Just a short post about housing markets today.
I find the relationship between rentals and income very interesting and I would
like to look into it a little bit here. For those wanting to have a look at data, I used disposable income per inhabitant to take into account population growth and rentals' growth from the HICP calculation.
Here come a few charts (and even fewer words
attached) depicting the relationship between rentals and disposable income in
countries that have undertaken internal devaluation-like adjustment programs.
Our first stop is Ireland.
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| source: Eurostat, own calculations |
As we can see during the boom years of the
property bubble, when I assume pretty much everyone, wanted their own place,
rentals fell while disposable income increased. What interests me more though
is how rentals reacted during the current depression. With a one year lag
(2008) rentals followed disposable income’s trajectory. It seems that there is
no significant downward rigidity for rentals in Ireland.
Next stop is
Estonia.
 |
| source: Eurostat, own calculations |
As we can see rentals and disposable income
moved pretty much as one. Downward rigidities, as far as rentals are concerned,
seem to be even less present in the case of Estonia. Rentals growth lagged
disposable income the years that the crisis raged (2009-2010) which maybe
indicated a buyer’s market (as it should have been).
The next stop is neighbouring Latvia.
 |
| source: Eurostat, own calculations |
Here too downward rigidities for rentals weren’t
an issue during the very difficult years of 2009-2010.
Now let’s move to the south of Europe. Our first
stop Is Portugal.
 |
| source: Eurostat, own calculations |
Despite
disposable income recording declines two out of the three past years, rentals
didn’t decline, just rolled over. Admittedly, falls in disposable income were
not as large as they were in the Baltics, but I think that we can safely infer
that rentals display downward rigidities.
Our last
stop is my native Greece. Here’s the chart.
 |
| source: Eurostat, own calcualations |
As the
chart makes obvious, after three successive years of falls in disposable
income, rentals haven’t budged at all. Just one more market in Greece, where
the word market is simply a euphemism…
I feel the charts are erroneous. Based on my own experience, the 4% and 6% drop in rentals that you show in Greece in 09 and 10 simply is a joke. Property owners faced cuts from 15% to 30% in rentals received in those two years alone. Moreover, if you calculate vacancies you'll come across a fall of around 35% in the numbers. Maybe you should check your data again.
ReplyDeleteThank you for the comment...unfortunately these are the only official data on rentals that I'm aware of..This is what the ECB uses to calculate HICP. This of course does not mean that they necessarily give out a good on the-ground view on the subject..Your figures concern commercial properties or not...? If you have any other data sources that you can share, I would really appreciate it if you did...cheers...
ReplyDelete"the 4% and 6% drop in rentals that you show in Greece in 09 and 10 simply is a joke."
ReplyDeleteWhat drop?
Nick, unfortunately I have no hard data. But I do have lots of property which I rent out. And I also have very many friends who own or rent property in Greece and they all agree to these figures more or less: Commercial property -40% from the peak of 09. Homes -25%. For confirmation you can ask any realtor, or even go out and ask the tenants how much less do they pay now. Cheers
ReplyDeleteArtaxia I do not doubt you...I'm sure u know a lot abt the R.E. market, while I obviously don't...it is just that this kind of data could be open to some kind of bias...for example most of my friends who rent, barely managed to negotiate their rentals being unchanged...It probably is one of the worse statistically-covered markets in Greece...and let's not forget that we're talking abt one of the main pillars of the so-called Greek growth model...cheers...
Delete