This is how much house prices are outpacing rents across Europe

House price growth is outpacing increases in rents in the European Union, according to statistics agency Eurostat.

During the period 2010 to 2021, house prices gained 34%, while rents increased just 16%, the data showed. On a country-by-country basis, house prices increased more than rents in 18 of 27 EU member states.

House prices rose in 23 EU countries and decreased in four, with the biggest increases in Estonia, where they climbed133%, Luxembourg, where they grew 111% and Hungary, where they jumped 109%.

Declines were seen in Greece, where house prices dropped 28%, Italy, where they sank 13% and in Cyprus and Spain, where they fell 8% and 3%, respectively.

The divergence between house prices and rents took off in early 2015, when house prices started to increase at a much faster pace than rents.

Estonia also saw the highest increase in rents, with prices rising 142%. Lithuania was second, with a 109% jump in rents, while Ireland was third with a rise of 66%. Decreases were recorded in Greece, where they fell by a quarter, and Cyprus, with a drop of 3%.

Home ownership varies

While there are differences in the rates of change of house prices and rents across the EU, there are also differences in home ownership.

In the EU as a whole in 2019, 70% of the population lived in a house they owned, while the remaining 30% lived in rented housing.

Owning is more common than renting in all EU member states, however in Germany, renting is almost on par, with 49% of the population being tenants.

The highest shares of home ownership are in Romania, where 96% of the population own their home, followed by Hungary and Slovakia – both at more than 90%.

Wage growth not keeping pace

High rates of house price inflation mean that in some member states, wage growth can struggle to keep pace, putting the prospect of ownership further from reach.

In the five years leading up to the COVID-19 pandemic, real wage growth fluctuated between 0.7% and 2.1% in the EU, according to the International Labour Organization. Initial estimates for 2020, when the pandemic took grip, show a drop in real wages.

World Economic Forum research shows that around 90% of cities around the world do not provide affordable or adequate quality housing. And since cities around the world are growing at an unprecedented rate, this raises a challenge for policymakers to help provide good, affordable housing.

“Well-functioning property markets can act as a financial springboard for enterprises and job creation,” the Forum Insight Report said. “The challenge of affordability requires not just short-term fixes but also long-term strategies. Solutions will need to address both the supply side and the demand side of the housing market, and involve public-sector, private-sector and non-profit stakeholders.”