Place-based determinants of housing prices in Europe

This resource, titled "Place-based determinants of housing prices in Europe," is published by the Joint Research Centre (JRC) and authored by a team including Filipe Batista e Silva and others. The document provides an in-depth analysis of the factors influencing housing prices across the European Union, emphasizing the significance of local dynamics in the housing market.

House prices in the EU have increased significantly, with a rise of about 55% from 2015 to 2024, which is higher than the net household income growth of 49% during the same period. As of 2024, households were allocating 23.6% of their total expenditure on housing, water, and energy. Various macro drivers, such as monetary policy and demographic trends, have contributed to this increase in housing demand, leading to a housing affordability crisis that has been escalating since the COVID-19 pandemic.

The JRC's research involved econometric analysis of data from 95,000 municipalities across the EU-27, ultimately focusing on 78,000 municipalities after excluding those with incomplete data. The study aimed to understand the local determinants of housing prices, controlling for factors like accessibility, socioeconomic characteristics, and the presence of short-term rentals (STRs). Data was gathered through web scraping real estate listings and statistical analysis from various sources, including Eurostat and AirDNA.

The study identified several place-based factors correlated with higher housing prices. Municipalities with limited land availability, higher household income, and good accessibility tend to experience higher prices. The presence of STRs and tourism intensity also contributes to increased housing costs, particularly in urban areas where demand outpaces supply. Notably, STRs account for about 1.2% of total conventional dwellings, with their impact being more pronounced in cities compared to rural areas.

The research highlighted a concerning trend of increasing unoccupied dwellings, which reached nearly 20% in 2021. This situation, along with insufficient housing supply growth, points to structural disincentives affecting the housing market. A detailed understanding and differentiation of unoccupied housing—whether permanently vacant or seasonally occupied—are crucial for developing effective housing policies.

The findings suggest the need for a place-based approach to address housing supply constraints and the effects of STRs. It is essential to enhance housing statistics to better understand the dynamics of unoccupied housing. The research emphasizes that while STRs currently represent a small fraction of the overall housing stock, their impact on local markets can vary significantly, warranting targeted research and policy responses.

As the EU navigates the challenges of the housing affordability crisis, understanding the place-based determinants of housing prices will be vital. Addressing the structural constraints in housing supply and exploring the implications of short-term rentals can lead to more sustainable housing solutions across Europe. Continued research and data collection will be necessary to inform effective policies aimed at improving housing affordability and accessibility for all residents.