Housing costs continue to rise for Eurozone households, including Greecedue to increases in mortgage repayments due to high interest rates, high rents and increased bills such as electricity, gas, water etc.
As a result, the percentage of households in the euro area who estimate that they will delay in paying rent or bills has increased to 20% based on January 2024 data, from about 15% in 2023.
In addition, this rate has doubled to nearly 30% for late mortgage payments.
The average cost of housing is estimated to have increase by 10.2% from July 2022starting with interest rate hikes.
According to the ECB, in terms of housing costs, the Greece is the second cheapest in the EU with an “asterisk”, so if we calculate the income – basic salary – then Greece is the second most expensive.
In Greece, the total housing burden is calculated on average term at 400 euros per month, if mortgages are excluded. Including them, the average cost increases to 600 euros. These amounts rank Greece in last place among the 11 specific countries in the report, regardless of income.
If we take declared incomes into account, the ranking supports different data, with Greece coming second in terms of housing cost to income ratio.
According to the ECB, the corresponding percentage is 28% without the cost of housing loans and 32% with their inclusion.
Essentially, this metric ranks Greece as a country with a higher housing cost-to-income ratioeven compared to households in wealthy countries such as Germany, the Netherlands and France.
According to the ECB, housing costs absorb around 20% of disposable income for owners, 40% for renters and 35% for mortgage payers, on average across eurozone countries.
According to the ECB’s Survey of Consumer Expectations, average housing costs rose by around 10.2% on an aggregate basis from July 2022 to January 2024. This corresponds to a cumulative rise in housing costs that is higher than the cumulative rise of the Harmonized Index of Consumer Prices by 5.5% during the same period.
Detailed charts as reported by the ECB
As the ECB reports, Chart A shows the dynamics of the total monthly housing-related burden for owners, renters and mortgage borrowers.
In January 2024 households paid on average 765 euros per month for the total cost related to housingincluding utilities, home maintenance and rent or mortgage costs.
In the period from July 2022 – the start of the rate hike cycle – to January 2024, average housing costs reported in the survey of consumer expectations rose cumulatively by about 10.2%, compared to a cumulative increase in the harmonized index consumer prices (HICP) by 5.5%.
In addition, the dispersion in monthly housing costs for each of the property types increased. For mortgage borrowers in particular, the higher costs appear to be at the upper end of the distribution, with costs at the lower end remaining relatively stable.
This wider spread could indicate heterogeneous effects among mortgage borrowers, i.e. while households with existing fixed-rate mortgages have not yet been significantly affected by the ECB’s monetary policy tightening and successive rate hikes, households taking out new loans or renewing or refinancing existing mortgages are already facing increased interest payments.
Diagram B, shows that this is largely the case for all classes, i.e. for landlords, tenants and mortgage borrowers. Housing costs take up about 20% of disposable income for direct owners, 40% for renters and 35% for mortgage borrowers.
This difference reflects, on the one hand, the fact that households with higher income are more likely to take out mortgage loans and generally do so for larger amounts, while, on the other hand, there has been stronger income growth for lower-income households, possibly partly attributable to recent targeted income support measures implemented by the larger euro area governments.
The Diagram C shows the percentages of over-indebted households for the eleven euro area countries covered by the Survey of Consumer Expectations, broken down by income quintile and property type. Rates vary dramatically across income brackets.
In the lowest income quintile over 60% of households are over-indebted, especially households with rent. Although the proportion of over-indebted households in the highest income quintiles is significantly lower, it nevertheless includes about 45% of households in the second income quintile and over 20% of those in the third income quintile.
Higher income ‘burdened’ households are mostly mortgage borrowers who are having difficulty paying the cost of their mortgage. Interestingly, the percentage of burdened households in the fourth income quintile is higher than in the third income quintile due to mortgage borrowers.
This may reflect the fact that, in the low interest rate environment of the past, these households took on disproportionately more mortgage debt than their income.
More households, and particularly lower-income households, have said in recent months that they expect to be late paying their rent or mortgage and/or utilities.
Given the current and future impacts of both increased interest rates and the loss of purchasing power due to inflation, the ability of households to meet their housing-related costs and mortgage payments is a source of concern, particularly for households with lower income.
In recent years, about 5-10% of low-income households have reported being behind on rent or mortgage and/or utility payments in the past three months.
