• Alexandra Kurbanova, real estate agent

Is it better to own or rent a place for living? What is the situation in Europe?


Let's talk about why a higher proportion of owner-occupied housing stabilizes society; why people in the west live in rental properties and in the east in their own; what the situation is in different European countries.


In the next article on this topic, we will talk about how the situation looks like in the Czech Republic, where the problem of the real estate market is and where it will take the longest time to save for the apartment purchase.


The share of owner-occupied housing in Europe

Under owner-occupied housing I mean both owner-occupied housing and those owned via cooperative.

Around 69.3% of the population in the European Union lives in the own properties. In the USA this number is very similar - 65.8%. (source: Statista.com).


A higher proportion of owner-occupied housing stabilizes society

A higher proportion of owner-occupied housing in the Czech Republic is an achievement that we should not only maintain but increase. For ourselves, for our children, for the peaceful seniority age, but also in order to maintain the social stability.

We have been hearing from all sorts of "experts" lately that a higher proportion of owner-occupied housing seems to be a sign of backwardness, that it is modern to live in a rental housing. And the example of Germany, Austria or Switzerland is often cited. Unlike poor Romania and other post-communist states where 95.8% of people live in their own homes.

My opinion - "The best investment of your life is in your own roof over your head."


Why do people live in rented properties in the west while in the east in their own?


Eastern Europe

In post-communist countries the housing stock has long been poorly supported and therefore neglected. Thus, after the fall of the Iron Curtain, the states of the Eastern bloc, including the Czech Republic, privatized houses and flats on a large scale to the tenants. Often the houses were in a very bad state. It was therefore logical to get rid of such places and have them repaired by new owners.

The privatization of the housing has contributed to the creation of a strong middle class and living standards in Czech republic came closer to the people of Western Europe.

Western Europe though took another road. It was a bit different in each state, so let’s have a look at a few countries with the lowest proportion of owner-occupied housing.


Germany

The German housing stock was devastated after the Second World War. The currency was devalued, the infrastructure destroyed. So it was necessary to quickly build or reconstruct flats as part of the establishment of social stability.

The world has recognized that the critical social situation is a threat to security in Europe. After all, the bad economic situation also contributed to the rise of fascism, when Germany had to pay war reparations after the First World War. Massive foreign aid in the form of Marshall plan led to a rapid recovery of the destroyed housing stock. In the eastern part of Germany, the construction of cheap prefabricated houses according to the Soviet model began. The housing stock was largely owned by municipalities and the state. Low rents and good administration in West Germany meant that people did not need to invest in buying their own real estate.

However, this has changed a lot in the last 20 years. Investment companies have seized the opportunity. E.g. in Berlin, flats were not privatized to tenants, but to institutional investors. The largest owner of the housing stock in Berlin is the private investment company Deutsche Wohnen, which owns 120,000 apartments. The concentration of the housing stock in the hands of large investment companies is causing social tensions. When high demand for housing led to rising rental prices, it caused great social unrest and demonstrations. The biggest protests were in Berlin, but also in Cologne, Frankfurt and Munich. As a reaction in 2019, the Berlin City Council froze the rise in rental prices with a decree. This triggered a wave of litigation, a shortage of rental housing, a freeze on investment in the housing stock, uncertainty and the proliferation of the black market. Mostly it concerns the socially weakest parts of the society. Hence Germany is not a good example to follow in the field of housing policy.


Austria

Austria has a very sophisticated housing policy, which began during the Austro-Hungarian Empire. Community-owned development companies build social housing, provide quality, efficient management and affordable prices, so many people do not need to own real estate.

Austria's housing policy can be inspiring for the Czechia. However, a similar model is not yet realistic here due to a poorly functioning state administration, greater corruption and clientelism. Just have a look at Prague. It owns over 2,000 unoccupied apartments and has not been able to repair and rent them for a long time.


Switzerland

Switzerland is a bit of a victim of its own economic success in housing policy. According to surveys, 80% of Swiss want to live in their own properties, while most of them live in rent.

The reason why they remain in rents is the high price of real estate. Their own housing has thus become financially unaffordable for many Swiss people or they do not want to repay a high mortgage all their lives. And because the Swiss rental market is working well, many Swiss have agreed to rent, but do not prefer it. About 50% of rental properties are owned by individual investors, about 40% by developers and investment companies and funds, and the rest by municipalities, cooperatives and individual cantons.


Different countries, different reasons for rental housing

The reasons why people live in rent are different in each country. They need to be understood in the context of local situation and historical developments. In some countries, the reason why people do not buy the properties is more difficult conditions to obtain a mortgage comparing to the Czech Republic.


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