It is a continuing interest by international professional investors about European real estate market. In the last years, some of the investors are moving into alternative or niche areas, like student housing, retirement living, etc. This is a big market that is starting shy but will continue to grow.
There are also many people from other continents, who are thinking to buy properties in European continent for investments purpose or other purpose. Buying an apartment in Europe is not a simple process and it is important to take in consideration the most important objective and subjective factors during the decision-making. In addition, it is necessary to analyse the real estate market, before buying an apartment in Europe.
In this work we are going to analyse the real estate market in the European continent and to find in which countries the market is overvalued and in which is undervalued.
If we consider the price to income ratio, the most expensive country is Serbia, where are necessary 18.6 years to buy an apartment. Albania is in the second place with 15.2 years, followed by Czech Republic with 15.2 years, Ukraine with 14.4 years and Belarus with 14.3 years.
If we consider price to rent ratio of the city centre, the real estate market is overvalued in Portugal, Poland, Belarus, Latvia, Denmark, Romania, Spain, Hungary, Albania, Greece, Estonia, Lithuania, Kosovo, Montenegro, Macedonia, Luxembourg, United Kingdom, Norway, Slovenia, Italy, Finland, Croatia, Austria, Germany, Czech Republic, Bosnia And Herzegovina, Serbia, Switzerland, Sweden and France, so in these countries is better to rent than to buy an apartment. In Ukraine, Russia, Malta, Moldova, Ireland, Slovakia, Bulgaria, Netherlands and Belgium is better to rent, but not always, because under certain circumstances buying is better. The only country where the real estate market is undervalued is Iceland, so in this country buying an apartment is better than renting.
If we consider price to rent ratio outside the city centre, the real estate market is overvalued in Belgium, Hungary, Denmark, Belarus, Romania, Italy, Lithuania, Finland, Estonia, Norway, United Kingdom, Luxembourg, Greece, Montenegro, Macedonia, Austria, Slovenia, Czech Republic, Germany, Croatia, Sweden, Serbia, Switzerland, France and Bosnia And Herzegovina, so in these countries is better to rent than to buy an apartment. In Moldova, Portugal, Russia, Bulgaria, Netherlands, Latvia, Slovakia, Albania, Poland, Spain and Kosovo is better to rent, but not always, because under certain circumstances buying is better. The only countries where the real estate market is undervalued are Ukraine, Iceland, Ireland and Malta, so in these countries buying an apartment is better than renting.
If we consider the mortgage as percentage of income, the most expensive country is Ukraine, where the mortgage payment is about 291.4% of the incomes. Belarus is in the second place with 212.6%, followed by Moldova with 183.1%, Russia with 149.2% and Serbia with 133.1%. The less expensive countries are Finland with 46.1%, Belgium with 44.1% and Denmark with 42.5%.
In European continent, there are many occasions to purchase an apartment at discount price when the real estate market is overvalued, but at the same it is necessary to be careful, because there are also many apartments at expensive price despite the real estate market is undervalued.
About the data used in this work
Real estate market analysis is made considering an apartment of 90 square meters which price per square meter is the average of price in the city centre and outside of city centre. The indicators used are:
- Price to income ratio. It is calculated by dividing apartment price to median familial disposable income for a year. Lower value is better.
- Price to rent ratio. It is calculated by dividing the apartment price to the received rent income or the estimated rent that would be paid if renting. Lower values suggest that it is better to buy rather than rent, and higher values suggest that it is better to rent rather than buy.
- Mortgage as percentage of income. It is calculated by dividing the monthly cost of the mortgage to take-home family income. Lower value is better.
The data used in this work are provided by Numbeo and are relating to 2019.