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Affordability Index

Definition:
The Affordability Index compares the average disposable income of households to average costs for residential properties and is publihed for purchasing prices and rents.
It's not intended to provide a datum to describe the actual affordabiliy in terms of feasibility or availability of financing, but to provide a simplyfied index to show the regional differences of income in contrast to residential costs, in a time-series. In order to achieve this the calculation model takes the following variables on a regional level into account:
  • Number of Households, Number of Inhabitants
  • Disposable Income, Purchasing Power per capita
  • Stock of Residential Floor-Space (living space)
  • Market Prices and Market Rents
In order to calculate a reasonably up-to-date average disposable household income the number of inhabitants, the average number of persons in a houshold, and the volume of income, i.e. purchasing power are used.

The market prices for single-family homes and terraced houses are already defined in RIWIS on a per residential unit base (=house). In order to do this for apartments, where data is given on a per sqm basis, it is neccessary to identify average apartment sizes, yet in a comparable range.

As the caclulation of average living space per unit results in a s significantly varying range from one region to another (ranging somewhere between 55 and 130 sqm), we use an adapted avg. size calculation for this model:

  • base avg size of 95 sqm for new apartments
  • base avg size of 85 sqm for older apartments
  • correction factor based on calculated avg living-space per unit based on official statistics
As a result urban regions have slightly smaller unit sizes and rural regions have slightly larger unit sizes, than the above mentioned base sizes.

EIX Affordability Index Prices

The Affordability Index for Prices is the multiple of the annual net household income, which would be needed to buy a residential unit. These costs don't include any additional charges (tax, financing costs), it is just the average purchasing price.

              Ø  Purchasing Price
EIX Price =  ------------------------
              Net Household Income p.a.

The average purchasing price is calculated by the mean value of prices for

  • existing apartments
  • new apartments
  • average apartment sizes based on the aforementioned methodology
  • terraced houses (new)
  • terraced houses (existing)
  • single-family houses

EIX Affordability Index Rents

The Affordability Index for Rents is the share of average rents (net, no additional charges) per year for residential dwellings on the average net annual household income.

             Ø Net Rent Per Dwelling p.a.
EIX Rent =  ------------------------
              Net Houshold Income p.a.

The average rent per dwelling is calculated by the mean value of rents for

  • existing aparments
  • new apartments
  • average apartment sizes based on the aforementioned methodology

Data:
annual value


Source:
own calculations by bulwiengesa AG