The latest data on Actual Individual Consumption (AIC) per capita, expressed in Purchasing Power Standards (PPS), reveals significant disparities in material welfare across Europe. This key indicator, which measures household access to goods and services, underscores the varying living standards within the European Union, European Free Trade Association (EFTA) nations, and EU candidate countries.

Luxembourg Tops EU Rankings, Bulgaria and Hungary Trail

In 2023, AIC per capita in the EU ranged from 70% of the average in Bulgaria and Hungary to 136% in Luxembourg, which outperformed all other member states. Nine countries exceeded the EU average of 100%, including Germany and the Netherlands (both 119%), Austria (114%), and Belgium (113%).

Among the EU’s major economies, Germany led with an AIC 19% above the average. France followed at 106%, while Italy matched the EU average. Spain recorded 91%, making it the lowest among the bloc’s “Big Four.”

Conversely, several Central and Eastern European countries, including Latvia, Estonia, and Croatia, reported AIC levels more than 20% below the EU average, reflecting regional economic disparities.

EFTA Nations Outpace EU Average, Candidate Countries Lag

All three EFTA countries—Norway, Switzerland, and Iceland—outperformed the EU average. Norway led the group with a 24% surplus over the EU benchmark, while Switzerland was 16% higher.

In contrast, AIC per capita in EU candidate countries remained below the EU average. Among these nations, Turkey stood out with household material welfare at 84% of the EU average, surpassing nine EU member states, including Poland (83%) and Greece (80%). Other candidate countries, such as North Macedonia and Albania, reported figures below 50%, highlighting stark differences in living standards.

Trends Over the Past Five Years

The past five years have seen both gains and declines in AIC across Europe. Denmark experienced the steepest drop among EU members, falling from 120% in 2020 to 108% in 2023. Other notable declines occurred in Czechia and Finland.

Conversely, Ireland and Bulgaria showed significant improvements, with Ireland rising from 87% to 99% of the EU average. Among candidate countries, Turkey recorded the largest increase, climbing from 64% to 84% during this period.

Understanding AIC as a Welfare Indicator

AIC captures household access to goods and services, including food, housing, healthcare, and leisure, whether provided directly by households, the government, or non-profit organizations. Expressed in PPS, the metric adjusts for price-level differences, offering a standardized comparison of material welfare across countries.

While AIC provides valuable insights into economic well-being, the data underscores persistent regional disparities, with Nordic and Western European nations achieving higher levels of material welfare compared to their Central, Eastern, and candidate counterparts.

House prices are expected to climb globally over the next two years, with construction unable to keep pace with surging demand in most countries, according to Fitch Ratings’ 2025 housing and mortgage outlook.

The report forecasts nominal home price growth in the low to mid-single digits for many countries, driven by factors such as low unemployment, real wage growth, and declining inflation, which have bolstered household disposable incomes.

Regional Highlights

• Europe:
  • In the eurozone, rising real household income is fueling demand and driving up prices. Exceptions include France, where prices are projected to decline due to strained affordability and political uncertainties, though a recovery may begin in 2026.
  • The Netherlands is expected to see rapid price growth, albeit slower than the current year’s 13%, with rates between 8% and 10% in 2025. Limited supply, coupled with government programs supporting first-time buyers, will sustain high demand despite tighter fiscal policies.
  • Germany and Spain are forecasted to experience accelerated price increases. Spain could see costs rise by 4% to 6% in 2025, driven by falling interest rates and robust consumer confidence, while Germany’s growth is expected to range from 2% to 4%.
  • The UK anticipates modest growth of 2% to 4%, supported by lower mortgage rates and a strong labor market. Italy, however, may see smaller increases of 0.5% to 2.5% due to high mortgage rates and a focus on older properties rather than new builds.
• North America and Latin America:
  • In Canada, price growth will benefit from government programs for first-time buyers, while Brazil and Mexico will see increases driven by rising wages and construction costs.
• Asia-Pacific:
  • China stands out as one of the few countries where prices remain subdued, reflecting its unique economic conditions and housing market challenges.

Challenges to Supply and Demand
Fitch highlights several factors limiting housing supply, including high land, labor, and material costs, as well as regulatory constraints. Smaller builders face difficulties accessing financing due to elevated borrowing rates.

Demand, meanwhile, continues to grow, fueled by declining mortgage rates, stable unemployment, and increased household formation. Energy-efficient homes are in particularly high demand, driven by sustainability concerns and rising energy costs.

Risks and Uncertainties
Climate risks, such as flooding, could impact housing prices, especially in vulnerable areas. Additionally, potential shifts in central bank policies or unexpected economic downturns could alter price trends.

Fitch notes that lower-than-expected mortgage rates or stronger economic performance could accelerate price growth, while higher unemployment or renewed inflation could dampen demand and affordability.

With the housing market facing a mix of opportunities and challenges, the global outlook remains cautiously optimistic for 2025 and beyond.