The maxim that a stable job and an average salary guaranteed access to a decent home to start a family is now faltering under the weight of a runaway housing market. For more than a decade, housing prices have grown much faster than household incomes, widening a gap that leaves more and more people out of the market. Thus, more than 70% of the European population lives in regions where an average salary is not enough to buy a home larger than 75 square meters, even with a 30-year mortgage. This is one of the main conclusions of a study published this Thursday in the scientific journal Journal of Maps, prepared by Franziska Sielker and Selim Banabak, researchers at the Vienna University of Technology.
The study offers a comparative snapshot on a European scale, without going into precise national classifications. Despite this methodological limitation, Spain appears as one of the examples cited by the researchers of greater territorial inequality. This fracture, which they describe as the existence of a “wide range of affordability levels” within the country, places Madrid as the main red flag due to prices, affecting all neighboring areas. The other most problematic point is the coastal areas, where tourist pressure and second homes raise prices well above local income. The effect of touristification affects, in addition to Spain, France, Portugal, Greece, and Croatia.
The researchers’ diagnosis, based on the analysis of more than 22 million real estate listings in 31 European countries, depicts a continent with a severe housing crisis, where buying a home has ceased to be a natural step and has become an increasingly difficult goal to achieve. The 75 square meter threshold is not arbitrary, as this figure represents the reference size of a standard two-bedroom family home. That for 72% of Europeans it is impossible to buy a home exceeding that size reveals how much the middle class’s ability to become homeowners has weakened.
The situation is even more suffocating in large European cities. 60% of the urban population lives in areas where the average salary does not even allow buying a 50 square meter home — the size of a one-bedroom apartment or studio — with a standard mortgage. Globally, 44% of all Europeans reside in areas with this level of extreme unaffordability. In these cities, real estate market prices force a large part of the population to make a financial effort greater than recommended by economic consensus, which states that allocating more than a third of a family’s income to housing payments is not financially healthy. On the other side of the scale is only 5% of the European population, living in the most affordable areas. In these markets, property costs are low enough to allow opting for a larger property without the mortgage payment exceeding that limit.
But even these calculations may be offering a more favorable picture than the reality of household financial capacity. The reason is that the researchers have used, like most analyses, the regional average salary as a reference to measure household purchasing power. The problem is that salaries are not distributed homogeneously, and it is enough for a handful to concentrate very high incomes for the average to diverge from the majority situation. Therefore, they point out, “it can be expected that more than half of the population earns below the reference income level.” In this regard, the analysts insist that “supporting incomes can be as important as moderating housing prices to achieve residential affordability.”
There is also another important issue when interpreting the figures. The study does not analyze what households that have already bought a home or who rent pay, but the prices at which a home is offered in the current market. The data thus show the conditions someone looking for an apartment now encounters.
Read more A traveling circus for the horror of Gaza
Impossible rents
The study uses the same calculation method to measure how far households can afford to pay rent. And the result is as discouraging as in the case of buying. Four out of ten people live in areas where renting a one-bedroom or studio apartment of 50 square meters requires allocating more than a third of household income. The consequence is a double expulsion from the real estate market. Purchase prices are too high and rents absorb an excessive part of income, making it almost impossible to generate the savings necessary to make the leap to ownership. For many households, especially younger ones and migrants, renting ceases to be a transitional stage.
The research shows a clear regional division in this respect, although it does not detail the situation of each state. Thus, as a general rule in economies like Germany, France, or Austria, an average salary allows renting a larger home than could be bought with the same income. But in southern countries, the opposite happens. In Portugal and Italy, rental prices have increased at such a rate that, with the same salary, you buy a larger home than you rent. And in Spain, something similar occurs. The pressure focuses on Madrid, the Mediterranean coast, and the islands. In these areas, the residential housing stock competes with short-term rentals and second homes.
Another conclusion is that the real estate pressure suffered by capitals like Paris, Berlin, or Madrid extends to surrounding areas. The study insists that there is a negative effect spreading to the outskirts and nearby municipalities of these cities, raising land prices in regions that were previously an escape route for families with lower salaries. Specifically, the document states that “urban agglomerations tend to be hotspots of unaffordability, often showing clearly visible spillover effects to neighboring regions despite the higher income levels generated in these areas.”
The countryside lives its own drama. Here the biggest barrier is not prices, but the availability of a proper housing stock. In this regard, the researchers have found that more than a quarter (28%) of Europe’s rural population lives in a municipality without a formal rental market. The researchers explain that, in these peripheral regions, “rental offer records are simply not available, either due to lack of availability or limited distribution through informal channels.”
Moreover, buying in rural areas is not the refuge it is often believed to be. In fact, for more than half of the population living in the countryside, the average salary in their area is also insufficient to buy a home larger than 75 square meters. This generates, in the authors’ words, “formal and informal entry barriers that lead to greater precariousness, instability, and housing insufficiency” for the most vulnerable groups.
