After the Financial Times article that ranks Greece as the second poorest country in the EU, a new report by the European Central Bank (ECB) comes to deconstruct the “miracle” of Mitsotakis development, placing the country in second place with the most expensive housing.
In particular, the new data released by the European Central Bank concern January 2024 and it appears that housing costs are “inconvenient” for households in the eurozone, including Greece, due to increases in mortgage repayment installments due to high interest rates, high rents and increased bills such as electricity, natural gas, water, etc.
As a result, the proportion of euro area households who estimate they will be late paying rent or bills has risen to 20% based on January 2024 data, up from around 15% in 2023.
Average housing costs are estimated to have risen across the eurozone by 10.2% since July 2022, when the ECB’s interest rate hikes began. In January 2024, households paid an average of €765 per month for total housing-related costs, including utilities (such as gas, electricity and water), home maintenance and rent or mortgage, according to the report.
The cost of housing in Greece
According to the ECB, Greece is the second cheapest in the EU with an “asterisk”, so if we calculate income – basic salary – then Greece is the second most expensive.
In Greece, the total housing burden is calculated on average at 400 euros per month, if housing loans are excluded. With their inclusion, the average cost increases to 600 euros. These amounts rank Greece last among the 11 specific countries in the report, without taking income into account.
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 ratio, even compared to households in wealthy countries such as Germany, the Netherlands and France.
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 around 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 dispersion 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 that take out new loans or renew or refinance existing mortgages already face increased interest payments.
Chart B shows that this is largely the case for all categories, ie owners, renters 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 higher-income households are more likely to take out mortgages and generally do so for larger amounts, while, on the other hand, there has been stronger income growth for lower-income households, which probably partly attributable to recent targeted income support measures implemented by major euro area governments.
Chart 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 ownership type. Rates vary dramatically across income brackets.
In the lowest income quintile more than 60% of households are over-indebted, especially rent-seeking households. 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 mainly mortgage borrowers who are having difficulty paying their mortgage costs. 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.
Tags: Mitsotakis Greece expensive Europe terms housing costs
-
