SHARE
COPY LINK
For members

PROPERTY

REVEALED: Where in Europe have house prices and rent costs increased the most?

Is it time to buy a property in Italy, Cyprus or Greece? House prices have shot up across Europe in recent years but there are major differences between certain countries.

REVEALED: Where in Europe have house prices and rent costs increased the most?
Italy is one of the few countries where property prices have decreased compared to 2010. (Photo by Nils Schirmer on Unsplash)

House prices have risen by an eye-watering 45 percent, and rents by 17 percent, across the EU since 2010, the latest figures released by the EU statistical office Eurostat reveal.

However, there are major differences among countries. In Austria, house prices have more than doubled and rents have increased by 45 percent compared to over a decade ago. In other countries, they have stalled or declined over the same period.

Greece is a notable example, with prices plummeting by 23 percent and rents by 25 percent between 2010 and 2021.

In Italy, house prices have fallen over overall since 2010 although like much of the EU they have been rising again in recent years.  Rent prices in Italy have registered only a modest increase, while Spain has recorded very small rises in both rents and house prices.

Here is the situation in the countries covered by The Local, according to Eurostat.

Finding a new home abroad?

Between 2010 and the first quarter of 2022, house prices have more than doubled in Austria (+114 percent) and have grown even more in Estonia, Hungary, Luxembourg, the Czech Republic, Latvia and Lithuania.

READ ALSO: EXPLAINED: What you need to know about buying property in Germany

In Germany, house prices shot up by a hefty 94 percent, in Sweden by 92 percent and in Norway by 91 percent.

Denmark (59 percent) and France (29 percent) also recorded double-digit growth.

Spain was the country with the smallest rise, 3 percent, among those countries covered by The Local.

Over the same period, prices have declined in Italy (-10 percent), Cyprus (-8 percent) and Greece (-23 percent).

READ ALSO: EXPLAINED: The hidden costs of buying a home in Italy

According to Italian real estate agency Tecnocasa, house prices in the country are now 29 percent lower than in 2010, even though a slow upward trend started in 2017. Only Milan bucks the trend, with an 8.5 percent increase between 2010 and 2021.

The reasons behind these data, according to Fabiana Migliola, director of Tecnocasa’s research unit, are dwindling salaries and low capital availability, with most buyers being able to afford properties of up to €250,000.

“Of course, a modest growth of real estate and lower prices compared to many other countries inside and outside of Europe make our country attractive to investors,” Migliola said. “This is a phenomenon we have recorded above all in the holiday home market, as 2021 signalled an increase in the number of holiday homes purchased by foreign buyers, especially from the US, France and Eastern Europe.”

2022 could be a year of adjustment, she continued, but rising interest rates could have an impact on buyers who finance their home purchases with a mortgage.

Looking at prices, the agency forecasts a recovery with a rise between 2 and 4 percent, with high demand currently from Italians.

Scaffolding on a high-rise apartment block

Austria has seen the highest average rent increase over the last 12 years. (Photo: Tobias SCHWARZ / AFP)

Where is it cheaper to rent?

Rents have not risen quite as much as house prices, but they have risen steadily since 2010.

Between 2010 and 2022, rent increased by 17 percent on average across the EU. The highest growth among the countries covered by The Local was in Austria, with a whopping 45 percent rise. Denmark (21 percent), Sweden (21 percent), Germany (17 percent) and Switzerland (10 percent) also experienced a double-digit rise.

READ ALSO: Property: How to find a rental flat when you arrive in Austria

Increases were more modest in Italy (7 percent), Spain (5 percent) and France (8 percent).

The highest growth was in Estonia (177 percent), Lithuania (127 percent) and Ireland (77 percent).

On the other hand, in Greece, rents decreased by a quarter over the period, and Cyprus recorded a -1 percent.

The problem of affordability

While average increase rates only give a partial picture of the real estate market, an additional indicator cited by Eurostat is the housing cost overburden rate, the percentage of people spending 40 percent or more of their disposable income on housing.

READ ALSO: 5 of the most affordable places to buy property in France

Despite its plummeting house prices and rents, Greece had the highest rate in 2020, with one in three people (33.3 percent) spending 40 percent or more of their income on housing.

Other European countries with a high-cost overburden rate are Denmark (14 percent) and Switzerland (14 percent).

Just below the 10 percent line stand Norway and Germany (9 percent), Spain (8 percent), Sweden (8 percent) and Italy (7 percent).

Despite the significant rise, Austria has a relatively low-cost overburden rate, at 6 percent.

How has Brexit impacted British buyers?

For British citizens, Brexit may have added difficulties to the purchase of properties in EU locations. Countries such as Austria have specific restrictions for non-EU citizens and where there are no restrictions, higher taxes and new immigration rules may result in fewer British buyers entering the market.

In Spain, it was reported this week that purchases by British residents, which used to make up almost a quarter of all transactions (24 percent), now only account for 12 percent.

However, a recent survey among 900 British buyers found that only 4 percent had given up plans to purchase a property abroad due to the difficulties caused by Brexit and the Covid-19 pandemic. Some 11 percent went ahead as planned last year and 85 percent are still planning to buy.

Useful links:

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

PROPERTY

IN CHARTS: How bad is the situation in Scandinavian housing markets?

House prices in the Nordic countries are now down double digits from their peak. How much further have they got to fall and what might that do to the Nordic economies?

IN CHARTS: How bad is the situation in Scandinavian housing markets?

The price of residential property peaked in Sweden and Denmark in June last year, and in August in Norway.

Since then, Sweden has seen the biggest falls, with the price of homes overall dropping by 16.8 percent, detached houses by 18.6 percent, and apartments by 13.8 percent, according to the Booli! price reporting service

Norway has seen slightly less steep falls, with the average price of a home falling from 4.6 million kroner in August 2022 to 4 million kroner at the end of December, a fall of about 13 percent. The seasonally adjusted figures used by the country’s national bank indicate a much lower 2.6 percent fall between August and December 14th. 

Denmark has so far come off the most lightly, with the price of apartments down 10 percent and the price of houses down 9 percent.

“It’s really the effect of higher interest rates that is driving down house prices, which is completely by the book,” Las Olsen, chief economist at Danske Bank, told The Local. “Higher funding costs naturally lead to lower house prices. And the increase in interest rates that we’ve seen over the last year is very large and that means that the pressure on house prices is also very high.”

Housing costs in all three Scandinavian countries were high by European standards before rates began to rise, explaining why the region has been relatively hard hit.

An analysis by Eurostat, using 2021 figures, showed that housing costs, including gas, electricity and water, were higher than in most other comparable countries, with housing costs in Denmark beaten only by countries like Switzerland and Ireland. Housing costs in Sweden and Norway were slightly lower.

When Eurostat looked at what percentage of household disposable income was spent on housing in 2021, Denmark and Sweden were also both at the high end. Norway was not included in the study.

Olsen said the situation in the housing market before rates started to go up explained why prices had so far fallen most heavily in Sweden.

“Swedish house prices have dropped quite a bit more than what we see in Denmark and Norway, even though the Swedish interest rate increases are not substantially bigger,” he said. “This reflects, for one thing, the fact that Swedish house prices were probably a bit more highly valued going into this period of higher interest rates.”

A report by the European Systemic Risk Board, published in December 2022 and based on data from the second three months of 2022, estimated that apartments and houses in Sweden were potentially more overvalued than any other country in the European Union apart from Slovakia and Luxembourg. 

The board judged that residential property in Sweden was between about 25 percent and a little over 60 percent overvalued. 

Residential property in Denmark, meanwhile, was only judged to be between 15 percent and a little over 30 percent overvalued. Norway was not included in the survey. 

Source: European Systemic Risk Board

Olsen noted that Swedish households are also “a bit more vulnerable”, as they have not been supported with government money during the pandemic and the more recent inflation crisis to the same extent as households in Denmark and Norway.

Danish households also have an advantage over their Swedish and Norwegian counterparts because more than half of Danish mortgages are fixed for the entire 30-year duration of the loan, whereas variable rate mortgages are much more common in Sweden and Norway.

Up until the middle of 2018 around 80 percent of new Swedish mortgages were only fixed for three months or less, while only a few percent were fixed for more than three years.

“Swedish households are very sensitive to movements in interest rates. They have variable loans, in general, so it’s feeding through very rapidly,” he said.

At the start of 2022, the number of new mortgages fixed for three years or more in Sweden soared to more than 80 percent, but according to the government-owned lender SBAB, a full 80 percent of customers still chose variable rate mortgages in December. 

How many new Swedish mortgages are variable rate?

Purple = fixed for three months or less. Blue = between three months and a year. Green =
fixed for between one and three years. Grey = fixed for more than three years.

Source: Statistics Sweden

Norway also has a large proportion of variable-rate mortgages, but Olsen suggested they were still less vulnerable. 

“Norwegian households have some other strengths: they have received a lot of support during Covid, especially. And also electricity bills are more or less capped in Norway, which they certainly are not in Sweden.”

How indebted are Scandinavian populations? 

Households in Denmark, Norway and Sweden have among the highest level of loans outstanding compared to their gross disposable income of any of the counties covered by The Local’s network, according to a survey by Eurostat.

The high apparent indebtedness of Danish households, however, is partly warped by loans taken out by farmers, which are included in household debt statistics. Olsen estimates that the real level of indebtedness in Denmark, while still high, is closer to that of Sweden.

In addition, household indebtedness as a share of income in Denmark has fallen steadily since it peaked in 2014.

“Households in Denmark have been saving quite vigorously ever since the financial crisis, so the level of debt is high but the direction is down,” Olsen said.

So what will happen over the next year or so? 

The official prognoses are for a soft landing rather than a full-on market crash.

Denmark’s central bank, Nationalbanken, expects house prices to fall by about 5.6 percent in 2023.

Adjusted for the season, Norway’s central bank, Norges Bank, expects house prices to fall in total by about 6 percent from August 2022 to August 2023, before starting to rise again. 

Sweden’s Riksbank central bank, using the Hox Sverige housing index, in a report out in November, predicted that the 11.75 percent annual fall seen at the end of 2022, would be repeated by a further 8 percent fall in the year leading up to the last quarter of 2023. This represents a total fall of about 19 percent.

Some economists are more pessimistic, however. 

“If interest rates go the way everyone expects, then it’s quite reasonable to see housing prices going down 8 percent in 2023,” Tor Borg, head of analysis at CityMark, told The Local, referring to the Swedish market. “But I think it could be worse, as I’m not that convinced that inflation will come down as quickly as everybody thinks and I’m not sure the Riksbank will stop increasing rates as soon as everybody else thinks.”

Las Olsen at Danske Bank said that even if the fall in property prices did turn out to be deeper and more prolonged than currently predicted, Sweden, Denmark and Norway were all “fairly well prepared for such a scenario”.

“We have after all been through the financial crisis and also through the crisis before that and hopefully we have learned something from those events so that the economies are more robust.”

SHOW COMMENTS