Confidence in European house prices continues to rise, but higher costs are putting a strain on consumers with many struggling to pay the rent or mortgage each month.
The ING International Survey on Homes and Mortgages 2015, which surveyed 15,000 people about their attitudes on the housing market, reveals that overall people across Europe remain bullish on house prices. The majority of consumers (56%) believe that prices will rise over the next 12 months, with confidence up by three percentage points from last year.
The ING House Price Optimism Index – now in its fourth year – found that optimism peaks in Turkey (82%), Luxembourg (76%), the Netherlands (70%) and the United Kingdom (70%). Sentiment rose fastest in Spain, having had extremely low levels of confidence in 2014 (35%), rising 14 percentage points to 49% this year and 38 percentage points since 2012. While in the Netherlands and Turkey ‘belief in bricks’ soared by 13 and 10 percentage points respectively.
More than ever, the majority believe that from a financial point of view it is better to own a property than rent (79%) – an increase of four percentage points on last year – and indication that consumers across Europe view property as an important asset.
This is especially the case in the UK where consumers are placing their faith in property for their retirement, with 21% viewing their home as part of their pension – significantly higher than the European average (15%).
However, 61% of people across Europe feel that current house prices where they live are too expensive, with many unable to get a foot on the ladder.
Greater confidence is seemingly coupled with greater unaffordability, as 25% of renters and homeowners admit to finding it increasingly difficult to pay their mortgage or rent each month. The report found tenants renting in Italy and Spain and homeowners in Romania and Turkey are struggling the most with payments.
The Index found that over the last four years, when consumers have expected house prices to rise over the next 12 months, prices have then tended to increase.
ING senior economist, Ian Bright, said: “House prices are on the up in many European countries and consumers remain bullish that this will continue. As a result, we’re seeing more people viewing property as an important financial asset – including countries where renting is the norm – but there is also frustration with property being increasing unaffordable.”
Bernie Hickman, managing director, Legal & General Individual Retirement Solutions, added: It is a peculiarly British belief that ‘my home is my pension’ – so it’s no surprise to see that we’re the most likely in Europe to see our main residence as a key element of our retirement funding plans. Today’s over-60s in the UK own some £1.3 trillion of property wealth, and unlocking this vast asset base in order to fund better retirement outcomes is going to be a challenge for both consumers and the UK financial services industry over the coming years and decades.
“Given Brits’ general reluctance to downsize – and the lack of suitable properties being built for ‘last time buyers’ to move into in the UK – retirement lending is going to play an increasingly important role for those in retirement. Retirement lending is an idea whose time has come, and a greater range of more flexible products will help older borrowers. It’s crucial that our industry makes bolder moves to cater for older homeowners and enable them to access the money they need to fund their retirement.
“Advice will be paramount in this process if retirees are to make use of the assets they have built up over a lifetime to fund a better retirement.”