European Housing Costs: A Growing Divide
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The cost of housing in europe is creating a significant financial strain on households, with a widening gap between the most and least expensive regions within individual countries. A recent report from the Organisation for Economic Co-operation and Development (OECD) sheds light on this escalating crisis, revealing stark regional differences in housing costs as a percentage of disposable income.
The year 2022 saw inflation in the European Union reach its highest point in over four decades, exacerbating existing housing pressures. This impact was especially acute in major cities and capital regions, were the disparity in housing costs is significantly greater than in smaller urban areas.
The OECD’s “Regions and Cities at a Glance 2024” report provides a detailed analysis of this issue, using data from across Europe to illustrate the extent of the problem. The report focuses on housing costs as a percentage of disposable income, a key indicator of affordability. This includes rent (both actual and imputed), mortgage payments, and home maintenance expenses, encompassing utilities, furnishings, and repairs.
On average, OECD households allocate nearly 20% of their disposable income to housing. In 2022, the report found a ten-percentage-point difference between the most and least expensive regions within the same country. However, this gap was even more pronounced in some nations.
UK Housing: A Tale of Two Cities (and Regions)
the United Kingdom exhibited the most significant regional disparity, with a 16-percentage-point gap. In Greater London, households spent a staggering 24.4% of their disposable income on housing—51% higher than the UK average of 16.1%. in stark contrast, the North of England reported the lowest proportion at just 8.7%, followed by Scotland at 11.3%. This represents a massive 181% difference between the most and least expensive regions.
While London’s exorbitant housing costs are an outlier, even the second-highest region, South East England, at 17.9%, still lags significantly behind. Interestingly, despite this extreme disparity, the UK also includes seven of the eleven least expensive regions in the study, highlighting that high disparity doesn’t automatically equate to universally high housing costs.
Italy and Spain: Similar Trends, Different Scales
Italy also faced a ample regional disparity, with housing costs averaging 25% of disposable income.The Campania region, encompassing Naples, had the highest proportion at 31.2%, while Marche had the lowest at 17.1%, a 14.1-percentage-point difference (82% more). While significant, this gap is less dramatic than that seen in the UK.
in Spain, the Balearic Islands, particularly Mallorca, emerged as the most expensive region, with housing costs consuming 30.4% of disposable income. This contrasts sharply with Galicia, the least expensive region, at 20.3%, resulting in a 10.1-percentage-point gap (a 50% difference).
These findings underscore the urgent need for policy interventions to address the growing affordability crisis across Europe. The implications for household budgets and overall economic stability are significant, mirroring similar challenges faced in many U.S.cities with high costs of living.
Soaring Housing Costs: A Global Look at the Burden on Households
A recent OECD report shines a light on the widening gap in housing costs across Europe,revealing significant disparities between urban and rural areas and their impact on homeownership rates. The findings highlight the disproportionate burden placed on urban residents, particularly in regions with high housing costs.
The report analyzed data from 11 European countries, revealing a complex picture of regional variations. In Switzerland,for example,Lake Geneva emerged as the most expensive region,with households dedicating a staggering 36.3% of their disposable income to housing. This is significantly higher than the Northwestern region’s 30.7%. “the data provides new insights on the impact on households, highlighting for example the disproportionate impacts that rising housing costs have on urban residents,” the OECD reported.
Lake Geneva Leads the Pack, Bratislava Close Behind
Lake Geneva’s high cost of living ranked it as the most expensive region among the 11 countries studied. Switzerland’s Ticino region followed closely behind at 34.9%, solidifying Switzerland’s position as the most expensive country overall based on national averages. Slovakia’s capital,Bratislava,secured the third spot,with housing costs consuming 33.2% of household disposable income. The report noted a relatively small gap of 3.8 percentage points between Bratislava and Slovakia’s least expensive region.
In contrast, countries like ireland (4.8 percentage point difference), Estonia (4.4 pp), and Sweden (3 pp) showed smaller regional disparities in housing costs. However, the overall percentage of disposable income spent on housing varied considerably across these nations, ranging from 17% in Estonia to 29.7% in Sweden.
Urban vs. Rural: A Clear Divide
The OECD report emphasizes the typical trend of higher housing costs in urban centers. “This means that relative price falls in housing costs translate, in theory, into smaller price changes in urban versus non-urban areas,” the report stated. This disparity underscores the challenges faced by urban dwellers in affording housing.
Homeownership: A Luxury in High-Cost Areas?
The study also revealed a strong correlation between high housing costs and lower homeownership rates. In eight out of nine countries analyzed, regions with the highest housing costs also had the lowest homeownership rates. Lithuania was the exception to this trend.The report cites Vienna as a prime example, with a mere 19% homeownership rate compared to 74% in Burgenland. In other examples, the homeownership rate is 31% in Lake Geneva and 54% in Greater London, illustrating the significant impact of housing costs on homeownership.
With housing costs skyrocketing across Europe, a new OECD report reveals a stark regional divide, highlighting teh growing struggle for affordability and accessibility. We sat down with Dr. Isabelle Moreau, a leading housing economist at the European Policy Institute, to unpack the report’s findings and explore the implications for European households.
Regional Disparities: A Tale of Two Cities?
Senior Editor, World Today News: The report paints a picture of significant regional variations in housing costs.Can you elaborate on the extent of this disparity?
Dr. Moreau: Certainly. The OECD report reveals a wide range in the proportion of disposable income spent on housing across different regions within the same contry. Such as, the UK exhibited the largest gap, with Londoners devoting a staggering 24% of their income to housing, while households in the north of England spend just 8.7%. That’s a difference of over 170%! Similarly, Italy and Spain also show considerable regional variations, though not as pronounced as the UK.
Senior Editor,world Today news: What are some of the driving forces behind these regional imbalances?
Dr. Moreau: several factors contribute.Major cities often experience higher housing demand due to economic growth, job opportunities, and migration. Limited land availability, stricter progress regulations, and a lack of affordable housing options exacerbate the problem, driving up prices. Conversely, rural areas typically have lower demand, leading to more affordable housing.
The Homeownership crunch: A Growing Concern
Senior Editor, World Today News: The report suggests a strong correlation between high housing costs and lower homeownership rates. Can you explain this connection?
Dr. Moreau: Absolutely. When housing costs consume a large portion of income, it becomes increasingly difficult for households to save for a down payment. This is especially true for young people and moderate-income earners who are frequently enough priced out of the market.Vienna serves as a prime example, with a homeownership rate of just 19%, largely due to the city’s high housing costs.
Senior Editor, World Today News: What are some of the potential consequences of this trend towards lower homeownership?
Dr. moreau: It can have far-reaching implications. Lower homeownership can lead to increased social and economic inequality. It also poses a challenge for building long-term wealth, as homeownership is often a significant asset.
Policy Challenges and Potential Solutions
Senior Editor, World Today News: What kind of policy responses could help address these challenges?
Dr. Moreau: Governments have a crucial role to play in promoting housing affordability and accessibility.This can involve increasing the supply of affordable housing through targeted investing in social housing, incentivizing developers to build more affordable units, relaxing zoning regulations to encourage denser development, and providing financial assistance to low- and middle-income households seeking to purchase a home.
Senior Editor, world Today News: Thank you, Dr. Moreau, for providing your valuable insights into this critical issue.
