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Housing related consumption in Europe was the only type of household expenditure which was not reduced during the economic and financial crisis, in contrast with other components of consumption and GDP trends, RICS research has found.
Housing related expenditure is the biggest component of consumer spending at a European level. In 2011, the equivalent of 1700 bln euros were spent on housing in the 27 EU member states, making up 23.6% of total household expenditure, up from 20.3% in 2000 and 22.5% in 2008. Other important components of consumer spending were: transport related expenditures (13.2%) and food and non-alcoholic beverages (12.9%).
There were large variations between countries. Member states with income levels well above EU average (e.g. Nordic countries, Netherlands, Luxembourg) indicated a high level of housing related expenditure. In contrast, member states in southern Europe (with the exception of Greece) noted a smaller proportion of housing related expenditure.
Looking at the development of actual rents over the last decade (2001-2012), in the countries most hit by the financial crisis there was an impact on the rental sector as a whole and not only on recently agreed rentals.
Peter Parlasca FRICS, author of the research, explains that housing related expenditure continues to absorb a significant proportion of consumers’ budget in times of economic uncertainty.
“If during 2008-2011, the housing sector was the most robust element of household consumption, it is because Europeans paid out more money in their rental and energy bills, and in particular due to the increased spending of home owners, for living in their own dwelling. However, consumers spent less in improving their homes (maintenance and repair of the dwelling was reduced by 3.2%),” Parlasca said.
According to the RICS report, the most important component of housing related consumption is “imputed rentals for housing” which are designed to capture the segment of owner occupied housing (12%), followed by water, gas, electricity (6%) as well as maintenance and repair of the dwelling (1%).
“Good quality affordable housing is a fundamental requirement for European citizens. It is also a key driver in economic recovery. This research shows that expenditure on housing is the biggest single expense for households in the vast majority of European countries, and second only to food in five EU member states,” said RICS President, Michael Newey FRICS and CEO of a UK housing association.
“A striking feature of the data is the huge variation in home ownership rates in individual countries between around 50% and 90%, and substantial differences in rental trends. While average GDP across Europe has fallen, the proportion of spending on housing has increased, and tends to grow alongside GDP per capita growth in individual countries. Nonetheless, variations between countries are due mostly to structural differences in national housing markets rather than income levels.”
THE CASE OF CYPRUS
Jennifer Petridou Sharpe, ΜRICS, on behalf of RICS Cyprus added: “This report records the trend for house consumption for the period between 2000 and 2011. Cyprus is one of the last member states of the EU to enter the financial crisis. Cyprus with an Income per Capita of EUR 15,600 (2011), like other member states with income levels above the EU average of EUR 14,200 (2011) indicated a high level of housing related expenditure. Housing, water, electricity, gas and other fuels consumption has increased from 14.3% in 2000 to 18.6% in 2011(EU27 average of 23.6%), transport consumption has decreased from 14.5% in 2000 to 11.5% in 2011, while Food and non-alcoholic beverages have decreased from 15.0% in 2000 to 12.6% in 2011.”
According to the finding of this report, Cyprus figures for 2011 indicate to 73.8% for Owner Occupied properties (EU27 average of 70.7%), 10.2% for Market Rent properties (EU27 average of 18.1%) and 15.9% for Social Rent properties (EU27 average of 11.2%).
Actual rentals for housing in Cyprus have shown a significant rate of change. For the period 2000-2005 the annual rate of change was 3.16% (EU27 average 2.17%), for the period 2005-2010 the annual rate of change was 2.52% (EU27 average 2.12%), while for the period 2011-2012 the annual rate of change was 0.49% (EU27 average 1.79%).
