data in different European countries mentioned in Section 4.8.1 above also apply to this table, Figure 4.8.1 Share of Household Income or Expenditure Devoted to Housing Costs in European Countries, Various Years Malta United Kingdom Slovenia Estonia Czech Republic Lithuania Slovakia Portugal Netherlands Germany Sweden Denmark France Italy Poland Austria Belgium 9.69 Note: this graph is derived from the data presented in Table 4.8.1. Data for the following countries are not available: Bulgaria, Cyprus, Finland, Greece, Hungary, Ireland, Latvia, Luxembourg, Romania and Turkey. 8.4 10.8 21 nevertheless it highlights some significant international trends in relation to housing affordability among different income groups. For instance, in a vast majority of the countries that are examined in this table, households with incomes in the bottom two deciles of the income scale devote a higher proportion of their income or expenditure to housing costs than their higher income counterparts. The countries in this category are: Belgium, Denmark, Finland, France, Luxembourg, Malta, the Netherlands, Slovenia and the United Kingdom. By contrast, Ireland, Lithuania and Spain are relatively unusual in European terms insofar as lower income households in these countries devote a lower proportion of their income or expenditure to housing than wealthier households do. 16 17.2 18 19.6 19.8 21.7 22 22 22.5 24.7 24.8 24.5 26.6 0 5 10 15 20 25 30 162 European Union Report Regular National Report on Housing Developments in European Countries 163
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