Greece and the whole of Europe is facing a housing crisis concerning the particularly high rents and the purchase prices of houses. It is an issue that preoccupied the country before the elections, finding its way to the debate of the political leaders.
Bloomberg’s tribute focuses on the crisis experienced by citizens in Germany, Sweden, the United Kingdom, France, documenting the European experience.
Buildings are collapsing across Europe and the “European family” is in danger of becoming homeless
The recession in construction activity does not only affect single-family homes, but also large projects involving residential renovations.
The examples of the European contraction of the construction sector
New building permits in Germany fell more than 27% in the first half, according to Bloomberg data. In France building permits are down 28% in the year to July and UK housebuilding is expected to contract by 25%.
Sweden, the best-known welfare state with working-class housing and a Nordic mentality, is suffering its worst recession since the housing crisis of the 1990s, with building rates less than a third of what is deemed necessary to keep up with demand.
Companies that undertake large housing projects such as Vonovia SE, Germany’s largest landlord, this year suspended all new construction indefinitely.
At the same time in Sweden, a flagship car battery cell project by Northvolt (with Volvo’s ongoing cooperation), aimed at reducing Europe’s dependence on the supply of electric car batteries from China, risks struggling to attract the workers needed in a town of 36,000 because of the lack of available housing.
Residence as a right, but also as a constitutional commitment
Sweden has a constitutional commitment to provide affordable housing, with housing supply not keeping pace with demand for decades, driving up house prices and forcing citizens to occupy homes as rent-free tenants.
In the UK, housebuilding has consistently missed the Tory government’s target of 300,000 homes a year from 2019.
In Germany, affordable housing was one of the key promises that elected Chancellor Olaf Scholz’s coalition government, but experts estimate that the target of adding 400,000 new homes a year until 2026 at the earliest will not be met.
The roof as a matter of social effervescence
Greece faces a very serious and multifactorial housing problem that pushes most young people to live with their parents until the age of 35. In particular, in the 25-34 year old category, 51.6% still live with their parents, with the corresponding percentage in the 18-34 category soaring to unimaginable, -but explainable given the socio-economic conditions- heights of over 70%, with the percentage of 2022 in the 18-34 age category to be at 71.9% versus 72.9% in 2021, as shown in the graph below.
The chart which includes the ages at which young people may be attending higher and higher education.
Other factors that exert pressure on the housing market in Greece are the general accuracy, the Golden Visa, but also the unthinkable interest rates.
In the case of the Golden Visa, there is official government recognition as a problem. Proof that in many areas of the country (including the popular islands, southern suburbs of Attica and others), the financial criteria for its acquisition have been changed, so that would-be Golden Visa holders do not buy properties below 500,000 euros and do not compete the worker’s residence.
Housing problems risk widening social inequalities, forcing, among other things, citizens to spend most of their income to meet this need.
The housing issue in Greece can also be seen from cohabitation with parents in the 25-34 age group, which does not include students.
In addition, the “My Home” program for young people aged 25-39 caused an increase in the prices of apartments up to €150,000, or even those that cost €130,000 for example, approached the upper limit of the program. Increased pressure on student and youth housing with the conversion of many available apartments into short-term rental spaces.
Housing may bring the rise of the far right
Bloomberg records the concern that the pressure on the right to housing can be a direct threat to the Republic.
“If we can’t solve the housing crisis, it will be a real threat to our democracy,” said Germanos, who links the rise of the far-right Alternative for Germany AfD to the housing crisis.
Similar phenomena are observed in Italy and other countries where there is an impressive rise of the extreme right.
The pressure on construction does not have the same intensity everywhere. In Portugal and Spain, housebuilding is well above 2015 levels, so the fallout from the debt crisis has almost frozen construction in those markets.
But serious shortages remain, showing how difficult it is to fix, while the golden visa scheme in Portugal has – there too – sent house prices soaring.
But who is responsible for the roof problems?
Most of the factors that negatively affect the issue of housing, building and construction are central government choices.
Housing straddles the line between an asset and a social right, with the “invisible hand of the market” occasionally tipping the scales and creating real estate bubbles, with prices that do not correspond to true value.
A central European policy, that of high interest rates to deal with inflation, is largely responsible for the slow death of construction in Europe with the advantage remaining only for large construction companies or those with access to cheap credit.
This is also the reason – in combination with the Golden Visa where it exists – that luxury residences do not face the same problem as more… popular residences.
In the UK, around 45,000 housebuilders have closed in the last five years, although in this case one of the main reasons is Brexit.
In Sweden, 1,145 construction companies filed for bankruptcy in the first 10 months of this year, a 35% increase from 2022, according to Creditsafe data.
The availability of homes for rent or sale has plummeted, as has construction activity. A harbinger of a recession or is the ECB’s poor policy around interest rates and inflation exacerbating the problem?
In the past, governments had undertaken extensive construction of workers and not only housing
A significant proportion of Sweden’s existing housing was built as part of a government initiative to add one million homes between 1965 and 1974.
After reunification in the late 1980s, Germany still had 4 million social housing units, but this number had fallen to just over 1 million in 2020.
The situation is similar in the UK, where council flats were sold to tenants in the 1980s.
In East Germany, where the far-right AfD has the strongest support, anxiety over housing is particularly acute. Today, East Germans are still less likely to own property than their West German peers.
What is going to happen;
Britain’s Labor Party has pledged to build 1.5 million homes during the next parliamentary term.
The Portuguese government aims to increase the amount of real estate available for residential use and to simplify licensing procedures.
Germany has pledged to simplify building rules and boost public investment, but the tepid action is not expected to provide much relief.
Bureaucracy and cracking down on it is a manufacturer-friendly measure. But the issue of bank lending across Europe, that is, of interest rates, must at some point be reined in, because alternatively it will threaten every development prospect of construction, housing, and the economy as well.
(with information from Bloomberg)