The European Union (EU) country where housing prices are furthest from their value considered sustainable is Portugal. The estimate is from the European Commission, which points to an overvaluation of around 25%, the highest among Member States. The diagnosis was released simultaneously with the presentation of a new European plan to respond to the housing crisis, at a time when access to housing has become one of the main social and economic problems in several countries, including Portugal.
According to Notícias ao Minuto, the community executive considers that the Portuguese real estate market stands out negatively, not only due to the extent of overvaluation, but also due to the pace at which prices have moved away from family income over the last decade.
Prices grew faster than wages
According to data from the European Commission cited by the publication, housing price growth began to outpace income growth in 2016, a trend that worsened in the following years.
The gap between the cost of houses and the financial capacity of families has increased particularly sharply in countries such as Portugal, the Netherlands, Hungary, Luxembourg, Ireland, the Czech Republic and Austria.
On average, house prices in the European Union have increased by up to 60% since 2015. In some Member States, the increase has exceeded 200%. At the same time, rent prices and energy costs continued to rise, worsening the burden of housing on the family budget.
In the Portuguese case, this pressure is more visible in metropolitan areas and areas with greater tourist demand, where the scarcity of supply meets intense demand, both internal and external.
Brussels presents the first European housing plan
Against this backdrop, the European Commission presented the first Union-wide plan dedicated to promoting affordable housing. According to Notícias ao Minuto, the package includes a strategy to reinforce housing construction, with special attention to the recovery of vacant houses, urban renewal and the conversion of buildings for residential use.
The plan also foresees the simplification of rules applicable to construction, particularly licensing, and a review of state aid rules, making public investment in affordable and social housing easier. Brussels also wants to mobilize more European funds, using the EU’s multiannual budget, cohesion funds, the InvestEU program and the European Investment Bank.
Local accommodation and speculation under scrutiny
Another axis of the European plan involves combating real estate speculation and reinforcing transparency in the sector. The European Commission also announced its intention to move forward with a new legal framework for local accommodation, creating a framework that allows national and local authorities to intervene more effectively.
According to the same source, in some regions of the European Union local accommodation now represents up to 20% of the housing stock, after having grown by more than 90% in the last decade, contributing to the reduction in the supply of homes for permanent residence.
Young people and students among the most affected
The European plan pays special attention to young people and students, identified as some of the groups most penalized by the housing crisis. Measures are planned to mobilize investment in university residences and to avoid practices considered excessive in leasing, such as requiring high deposits.
Brussels also announced the creation of a Housing Alliance, involving Member States, local authorities and regional authorities, as well as mechanisms for continuous monitoring of the real estate market.
Europe needs more homes in the coming years
According to estimates from the European Commission cited by Notícias ao Minuto, the European Union will have to build around 650,000 new homes per year over the next decade. This effort will require public and private investment estimated at 150 billion euros annually.
In a context in which residential construction permits have fallen by around 22% since 2011, Brussels recognizes that the response to the crisis will have to be structural. In Portugal, where prices are more overvalued than in any other EU country, the challenge takes on a particularly urgent nature.
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