Rooms, buddies and zero deposits: How young Europeans are chasing a home

A Spanish startup is selling bedrooms in flats shared with strangers, a British developer offers mortgages for friends willing to buy together, while stakes in rental properties help some tenants cover their housing costs.

Such unconventional arrangements highlight the lengths some young Europeans are ready to go to cope with a housing crisis that has hit them the hardest.

Over the past decade, house prices in the European Union grew 10 per cent faster than incomes, according to the European Commission research, and all metrics show that the young feel the squeeze the most.

And while plans announced by the EU executive in December to make housing more affordable have yet to take shape, some businesses offer novel ways of getting a foothold in the increasingly challenging property market.

In Spain, where housing shortages in Madrid, Barcelona and other major cities were made worse by a surge in short-term holiday rentals, Habitacion.com offers individual rooms for up to 80,000 euros ($95,200), about a third of what a one-bedroom flat would fetch in similar locations.

It said it sold 200 rooms last year and has a waiting list of 32,000, with properties in seven cities listed on its website.

OFFER FOR SINGLES ON TIGHT BUDGETS

Founder and CEO Oriol Valls says his firm offers a solution to the squeeze on finances – official data show average Spanish monthly salaries rose 26 per cent over the past decade and property prices 81 per cent – and changing life circumstances.

“People no longer get married, or if they do, they get married but don’t have children … or they do it much later,” he said. “They require much smaller living spaces that are also much more affordable.”

Customers must fill compatibility questionnaires, which cover questions whether they have partners or wash the dishes after meals, to be paired with co-owners or renters. They also need to use personal loans rather than mortgages and have to go through the company if they want to resell.

Alvarez, a prospective buyer who declined to give his first name, said Habitacion.com offered to help him get a personal 10-year loan from a regional bank at 6 per cent interest, twice the regular mortgage average, but in the end could not find any rooms in Madrid where he lives.

He also said the scheme, while a good option in general for young people with not enough savings, “loses all appeal if I can’t live with my partner.”

Meanwhile, in London, developer Fairview has a “Buddy Up” scheme, offering to connect friends with a broker and solicitor and covering up to 2,000 pounds ($2,726) toward legal fees if they decide to buy property together in the capital or its surroundings.

Banks in Britain, France, Germany and Italy are also reviving low or zero-deposit mortgages that vanished after the 2008 financial crisis. They come with higher costs and typically require applicants to present high, stable income, but while still rare offer an option for those unable to save up for a downpayment but desperate for a home of their own.

Natalie and Martin Walker from West Yorkshire in northern England say an eviction notice served when their baby was one month old drove them to take up a zero-deposit mortgage last year to buy a house after four years of renting.

“The sense of stability that it brings you, that’s the biggest delight for me,” said Natalie.

Back in Spain, Carlos Sempere, a 36-year-old industrial engineer who rents a flat in central Madrid, where properties are selling for around 1 million euros – far out of his reach – bought a rental property in southern Spain instead via an investment company PropHero.

“Either it helps me pay the rent, or I sell it in the future,” he said.

For those who cannot afford a whole property, PropHero also offers stakes in rental apartment buildings in Spain and Ireland for as little as 20,000 euros.

Ultimately, it is the dire market conditions that make prospective first-time buyers look past legal complexities and cost of new schemes, says real estate consultant and head of alternative investments at AIRE Partners Patricio Palomar.

“All these housing solutions serve to show how people are getting poorer.”