Regional disparities in housing costs relative to disposable income exhibit considerable variation across nations. The United Kingdom reports the widest gap in housing expenses, yet it also includes regions with some of the most affordable proportions.
The housing and living crises have profoundly impacted Europe in recent years, with inflation skyrocketing in 2022 to levels not seen in over four decades within the EU. Urban residents, particularly those in capital cities and major metropolitan areas, have faced heightened challenges as the disparity in housing costs between cities and smaller towns is markedly pronounced.
A recent report by the Organisation for Economic Co-operation and Development (OECD), titled “Regions and Cities at a Glance 2024,” highlights the significant regional variations in housing costs within individual countries and offers compelling insights into these economic trends throughout Europe.
This measurement is especially valuable as it assesses housing costs as a percentage of disposable income. When analyzing household spending on housing, it encompasses various components such as actual and imputed rents, mortgage payments, and home maintenance expenses, which include utilities like water, electricity, and gas, along with furnishings and routine upkeep.
Housing expenses constitute a major strain on household finances, with OECD regions averaging nearly 20% of their disposable income allocated to housing. In 2022, the average disparity in housing expenditures between the most and least expensive regions within the same country was around ten percentage points (pp), as indicated by the report.
The report reveals an even wider gap among 11 European countries analyzed, including nine EU member states, the UK, and Switzerland, where countries like the UK and Italy show housing cost disparities of 16 pp and 14 pp, respectively.
London’s Housing Costs: A Notable Exception
In the UK, households allocated an average of 16.1% of their disposable income to housing. However, in Greater London, this figure surged to 24.4%, representing a staggering 51% hike above the national average. In contrast, Northern England featured the lowest housing allocation at 8.7%, while Scotland followed at 11.3%. This results in a remarkable disparity of 15.7 pp, translating to an eye-watering 181% difference.
Greater London distinctly stands apart, with the next highest allocation being 17.9% in South East England, still falling short by 6.4 percentage points.
While the UK may display the largest regional disparity, it is also home to seven of the least expensive regions among those countries studied, demonstrating that disparity doesn’t necessarily equate to high housing costs.
Italy’s Housing Cost Challenges
In Italy, housing costs consumed an average of 25% of disposable income. The Campania region, covering Naples, witnessed the highest proportion at 31.2%, whereas Marche reported a much lower share at 17.1%, yielding a significant difference of 14.1 pp or 82% more.
Notably, the differences in other regions were less drastic than that of Greater London. The Province of Bolzano-Bozen and the Province of Trento saw shares at 31.1%, followed by Abruzzo at 29.1%.
Spain’s Balearic Islands: The Costly Frontier
In Spain, housing costs accounted for 26.3% of disposable income, with the Balearic Islands emerging as the priciest region where the allocation surged to 30.4%. This starkly contrasts with Galicia, noted for its affordability at 20.3%, creating a gap of 10.1 pp—a 50% higher cost in the Balearics.
The Balearic Islands were closely followed in expense by Murcia (30.2%) and Madrid (30%), while Catalonia registered a lower share at 27.1%.
Austria recorded a more modest gap of 7.8 pp, with Vienna’s share at 29.9% compared to Upper Austria’s 22.1%, and a national average of 24.9%.
The OECD’s findings shed light on the burdens faced by households, particularly emphasizing how rising housing costs disproportionately impact urban dwellers.
In Lithuania, regional disparities were noted with a difference of 7.6 pp between Klaipeda (21%) and Alytus (13.4%), while the capital, Kaunas, recorded 15.5%.
Lake Geneva: The Costliest Region in Europe
Switzerland’s Lake Geneva ranked as the most expensive region for housing costs, with households spending an astonishing 36.3% of their disposable income. The Northwestern region followed closely at 30.7%.
Among the 11 European nations evaluated, Lake Geneva’s expense stood unrivaled, with Ticino close behind at 34.9%, solidifying Switzerland’s status as the most expensive country on a national average basis.
Bratislava: A Surprising Contender
Slovakia’s capital, Bratislava, recorded the third-highest housing costs in terms of disposable income, reaching 33.2%, with a modest disparity of just 3.8 pp from the least expensive region.
In contrast, countries like Ireland (4.8 pp), Estonia (4.4 pp), and Sweden (3 pp) featured smaller gaps, yet their disposable income shares for housing varied notably at 29.4%, 17%, and 29.7%, respectively.
Notably, some countries reported data reflecting earlier years instead of 2022, adding complexity to the analysis.
Rural vs. Urban Housing Costs
The OECD report emphasizes that housing costs—and their significance within consumption baskets—tend to be markedly higher in urban settings. The analysis indicates that any decreases in housing costs are typically less pronounced in urban areas compared to their rural counterparts.
Homeownership Trends in High-Cost Areas
The OECD’s findings further reveal a critical trend: in regions where housing costs comprise a significant portion of disposable income, homeownership rates are typically lower across eight out of nine examined countries, with Lithuania as the notable exception.
For instance, Vienna demonstrated a strikingly low homeownership rate of merely 19%, compared to Burgenland’s 74%.
Homeownership rates in Lake Geneva and Greater London are 31% and 54%, respectively, reflecting the growing challenges in high-cost regions.
Photo credit & article inspired by: Euronews
