European confidence in house prices is up

However, consumers are still struggling though

Confidence in European house prices is rising, but the temptation to over-stretch financially is putting consumer finances under pressure.

• Three in five (59 per cent) people in Europe expect house prices to rise over the next 12 months

• But 61 per cent say housing is expensive

• Overreaching sees one in five people find it difficult to pay for housing

According to the sixth annual ING International Survey Homes and Mortgages 2017, which surveyed almost 15,000 people in 15 countries about their attitudes on the housing market, overall people across Europe are feeling more bullish. The majority of consumers (59 per cent) believe that prices will rise over the next 12 months; confidence is up by three percentage points from last year – the first rise in two years.

House price expectations have leapt in Romania (72 per cent), Spain (66 per cent) and the Czech Republic (65 per cent) as their economies continue to grow. Romania shows the largest leap (20 percentage points), although most people only expect house prices to rise slightly, but in Spain, where mortgages have reportedly become easier to secure, expectations are up by 14 percentage points.  

On the other hand, expectations in the UK have plummeted. The proportion of people who believe house prices will rise over the next 12 months is down by 13 percentage points since 2016, from 57 per cent to 44 per cent. See Figure 1 for full international table. 

Figure 1

Expectation house prices will rise over the next 12 months

Country	2014	2015	2016	2017	Change (2017-16)
Romania	46 per cent	53 per cent	52 per cent	72 per cent	+20
Spain	35 per cent	49 per cent	52 per cent	66 per cent	+14
Czech Republic	47 per cent	50 per cent	52 per cent	65 per cent	+13
Poland	44 per cent	43 per cent	43 per cent	51 per cent	+8
France	42 per cent	41 per cent	46 per cent	54 per cent	+8
Luxembourg	72 per cent	76 per cent	78 per cent	86 per cent	+8
Austria	71 per cent	69 per cent	71 per cent	78 per cent	+7
Germany	60 per cent	61 per cent	61 per cent	64 per cent	+3
Netherlands	57 per cent	70 per cent	69 per cent	72 per cent	+3
Italy	30 per cent	33 per cent	37 per cent	38 per cent	+1
Turkey	72 per cent	82 per cent	81 per cent	77 per cent	-4
Belgium	60 per cent	55 per cent	65 per cent	59 per cent	-6
United Kingdom	72 per cent	70 per cent	57 per cent	44 per cent	-13
European Consumer	53 per cent	56 per cent	56 per cent	59 per cent	+3
Australia	n/a	63 per cent	50 per cent	56 per cent	+6
United States	56 per cent	60 per cent	57 per cent	59 per cent	+2

 

Financial fragility

However, latest IMF data shows house prices are continuing to increase relative to incomes and rent in a number of countries, making housing increasingly less affordable. ING’s study found a similar reaction with three in five (61 per cent) people considering housing to be expensive.

With prices continuing to rise, the study reveals a number of consumers could be lured into a false sense of security and are overstretching their finances as a result.

Across Europe, two in five (41 per cent) report that their current home was over or at the top of their budget, while nearly a quarter (23 per cent) of all respondents in Europe find that their running costs are higher than they anticipated, and one in five (20 per cent) find it difficult to manage their housing payments. 

The impact could be leaving many people with limited disposable income, affecting the amount they are able to save and put towards other expenses.

This is supported by findings from the ING International Survey Savings 2017 released earlier this year, which found that 29 per cent of people in Europe have no savings at all. Of the 71 per cent who say they do have savings, more than a third (36 per cent) have no more than three months’ take-home pay put aside, leaving them potentially vulnerable to unexpected costs or loss of income.

In the ING International Survey Homes and Mortgages 2017, when consumers were asked whether their country is on the right track in terms of housing, just 29 per cent of people in Europe agreed, while 45 per cent disagreed.

ING behavioural scientist Nathalie Spencer said:“People across Europe are finding housing expensive; many have paid at the top of or even above their budget for their home, and some have higher-than-expected running costs too. The result is many are feeling the pinch and finding it difficult to pay their rent or mortgage each month.

“When housing is expensive people have less available for saving or investment, which may leave them vulnerable if faced with unexpected income or expenditure shocks. Planning and sticking to a budget is crucial when buying and renting a home and will help ease pressure on the purse strings in the long term.”