Housing conditions: Europe VS Russia

Abstract

Having a decent place for living is one of the essential parts of human life. Housing should be a safety place to live; respond to our basic needs, there should be an opportunity to have a personal space and to meet old age. However, not all people are satisfied with the quality of their dwelling. This work is devoted to comparative analysis of housing conditions in European countries and Russia. According to numerous reports, Europe seems to be an attractive place for immigration. Is it really so? This article is aimed to consider several countries and to find the most appropriate place for living from the housing perspective.

In this work will be analyzed Norway, Germany, the United Kingdom, the Czech Republic and the Russian Federation. The countries compared, are chosen according to the preferences of Russian immigrants and Legatum Prosperity Index, which represents the conditions as the combination of nine pillars: Economic Quality, Business Environment, Governance, Personal Freedom, Social Capital, Safety and Security, Education, Health, and the Natural Environment.

Comparing the countries in terms of prosperity index, the results are following

  • Norway 1
  • UK 7
  • Germany 14
  • Czech Republic 27
  • Russian Federation 96

Europe: overview

The share of persons living in flats ranges from 7.4 % in Ireland  and 14.3 % in the UK , up to more than half in Estonia (62.0 %), Spain (66.1 %).

On the other hand, more than 50% of the population in Poland and Norway lives in detached houses, however in Croatia the number reached its maximum with the total number 71.0 %.

Ireland, the Netherlands and the United Kingdom (60.1 %) are the only countries of EU where more than 50% of the population is living in a semi-detached house.

Concerning the tenure status of dwelling, across each of the EU Members, at least half of the population own their own home, with this share ranging from 51.7 % in Germany up to 96.0 % in Romania. Statistics reveals that more than 40 % of the European population lives in an owner-occupied dwelling without a loan or mortgage.

 The share of the population that are homeowners and does not have an outstanding mortgage or housing loan was generally high in Eastern Europe and the Baltic Member States. By contrast, in much of Western Europe, more than one third of homeowners has a mortgage or loan and this share rose to more than half in Sweden (54.8 %) and the Netherlands (61.0 %); even higher rates are in Norway (62.3 %) and Iceland (62.8 %).

Just about third of the European population lives in rented accommodation.

Space in dwelling

Despite a slowdown in population growth, many European countries are characterized by a shortage of satisfactory housing; this fact appears in change in the households, because bigger part of the population prefers to live alone, while fewer extended families occupy the same dwelling. The provision of housing in Europe can be judged by estimating the overcrowding index, which takes into account the number of rooms per person, size of a household and the ages of its members.

According to Eurostat data, in 2016 in EU there were 16.6 % of overcrowded households. The ratio varied from less than 4%, in details: 2.4% (Cyprus) up to 55.5%, 50.1% in Serbia and FYR Macedonia, respectively.

Overall saying, the overcrowding rate was higher in Eastern and to a lesser degree Southern Europe, while it was generally lower in Western Europe and the Nordic Member States.

Housing characteristics: affordability

 The housing affordability ratio (housing price to income ratio) is calculated as the ratio of the average cost of an apartment of 54 square meters to the average income of a family of 3 people per year.

HAR corresponds to the number of years during which the family can save up for an apartment under the assumption that all income received must be saved for the purchase of an apartment.

The most affordable housing is in Iceland, for buying an apartment a typical family needs 6.63 years, in Norway, Germany and the UK it is necessary to treasure money for 8-9 years. Russia is located on 15th place; it means that for purchasing an average Russian should save money for 11 years. The highest rates are in Serbia, Ukraine, Belarus, with the total numbers 18.13, 15.29 and 14.94 years, accordingly.

The number of rooms per person can judge the availability of housing in Europe. The number of rooms in a dwelling represents whether residents are living in crowded conditions. Overcrowded housing may have a negative impact on physical and mental health, relations with others and children’s development.  On average, this indicator is now equal to 2.0; He is the highest in Norway (2.1 rooms), the lowest in Greece (1.4 rooms). Living conditions in the EU are considered unsatisfactory if there is more than 1 person for 1 room;

According to statistics, 15% of families live in such conditions. Their share is highest in Italy (46%), and for example in the Netherlands, there are none at all. In Sweden, it is considered normal if the number of rooms in an apartment is one more than the number of family members; the minimum size of housing here is 46 m2 per person. In the EU, only 47% of families consider the maintenance of their dwelling space to be easy, while the majority regard it as a heavy burden. Most of these families in Italy (40%) and in Germany (30%).

Norway

Norway is a country that has been a leader in the ranking of the best, richest and most favorable countries for life for more than one year.

For permanent residents of Norway, medical care, including dental services, is free, education, as well as kindergartens are free, and the state provides subsidies for renting apartments.

A quarter of the population of Norway lives in farms and villages. Two thirds of the population live in cities not exceeding 50,000 people. Recently, there has been a large outflow of the population in Oslo, even relatively tall skyscrapers or just tasks with modern architecture have even been built here. Norway has one of the lowest population densities and to build huge high-rise apartments does not make economic sense.

From the total income, on average, about 17% is spent on housing. In addition, on average, there are two rooms per person in Norway. In terms of basic facilities, 100% of dwellings sampled in Norway contain private access to an indoor flushing toilet, compared with an OECD average of 97.9%. According to the poll conducted, 91% of the population are completely satisfied with their living conditions.

Population growth and urbanization force to build many new homes in Norway in the nearest future. According to Statistics Norway, in 2016 the number of new homes increased by almost 17%, to 35,074 units, after rising by 14.3% in 2015. Housing permits also increased in 2016 for most types of buildings. Completion of housing increased slightly to 2.4% to 27,814 units in 2016, which is a recovery after a decline of 1.1% in the previous year.

About 20% of people rent dwellings in Norway. Regarding real estate prices, renting a 2-room apartment in Oslo in the city center will cost from about $ 1,172 to $ 1,982 per month. For this money, the tenant will get decent housing shine of rubbed surfaces, thoughtful free space and incredible accuracy – the national traditions of Norway.

The Czech Republic

Modern housing in the Czech Republic is characterized as high quality and meets all international standards. The households on average spend 24% of income on keeping their dwelling in satisfactory conditions. This ratio outweighs the OECD index of 20%.

Concerning the number of rooms per person ratio, the average home contains 1.4 rooms per person, less than the OECD average of 1.8 rooms per person. This fact can be explained a national feature of standard Czech apartments: its size does not exceed 50 square meters. In terms of basic facilities, 99.4% of dwellings are equipped in the Czech Republic.

The average price of apartments in the Czech Republic surged by 11.87%. There was a sharp rise in demand in the first half of 2016. The number of new apartments and villas sold was 11% higher than during the same period last year at 3,960, according to Jones Lang LaSalle (JLL) Czech Republic. Most apartments sold cost US$ 1,764 to US$ 2,156 per square meter. The volume of granted mortgages in 2016 hit the decade´s maximum.

Yet despite increased construction, during the first half of 2016 the number of available units for sale fell 23% y-o-y, due to the slow issuance of building permits.

Average monthly salary in the Czech Republic is 892.14 € (1,011.05 $) and the price to income ratio is 15.27 which represents that apartment purchase affordability is lower than in the majority of European countries.

However, retail property in the Czech Republic is traditionally popular with buyers from Russia and other CIS countries. In recent years, the Czech authorities have significantly simplified the procedure for buying property. Innovations have affected thousands of people. Only Russian citizens annually buy up to 1 thousand houses and apartments in the Czech Republic. Up to 90% of transactions take place in Prague (including suburbs).We can conclude that housing for Russians is quite affordable in the Czech Republic.

The United Kingdom

The UK is considered one of the most prosperous countries in the world that is why it seems so attractive for immigration. Only according to official statistics, who moved to the UK from Russia since 2000, has tripled. England is chosen for life, study and business.

However, the United Kingdom is known as one of the most expensive countries in terms of housing. In the UK, the households have high expenditures on electricity, water, gas, heating. On average people, spend about 24% of their income to keep a roof above their heads. This ratio is higher than the OECD average, which is 20%. In order to decrease costs, the citizens are forced to shorten the consumption of hot water, to reduce the temperature of heating.

In the United Kingdom, the average household net adjusted disposable income per capita is $ 28 408 a year, lower than the OECD average of $ 30 563. The average household net financial wealth per capita is estimated at $ 83 405, lower than the OECD average of $ 90 570.

In the United Kingdom, the average home contains 2.0 rooms per person, which outweighs the OECD average of 1.8 rooms per person. However, according to the IKEA research, nearly 20% of Britons are squeezed into just 30m2 of space, compared with the average living space, which is 85m2.  The UK has its own state program to provide the population with affordable housing since the late 40s of the last century, but it is not possible to completely resolve the housing issue. In the waiting lists, more than 700 thousand families, more than a million inhabited houses are unsuitable for life, and about half a million Britons live in officially recognized cramped conditions.

86% of citizens say that if they had a free choice they would choose to buy a house, because in England, the cheapest mortgage in the world, and banks give about 95% of the loan.  Concerning renting an apartment in the UK, in the city center it will cost from $ 897 up to $1500, outside the city not more than $1169, however the quality of the dwellings leaves much to be desired. The main problems are constant dampness and the appearance of mold, as a result of heating savings. In old houses, bad boilers, in general, a tenant or a property buyer may need to spend money on upgrading such a system.

Germany

There is a wide range of housing stock in Germany, from mansions and country estates for the wealthy, to tents and special hotels for the homeless. Most Germans live in self-contained apartments or in single-family houses. Single-story and two-story townhouse-like dwellings characterize the tidy neighborhoods of small towns and medium-sized cities, and high-rise apartment buildings are common in larger cities. In many communities, merchants, tradespeople, and shopkeepers continue to live above their stores, and clustered farmhouses still form the nucleus of many villages.

Because decent housing is perceived as a basic right in Germany, the government provides financial aid to households devoting too great a share of their income to housing costs. The aid can subsidize their rents or help pay mortgages.

In Germany, households on average spend 20% of their disposable income, which is equal to the OECD average. German houses are not  seem to be overcrowded as for 1 person there is 1.8 rooms, which is also an average ratio according to OECD.

After about four years of strong house price rises, Germany’s housing market remains very strong. Strong economic growth, 1.1 million refugees, high work-related immigration, record-low unemployment, weak construction supply and low interest rates; all these factors influenced the housing market.

Low construction activity is another reason for the continued increase in house prices. Housing supply is not keeping up with demand. In the foreseeable future, the country needs to build around 400,000 flats annually to prevent housing shortages in cities The problem of housing shortage is accelerated due to refugees coming to Germany. Although more than 800,000 new apartment units were completed from 2015 to 2017, this number is insufficient.

Germans are mostly tenants. Even in the western part of the country there are more than half (about 55 percent), and in the former GDR, more than two-thirds of households (almost 70 percent) use rented housing, according to the statistics of the Federal Republic of Germany. Nowadays, the price for renting an apartment in Germany in the city center will vary from $792-$1530. In order to buy a house, a typical German should spend 8.48 years for saving money.

The Russian Federation

According to public opinion polls, more than 60% of Russians respond positively to the question “Do you have a need to improve their living conditions?”, but most often, they give a negative answer when they are asked if there is a possibility for this.

No less interesting are the circumstances complained of by respondents dissatisfied with their living conditions. Most of them (from closeness to poor quality public utilities) minimally changed their performance compared with a similar study in 2007.

However, significant changes occurred in three extremely remarkable parameters. The number of complaints about the high cost of housing and public utilities services has more than doubled (from 18 to 40 percent), and it should be recognized that this objectively reflects the real situation – the cost of paying for housing has become a noticeable part of the budget of most people. On the other hand, two other points significantly decreased complaints of accidents (from 25 to 14 percent) and insufficient housing comfort (from 21 to 12 percent).  Nowadays people spend on housing costs 19% of their disposable income, whereas the OECD average is 20%. However, considering the size of dwellings and the quantity of the rooms per person, Russia lags behind its colleagues, there is only 1.0 room in the average Russian home, while the OECD average is 1.8. Concerning basic facilities, such as access to an indoor flushing toilet, there is 86, 2 % of dwellings, which respond to this criterion. It is much less than the average in OECD, with the total number 97, 9%.

It is said that money cannot buy happiness, but it is one of the important factors, helping to achieve higher living standards and as a result a greater well-being. Higher economic wealth may also increase affordability to high quality education, health care and housing.

Household net adjusted disposable income is the amount of money that a household earns each year after taxes and transfers. In the Russian Federation, the average household net adjusted disposable income per capita is estimated at USD 16 657 a year, lower than the OECD average of USD 30 563.

Household financial wealth is the total value of a household’s financial worth, such as money or shares held in bank accounts. In the Russian Federation, the average household net financial wealth per capita is considerably lower than the OECD average of USD 90 570.

In Russia renting an apartment in city center will cost $368,47-$667,97. Outside the center prices are more attractive $236,64-$459,94.  Buying an apartment seems problematic, as the average price for square meter costs from $885 up to $1389 and the usual citizen of Russia has to save money for about 11 years. In addition, there is a risk to invest money and lose it due to an unfair developer, for example.

In some regions, about 30% of new buildings remain unbuilt, despite record-low mortgage rates and falling real estate prices. However, over 200 thousand homeless orphans are in the housing queue. In addition, the total area of ​​dilapidated and emergency housing reaches 90 million square meters.

If we compare the structure of families and the structure of the housing stock, it turns out that we have more apartments than families”, said the chief architect of the project for the Center for Spatial Information.

It is unlikely that they will believe in an excess of housing in Russia and hundreds of thousands of graduates of orphanages, to whom the state, according to the law, must issue separate housing, but does not do so. Moreover, the authorities are increasingly refusing their obligations to provide housing for orphans. Over the past year, the queue for housing from homeless graduates of orphanages has increased by 20%. Regional authorities allocate to the orphanage less and less housing, and often “settle” them into uninhabitable buildings. The country has almost 230 thousand homeless orphans.

The housing issue has not lost its relevance for Russian families for many years. Qualitative improvement in the situation is hampered by housing prices, which, despite the shock pace of construction and housing construction in recent years, remain high. In addition, incomes of the population for several years under the influence of crisis factors in the economy remained at a low level, for a long time without showing positive dynamics.

The provision of living space in Russia lags far behind foreign countries. According to Rosstat, 64% of families live in an apartment of 60m square.  In the Russian Federation, the share of small-sized apartments is high (1-2 rooms), therefore, the fact that there is an average of one room per person is reliable. More than half of population does not feel constrained in the apartments of this type.

Speaking about the quality of housing, it is worth saying that more than half of the housing stock (55-65%) is in a satisfactory condition. Most of all capital repairs are required in dwellings located in cities with a population of 500–950 thousand people. Least of all is required in the cities of millionaires (not including Moscow and St. Petersburg).

Affordability of housing in Russia is a separate topic that I would like to consecrate in this article. Since European portals have information that a typical Russian citizen will have to save for the purchase of housing for about 11 years. I believe that it is necessary to analyze information on the availability of housing, on income in the regions.

For analysis, I decided to choose 10 regions of the Russian Federation, so that the data were more reliable.

Here I will consider the affordability of housing, based on the number of years it is necessary for a resident of a given region to afford typical housing. But we take into account the fact that the family will not save all the money only for the purchase, suppose that the amount of money that is the subsistence minimum will be spent on the basic needs of the family, that is, the remaining money will accumulate.

To begin with, we will take 10 regions, including 2 cities of federal significance — St. Petersburg and Moscow, 3 republics — Mari El, Udmurtia, Dagestan, 3 oblasts—Novosibirsk, Chelyabinsk, Rostov, 2 edges: Krasnodar and Perm (Table 1).

Table 1

According to the statistics of Rosstat, from 2000 to 2017 the housing affordability index declined by 1.8 times, namely from 4.7 to 2.6 annual family income is required to purchase a standard apartment in Russia. In many countries, this index is higher, but the area of a typical apartment is larger.

Referring to a study conducted by the RIA Rating, the level of housing affordability varies greatly by region of the Russian Federation. In the regional context, a single dynamic is not observed. In most regions, it can be said that housing affordability for families with one child has become higher.

In the considered regions, the most affordable housing in the Chelyabinsk region, where the family will have to save for 3.5 years. The Republic of Dagestan closes the list; although there was the most significant reduction (3 years) in terms of accumulation on an apartment occurred.

According to experts, no radical changes should be expected. Looking at the current positive dynamics, it is hoped that in several years housing will become more affordable. For some Russian families, the opportunity to improve their housing conditions increases due to the active development of mortgages, but according to the results of the regions rating on affordability for families to buy housing for mortgages, their share is relatively low and on average throughout Russia does not exceed 26%. The expected reduction in interest rates will certainly help to solve the problem, but for now, this is a matter of the future.

Conclusion

The housing issue is acute not only in Russia, but also in European countries. Each of the countries considered has its own peculiarities: in one, there is lack of demand, in the other one of supply. In some, rental housing prevails, in others its purchase. In Europe, there is no single trend in the housing market, but most countries are similar in one thing: it is essential to provide assistance from the state: whether it is a low mortgage rate or the provision of housing according to social programs.

It is worth saying that the fight against this problem in EU and Russia is made according to similar scenarios, but the key difference lies in the mechanisms and pace of implementation. It is obvious that for Russia the housing issue is now one of the priorities in state policy. To consider the issue resolved, it is necessary to take measures to make housing more accessible to a larger percentage of the country’s population. It is very important to speed up the construction of new housing so that the problem of protracted construction will disappear.

Perhaps one solution to the housing issue could be the wintering of some provisions on housing legislation among European colleagues (the size of bank loans should be differentiated by region and linked to the standard of living in the region)

As long as living conditions are at the level at which they are now, people will look for options for their living abroad.

References

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