Housing Affordability in Europe

In this study, I analyze housing affordability and housing tenure choice in Europe. Using the data from Numbeo website the general situation of housing affordability and rent burden across European countries is examined. Taking advantage of the net present values of income computation, I determine whether it is better to buy a dwelling in a certain European city or country than to rent it. Moreover, hedonic regression models are estimated to identify the factors that affect housing and rent prices and income of the households. I find that the housing affordability and rent burden vary strongly across Europe. Some typical patterns can be distinguished: Scandinavian countries have the most affordable housing in Europe, while countries in East and South-East of Europe tend to have housing affordability problems. In most countries, it is better to buy an apartment than to rent it. The housing and rent prices and incomes of the households are closely associated with prices for essential consumer goods, basic utilities costs, price of public transport, and location of the observation in particular country.