Economy, Europe

Many families in Europe lose hope of 'home ownership' due to high prices

Housing prices in EU countries have increased by 30.9% since 2010, according to Eurostat

Bahattin Gonultas   | 03.10.2021
Many families in Europe lose hope of 'home ownership' due to high prices

BERLIN 

While people's hope of being a "homeowner" is gradually decreasing in Europe, where housing prices and rents have posted a record rise stemming from the coronavirus pandemic, the ongoing protests have led politicians to seek solutions.

The pandemic has raised concerns about social inequality, financial instability, and political polarization as more people are trapped in high rents in Europe.

According to data by Eurostat, housing prices in EU countries, measured by the House Price Index, have increased by 30.9% since 2010.

In the first quarter of this year, the housing prices climbed significantly in EU countries with their economies having hard times due to the pandemic.

The prices went up by 17% in Luxembourg, 15.3% in Denmark, 11.9% in Czechia, 11.3% in the Netherlands, 9.4% in Germany, 5.5% in France, and 6.7% in Belgium.

The first quarter's figure was the highest rise since mid-2007, while the European Central Bank (ECB) said Germany, France, and the Netherlands accounted for nearly three-quarters of the total housing price increase in the region last year.

Analysts said the low housing supply, influx of immigrants, lowest ever interest rates, the virus-driven savings pile up, and the rising desire for remote working accelerated the upward trend in housing prices.

Wealthy institutional and private investors in Russia, Asia, and the Gulf region are also causing the climb in housing prices with "high price" offers.

Some countries, such as Ireland, have also raised taxes, such as stamp duty, to prevent these investors from purchasing large numbers of properties.

A number of politicians hesitate to do too much to control prices to not to damage existing homeowners.

Some part of the society being shut out of urban areas because they can no longer afford apartments, Berlin Mayor Michael Mueller noted.

“That’s the case in London, in Paris, in Rome, and now unfortunately increasingly in Berlin," Mueller added.

Meanwhile, developments over China's heavily indebted Evergrande Group recalled how hard it is to "tame the market."

Chinese leaders took steps to curb price increases and rein in borrowing with concerns that rising housing costs may trigger disturbance and add risk to the financial system.

“Of course we have a real estate bubble,” said Reiner Braun, the CEO of the German-based Empirica Research Institute.

The residential price index of Austria's Oesterreichische National Bank (OeNB) was doubled in the last decade, reaching 245 points.

While OeNB warns of "increasing overheating in the real estate market," the average square meter price of flats in the capital Vienna is above €5,248.

With a housing price index of 174.6 points, Germany is in the top group in the euro area. House prices in the capital Berlin have increased by 148% in 10 years while it doubled in Frankfurt.

The average price of a property in Germany, including ancillary costs, is around $500,000.

Sweden's housing prices have surged by 14% on average in the last 12 months to 174.26 points.

The average price of a detached house in Stockholm is 8.5 million kronor (€830,000), while 4.7 million kronor (€470,000) has to be paid to buy a flat.

In Switzerland, the house price index rose to 144.69 in the first quarter of this year, up 8% year-on-year due to decreased construction and rapidly rising demand.

In some elite regions, square meter prices are above 36,000 Swiss francs ($38,678).

The price of an average flat across the UK has increased by 60% since 2010, and up 80% in London.

Real estate prices have increased by an average of 22% in 10 years in France with square meter prices in Paris exceeded €10,000 ($11,593).

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