EMF HYPOSTAT 2018: Executive Summary

26 September 2018


The 2018 edition of Hypostat, the EMF-ECBC’s flagship statistical publication, was published on 3 September 2018. Hypostat is an established source of statistics, information and analysis on European mortgage and housing markets. The publication includes historical annual series for 30 indicators covering, where data is available, the 28 Member States of the European Union (EU) and 10 non-EU countries, namely Australia, Brazil, Iceland, Japan, Norway, Russia, Singapore, South Korea, these last two were new entries in this edition, plus Turkey and the United States. As was the case in the past, Hypostat 2018 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 2018 provides a general analysis of the European mortgage and housing markets together with some background information on demographic, social economic dynamics.

Besides an analytic overview of housing and mortgage markets, Hypostat 2018 also includes three external articles which focus on topics which are of crucial importance and have an impact on the market.

The first of these articles is concentrated on a mapping exercise of Europe’s social and public housing. Housing Europe, a network of 45 national and regional federations which together gather about 43,000 public, social and cooperative housing providers in 24 countries, has authored this article in which it provides a general overview of social housing in the EU Member States, the actors involved, the size of the market and the challenges ahead. This article is also meant to mark a first step towards further cooperation between the EMF and Housing Europe on these topics which are gaining in importance on both the national and European political agenda.

Regarding the second article, in the ongoing debate of improving financial stability in Europe, the financing of residential real estate plays an important role. Following on from last year’s article on the various ways to calculate the Loan-to-Value (LTV) ratio, European DataWarehouse (EDW) has authored a follow-up article on the importance of Current Loan-to-Value (CLTV) i.e. the current amount of a loan compared with the current value of the property used as collateral and its implications in performance monitoring related issues. The article takes advantage of the granular database of EDW to provide empirical findings.

In recent years, the EMF has become a primary advocate of energy efficient mortgage finance and has, since 2016, been working on the development of an energy efficient mortgage product, according to which building owners are incentivised to improve the energy efficiency of their buildings or acquire an already energy efficient property by way of favourable financing conditions linked to the mortgage. The third article of this year’s Hypostat provides an update on the latest state of play of the Energy Efficient Mortgages Initiative, with a particular focus on the recently launched Pilot Scheme involving 39 pioneering banks together with European and international institutions, as well as the evolution of green covered bonds.

Hypostat 2018 highlights some interesting trends observed in the housing and mortgage markets across the EU. These developments must be evaluated within the broader macroeconomic backdrop. The EU produced growth of 2.4% in 2017 building on the positive path started in 2013 and, for the first time since the onset of the crisis, every country showed positive growth. Moreover, in aggregate terms, the debt-to-GDP ratio continued to decrease in the EU reaching 84%. A high level of fragmentation remains in the EU in terms of GDP growth. Unemployment went down across the EU by 1 percentage point following the promising path of the previous years. However, also here the picture across the EU remains very fragmented and especially youth unemployment continues to be a source of concern in some countries. Inflation, calculated with the Harmonised Index of Consumer Prices in the Euro area, continued picking up in 2017 and approached the ECB’s long-term goal of close to 2% inflation.

Against this backdrop, Hypostat 2018 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 and in aggregate terms have accelerated since 2015 from 3.5% to nearly 6% in 2017. Moreover, half of EU Member states have reached or surpassed the house price levels of 2007, with some countries experiencing, in terms of national average, a house price increase of over 60% over the last ten years. On the other hand, some countries are still far away from their pre-crisis levels. In terms of dynamics, in all but two EU Member States, house prices increased in 2017. City level data shows that the heterogeneity in house pricing trends is not only present among countries but also within Them. Most countries registered national house prices moving at different paces depending on the region/city, with capitals and large cities leading the pack 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 the larges German cities have increased by more than 53 percentage points compared to the rest of Germany over the last 10 years, whereas in countries such as Greece, house prices in the capital showed a further decrease on top of the general country-wide contraction. This year Hypostat also focused on the Price-to-Income Ratio evolution in the various countries and the statistics collected indicate that over the last four years in 15 EU Member States there has been a deterioration, i.e. house prices increased more with respect to disposable income, thus making the acquisition of a dwelling more challenging. Especially in countries such as Luxembourg, the UK, Sweden, Austria and Belgium, in 2017 the affordability of buying a dwelling deteriorated by at least 25% with respect to the long-term average of the past 18 years.

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 supply is still significantly outmatched by the demand. Also here a significant heterogeneity can be seen among countries. On the one hand countries such as Finland saw a significant increase of 20% of their housing permits in 2017 with respect to the previous year on top of an already higher level of housing permits given with respect to the 2000-2007 average, while in countries such as in Bulgaria and Italy housing permits contracted last year and their permit levels were still far away with respect to the pre-crisis period.

In the year 2017 the total outstanding amount of mortgages in Europe surpassed the EUR 7 trillion mark and, after the slight contraction of the previous year, it increased by 2.2%. Though to a lesser extent than last year, the depreciation of the GBP to the EUR contributed to dampening the overall outstanding figures. Moreover, besides Spain, all other major EU Member States saw their outstanding mortgage loans increase in 2017. Regarding gross lending an increase of 3.5% was seen in 2017, reaching EUR 1.14 trillion, notwithstanding the FX effect of the depreciation of the GBP and the SEK, with only Italy, as a major EU Member State, seeing a gross issuance contraction in 2017 with respect to the previous year. Hypostat 2018 also presents  a new statistic which is already regularly published in the EMF-ECBC’s Quarterly Review, i.e. the amount of gross lending with a variable interest rate (up to 1 year fixation). The data at hand show that over 20% of the new issuance in 2017 was done with a variable interest rate, with the majority being issued in Sweden and the UK.

All in all, notwithstanding the challenging times the EU weathered during 2017 with political instability within and around its borders, housing and mortgage markets continue on the positive path outlined already in 2014, although fragmentation remains a major feature observable through most indicators presented in Hypostat 2018. 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 2018 also seeks to give an idea of what these markets will look like in the coming months and years.

To download the EMF HYPOSTAT 2018, click here