Rising house prices, good news or bad?

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11 September 2017

While almost two-thirds of Europeans expect house prices will rise even more in the coming year – good news for sellers – it’s outpacing incomes, making it hard for many to afford housing.

ING’s sixth international survey of homes and mortgages found three in five Europeans (61%) consider housing in their area to be too expensive.

That said, 59% see prices continuing to rise over the next 12 months. Expectations are rising most quickly in countries with growing economies like Romania, Spain – where it’s become easier to get a mortgage – and the Czech Republic. Only in two countries – the UK and Italy – do less than half of those polled predict house prices will increase.

Many are feeling the pinch and finding it difficult to pay their rent or mortgage each month.

- Nathalie Spencer, behavioural scientist

Higher housing costs

Higher house prices, however, mean buyers have to borrow more to afford a home, tempting many to overreach financially and putting pressure on their personal finances. One in five Europeans say they find it hard to manage their housing costs.

The survey questioned 15,000 people in 15 countries and includes both home owners and people who rent. It found that 41% of house hunters who had a budget had stretched it to the limit to afford their current homes, leaving them with little money to save or cover unexpected expenses. This figure includes 12% who said they’d gone over their budget.

In addition, 23% of the respondents said the costs of running their homes – such as electricity, water and heating – were higher than expected.

Financially vulnerable

Those finding it hardest to afford housing (both mortgages and rent) are aged between 55-64 (25%) and 18-24-year-olds (22%).

“People across Europe are finding housing expensive. Many are feeling the pinch and finding it difficult to pay their rent or mortgage each month,” said ING behavioural scientist Nathalie Spencer.

This leaves them vulnerable to financial shocks. She advises planning and sticking to a budget to ease pressure on the purse strings in the long term.

Forever homes

With housing already seen as too expensive, it’s little wonder that 54% of homeowners say their current home is their “forever” home, especially as they get older. This could be for a variety of reasons – inertia, the hassle of moving or an emotional attachment.

The survey also found people across Europe continue to regard property as a ‘safe’ return on investment, with around one third of respondents saying “house prices never fall”. This was highest in Turkey (59%). However, thinking house prices never fall could indicate that some are failing to consider the true financial risks associated with buying a house. This could also contribute to the survey’s other findings that people are over extending their finances when it comes to housing.

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