Average wages no longer buy a standard-size home in most of Europe

The old maxim that steady employment and an average salary would guarantee you access to a decent home for starting a family is now faltering under the weight of a runaway housing market. For more than a decade, house prices have risen far faster than household incomes, widening a gap that leaves an increasing number of people shut out of the market.

As a result, more than 70% of the European population lives in regions where an average wage is not enough to buy a home larger than 75 square meters (807 square feet), even with a 30-year mortgage. That is one of the main findings of a study published Thursday in the open-access publication Journal of Maps by Franziska Sielker and Selim Banabak, researchers at the Vienna University of Technology.

The researchers’ diagnosis, based on an analysis of more than 22 million property listings across 31 European countries, paints a continent with a severe housing crisis, where buying a home has ceased to be a natural step and has become an increasingly difficult goal to reach. The 75-square-meter threshold is not arbitrary: it roughly corresponds to the standard reference size for a two-bedroom family home. The fact that 72% of Europeans find it impossible to buy a dwelling exceeding that size reveals how weakened the middle class’s ability to become homeowners has become.

The study offers a comparative snapshot at the European scale, without entering into precise national rankings. Despite this, Spain is one of the examples the researchers cite as having the greatest territorial inequality. That fracture, which they describe as the existence of a “wide range of affordability levels” within the country, places Madrid as the main hot spot for prices, affecting all neighboring areas. The other most troubled areas are the coastal zones, where pressure from tourism and second homes push prices far above local incomes. The touristification effect also affects France, Portugal, Greece and Croatia.

The situation is particularly suffocating in Europe’s large cities. Sixty percent of the urban population lives in areas where the average wage does not even allow the purchase of a 50-square-meter home—the size of a one-bedroom or studio apartment—with a standard mortgage. Across Europe as a whole, 44% of all Europeans reside in areas with this level of extreme unaffordability. In these cities, market prices force a large share of the population to take on a financial burden above what economic consensus considers healthy, which considers spending more than one-third of a family’s income on housing as financially unsound. At the other end of the scale is just 5% of the European population, living in the most affordable areas. In those markets, property costs are low enough that one can opt for a larger dwelling without mortgage payments exceeding that threshold.

But even these calculations may present a rosier picture than the reality. The reason is that the researchers used regional average wages as the reference for measuring household purchasing power, as most analyses do. The problem is that wages are not evenly distributed, and it takes only a handful of very high earners to pull the average away from the majority’s situation. For that reason, they note, “it can be expected that more than half of the population earns below the reference income level.” In that sense, the analysts insist that “supporting income may be as important as moderating housing prices to achieve housing affordability.”

There is also another important issue when interpreting the figures. The study does not analyze what households that have already bought a home or that live in rental housing are actually paying; rather, it looks at the prices at which listed homes are offered on the current market. The data therefore show the conditions someone seeking a place now would face.

Impossible rents

The study uses the same calculation method to measure how far households can go in affording rent. And the result is as discouraging as it is for buying. Four in 10 people live in areas where renting a one-bedroom apartment or a 50-square-meter studio requires dedicating more than one-third of household income. The consequence is a double expulsion from the housing market. Purchase prices are too high and rents absorb an excessive share of income, making it nearly impossible to save the funds needed to move into ownership. For many households, especially younger people and migrants, renting ceases to be a transitional stage.

On this point the research shows a clear regional divide, although it does not detail the situation of each state. As a general rule in economies such as Germany, France or Austria, an average wage allows renting a larger dwelling than one could buy with the same income. But in southern countries the opposite happens. In Portugal and Italy, rents have risen so rapidly that, with the same salary, you can buy a house larger than the one you can rent. Spain shows a similar pattern. Pressure is concentrated in Madrid, the Mediterranean coast and the islands. In these areas the residential housing stock competes with short-term rentals and second homes.

Another conclusion is that the housing pressure experienced by capitals such as Paris, Berlin or Madrid spreads to adjacent areas. The study stresses that there is a negative effect that extends to the peripheries and nearby municipalities of these cities, pushing up land costs in regions that once provided an escape route for lower-income families. Specifically, the paper states that “urban agglomerations tend to be hotspots of unaffordability, often showing clearly visible spillover effects into neighboring regions despite higher income levels generated in these areas.”

The countryside faces its own drama. Here the main barrier is not prices but the availability of a formal housing stock. The researchers found that more than a quarter (28%) of Europe’s rural population lives in a municipality without a formal rental market. They explain that in these peripheral regions “rental listings are simply not available, either because of a lack of supply or because distribution is limited to informal channels.”

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