EMF Publishes Hypostat 2017

9 September 2017

By Kaare Christensen, Finance Denmark and Chairman of the EMF Research & Data Committee, and Daniele Westig, Economic Adviser, EMF-ECBC


The 2017 edition of Hypostat was published by the EMF-ECBC on 8 September 2017 and made available for download via the EMF-ECBC website. Hypostat is an established source of statistics, information and analysis regarding the European mortgage and housing markets. The publication includes historical annual series for around 30 indicators covering, where data is available, the 28 Member States of the European Union (EU) and 8 non-EU countries, namely Australia, Brazil, Iceland, Japan, Norway, Russia, Turkey and the United States. As was the case in the past, Hypostat 2017 brings together over 30 contributors who provide Country Reports for every EU 28 Member State, giving details about their specific markets and outlining developments observed over the past year. Furthermore, Hypostat 2017 provides a general analysis of the European mortgage and housing markets together with some background information on demographic, social and economic dynamics. Moreover, it also includes external articles which focus on significant topics which have an impact on the market. This year, one article studies the various ways the Loan-to-Value (LTV) ratio can be assessed in certain countries and provides also some policy implications. Drawing on its very detailed database, European DataWarehouse (EDW), the author of this study, also provides empirical findings on the relationship between LTV and the probability of default. The second external article prepared jointly by the Banking & Payments Federation Ireland and UK Finance, focusses on the identity of first time buyers (FTBs) in Ireland and the UK. It shows that over the past years, in general, the age of FTBs in these two countries has increased and they increasingly face challenges to ‘get on the housing ladder’ with knock-on effects for policy makers.


Hypostat 2017 highlights some interesting trends observed in the housing and mortgage markets across the EU. These developments must be evaluated against the broader macroeconomic backdrop. The EU produced a growth of 1.9% in 2016, continuing on the positive path started in 2013. For the first time since the onset of the crisis, no country is any longer in a recession. Moreover, in aggregate terms, the debt-to-GDP ratio continued to decrease in the EU, reaching 85%. A high level of fragmentation remains in the EU in terms of GDP growth. Unemployment went down across the EU by nearly one percentage point. However, also here the picture across the EU remains very fragmented, and especially youth unemployment remains a concern in some countries. Inflation, calculated with the Harmonised Index of Consumer Prices in the euro area, after remaining virtually at zero in 2015, started picking up in 2016.


Against this backdrop, Hypostat 2017 describes and analyses some important developments in terms of housing and mortgage markets. For example, house prices in the EU (according to our methodology) continue the general positive trend over the past years. Nonetheless, in countries with an ongoing contraction in house prices the rate has slowed down, though recovery could be stronger. Looking at city data, it is clear that the heterogeneity in house pricing trends is not only present among countries but also within. Most of the countries observed registered national house prices moving at different paces depending on the region/city, with capitals and large cities leading the way and rural and remote regions retracting. House price increases in capital cities were on average more than 10 percentage points higher compared to the overall situation in their respective countries. At one end of the spectrum, house prices in London increased by more than 40 percentage points more than in the rest of the UK, whereas in countries such as Romania or Croatia, house prices in the capital showed a decrease of nearly 10 percentage points compared to the rest of the country. Housing supply (as measured by the number of building permits issued, housing projects begun and housing projects completed) confirmed the timid pick-up already seen in 2015, but it is clear that at aggregate level and especially in some high growth areas the supply is still by far outmatched by the demand.


In the year 2016, the total outstanding amount of mortgages in Europe dipped just below the EUR 7 trillion mark, although in 2016 the general trend was positive. This was principally caused by the Exchange Rate effect of the depreciation of the GBP to the EUR, thus sharply reducing, by more than EUR 250 billion, the outstanding amount of the UK, the largest in absolute terms in the EU, in EUR terms. Regarding gross lending, an increase of 3.3% was seen in 2016, reaching EUR 1.14 trillion notwithstanding the FX effect of the depreciation of the GBP and the SEK.


All in all, despite the challenging times the EU weathered during 2016 with political instability within and around the block, the picture given of the housing and mortgage markets continue the positive trend outlined already in 2014, though fragmentation remains a major feature, observable through most indicators presented in Hypostat 2017. Fragmentation is, however, also very much present within individual countries, reflecting the many physical and location-specific factors that heavily influence the performance of the housing market, in addition to the macroeconomic elements. Hypostat 2017 also seeks to give an idea of what these markets will look like in the coming months and years.