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30 October 2023, Europe, Germany | News

Catella Infographic - Housing cost burden in Europe 2023

Munich, 31.10.2023 - Do you actually know the motto of the EU? "United in diversity" is the right answer. To be honest, that came to mind when we were looking at housing cost burden ratios in Europe.

In Europe's urban centres, housing is a scarce commodity - from both a demand and supply perspective. The combination of scarce supply and high demand has led to accelerated rental growth in recent years. Even the current economic turmoil and the changed interest rate landscape are not causing any significant change in residential rents, with value adjustments in the single-digit percentage range measurable for existing prices. The consequence is that for an increasing proportion of households, (rental) housing in a major European city is less and less within their financial means. This development is also supported by the high inflation rates that were recorded in the European economy in 2022 until Q2/2023.

You probably already guessed: the direct comparison of wages and salaries is not very meaningful at first, so we have taken an indirect measure. According to Eurostat's definition, a housing cost overburden ratio exists "if the housing costs of a household amount to more than 40 % of the disposable household income". And here comparisons can then be made.

If we look at the proportion of European households with a housing cost burden ratio that is too high, it becomes clear how heterogeneous the European residential property rental markets currently are. For example, at the beginning of 2023, the proportion of people in the eurozone living in a household where housing costs exceed 40% of disposable household income was 9.4%.

The housing cost ratio in selected countries:

- The Netherlands, with a share of 21.7%, is well above the EU average.

- In contrast, Portugal (5.0%), Finland (5,4%) and Poland (5.6%) have the lowest figures.

- Germany is also above average with a share of 11.8%, Sweden (9.1%) slightly below.

Is the solution to be found in an increase in supply, deurbanisation or a reduction in area?

The only effective instrument for reducing the housing cost burden is the expansion of supply, which is both quantitatively and politically feasible. However, the interest rate level in Europe is currently causing investors to hold back on property investments. A significant easing of the situation on the European rental market for residential space due to an increase in supply is therefore not to be expected soon. Until then, the only alternatives are "restrictions in consumption & space" or - relatively unrealistically - moving to regions with a more relaxed housing market.