The rising cost of housing


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Housing is a major expense for most families. But the index the ECB uses currently, the HICP (Harmonised Index of Consumer Prices), does not fully reflect the evolution of the cost of housing because it leaves out the costs borne by owners who live in their own homes. The ECB has recognised this problem[1] and promised to include the cost of ‘Owner-Occupied Housing’ (OOH) in the consumer price index, for which it wants to achieve an inflation rate of 2%.

That the cost of housing is rising quickly is no mystery. For a number of years, Eurostat has been publishing the Owner-Occupied Housing Price Index (OOHPI) for almost all euro area member countries.[2] This index, which for the time being is available only on a quarterly and annual basis, has been running above 2% p.a. for the last five years and, since 2017, has been increasing, on average, by more than 3% – much more than the core inflation rate (which ignores volatile elements like energy). See Figure 1, below.

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