A new study compares house prices in 62 countries against local average salaries.
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According to a new report from BestBrokers.com, Denmark is the most affordable country in Europe to buy a home relative to the average income.
The average price of a 100 square meter property is equivalent to 114 net wages in Denmark, putting the Nordic country at the top of the most affordable European countries for buying a house, according to IMF data, specialist of Numbeo real estate prices and TradingEconomics, says BestBrokers.
Furthermore, Denmark was the most expensive country in the EU in 2023 (prices of goods and services were 43% higher than the EU average, according to Eurostat) and the average annual salary was the seventh most bred from Europe.
“Since prices and incomes vary widely from country to country, the BestBrokers team decided to examine the real estate market based on the number of months’ salary needed to purchase a house in different European countries”we can read in their report.
The affordability ranking is based on data examining house prices, average net monthly income, inflation and “real” mortgage interest rates, i.e. adjusted mortgage rates depending on inflation, in 62 countries around the world.
In which country in Europe would you have to save the longest to buy a home?
According to this report, Ireland and Sweden are the second and third most affordable countries in Europe, with 123 and 129 net salaries respectively sufficient to buy a 100 square meter house. This is equivalent to approximately 10 years of annual salary.
There is, however, a small drawback: the calculation is purely theoretical. This means that expenses related to food, housing, childcare, or anything else a person might need or want are not taken into account.
The Czech Republic and Slovakia occupy the last places in the European ranking. In the latter country, the average 100 square meter house costs 297 times the average salary, which could be earned for almost 25 years. If a person can save half of their take-home pay, it will take them another 50 years to save vigorously to own a home for their family.
Real mortgage interest rates in Europe for the third quarter of 2024
One of the key data points for analyzing housing prices and affordability is the count of actual mortgages in each country. The study used data on mortgage rates and inflation rates forecast for the third quarter of 2024 to determine “real” mortgage rates for the third quarter of 2024 in different countries.
“The real mortgage interest rate reflects the true cost of funds to the borrower and the true return to the lender”we can read in the report.
According to the report, the highest real mortgage interest rate is in Russia, where a state-guaranteed mortgage program ended in July 2024.
According to the report, the nominal mortgage rate is expected to be around 20.3% for the third quarter of 2024. This rate was adjusted for expected inflation of 8%, resulting in a real mortgage rate of 12.3% for the period July to September 2024.
Based on this calculation, other European countries with high real mortgage rates are Latvia (6.65%) and Poland (5.1%). In Germany the rate is 1.85% and in the United Kingdom it is 1.77%. In other major European economies, the rate is around 1%, such as in France (1.13%), Italy (0.99%) and the Netherlands (0.96%).
Real mortgage rates are negative in Belgium (-0.52%) and Sweden (-1.21%). These rates “does not suggest that homebuyers in these countries would ultimately pay no interest on their mortgage; rather, it shows that the real (relative to nominal) cost of borrowing may have fallen”we can read in the study.
How much monthly salary does a 100 square meter house cost worldwide?
The most affordable country in the world for buying a house relative to wages is South Africa, where people need 71 times the average salary to own a 100 square meter property.
ADVERTISEMENTThe United States comes in second place in this ranking. However, real estate prices vary widely from state to state. The report states that in the United States, it takes 76 average monthly wages to buy a home. This equates to approximately six years of annual salary.
At the bottom of the ranking is Nepal, with 684 wages needed to buy a house, followed closely by Turkey, where the figure is 631, the equivalent of 52.5 years of wages.
Disclaimer: This information does not constitute financial advice. Always do your own research to ensure it is suitable for your particular situation. Remember, we are a journalistic website and our goal is to provide the best guides, tips and advice from experts. If you rely on the information contained on this page, you do so at your own risk.
