The years of average annual income needed to cover the price of a 100m2 property have increased in almost all Organisation for Economic Co-operation and Development (OECD) countries and in some of them almost doubled in the comparison between 2000 and 2020. "Developments in the housing market risk reinforcing pre-existing inequalities," the agency points out in a recent study by the organisation entitled 'Housing taxation in OECD countries'. So, how long do people have to save to buy a house? And how many years does it take to buy a 100m2 property in Italy? We explain everything.
Buying a property in 2020 compared to 2000
Buying a home is becoming more burdensome, which alienates many households from access to home ownership in most developed countries. "In recent decades, real house prices and rents have risen faster than inflation and incomes, and while lower interest rates have lowered mortgage payment costs, this has only partially dampened the impact of rising house prices," the report points out.
According to the study, which considers data on house prices and average gross household income for the year 2020, Italians need 8.7 years of disposable income to buy a 100m2 property. Little change from the 8.5 years needed in 2000, but some countries are far worse off: New Zealand (18.7 years), South Korea (16.6), Ireland (16.1) or Luxembourg (15.8). In Spain, 11.1 years of salary are needed in 2020, while in 2000 Spaniards needed 'only' 8.2 years of full income.
How many years does it take to buy a 100m2 house in Italy?
Italy is among the countries with the lowest household effort to buy a home in the ranking of 31 OECD countries compiled from available data on the household effort rate to buy a home in 2020. Other countries at the bottom of the ranking are Norway, with a result of 7.8 years (compared to 6 in 2000), Japan, with 9.2 years (compared to 7.5 in 2000), Finland, stable at 6.7 years, and Lithuania with 8.4 years compared to 6.5 at the beginning of the century. The European average stood at 4.1 years in 2020 while in 2000 it was 3.6 years.
Years needed to buy a house in 2000 and 2020
Another way to measure the impact of house prices and their relation to lower wage growth is to look at the increase in years of salary needed between 2000 and 2020. In these 20 years the situation has changed a lot in countries like Luxembourg, where almost 10 more salary years are measured (from 6 salary years in 2000 to 15.8 years in 2020). This is followed by New Zealand (8.4 years difference), Sweden (5.1 years between 2020 and 2000) or France (5 years difference).
But not all OECD countries have increased their rates. For example, Italy is among the countries that show the smallest increase in economic effort on the part of households. But in some countries the years spent buying a house are now even lower than at the beginning of the 21st century, with rates up to two years lower in Korea (2.2 years), very close in Lithuania (1.9 years) and Japan (1.7 years), and slightly more stable in Ireland (0.4 years). Nor has the situation changed much in Finland, where the stress rate remains stable at 6.7 years, along with Portugal, Latvia, Germany and the United States, where the change is less than one year.
Rising house prices, the consequences in OECD countries
The OECD study also highlighted some consequences of rising house prices in socio-economic terms, which can be summarised as follows:
- Rising housing costs (rent or mortgage) have "deeper effects" on younger and lower-income households;
- Rising housing costs make it impossible for poorer households to invest in house maintenance or find better housing to live in:
- Increased socio-economic imbalances. "Rising house prices are a great opportunity to accumulate wealth, as homeowners benefit from significant returns on investment," notes the OECD, also noting increased access to credit for homeowners, as owners benefit from the profits made;
- On the investment side, in many cases houses serve as collateral. On the other hand, rising house prices "represent an increasing barrier to home ownership, leading to higher initial purchase costs and higher mortgage burdens for first-time buyers", such as young and low-income households;
- Spatial segregation. Housing price growth varies considerably across regions, with increasing regional differences in property values limiting the ability of low-income households to live close to where they work. Housing can also contribute to spatial segregation, with important implications for household welfare, access to public services and social mobility, which can lead to long commutes and negatively affect their well-being,' the study explains;
- The OECD concludes that it can also "affect the ability of households to move to areas that offer better employment and education opportunities or access to higher quality public services, thus reinforcing existing economic inequalities".