VIENNA, August 2, 2018 – According to a recent analysis of 21 European countries conducted by BAWAG P.S.K., people above the age of 60 spend an average of 62% of their consumer expenditures on housing, food and transportation. Austrian retirees have to use more than half of their budget – 52.8% – to cover these fixed costs. “It is reason enough to start reducing your fixed costs early to plan for retirement. In Austria, the burden of housing costs on people aged 60 and up is not only the most pronounced of any age group, but it is getting heavier. The current low level of interest rates on mortgage loans offer a good opportunity to reduce future costs of housing,” explained Markus Gremmel, Head of Marketing and Product Management at BAWAG P.S.K.
Top living expenses for older people: housing, food, and transportation
According to Eurostat, roughly 28% of the consumer expenditures incurred by Austrians above the age of 60 go to housing – this figure amounted to around 24% in 2005. This includes rent, expenses for owner-occupied apartments, maintenance, and repairs, as well as running costs and expenses for water, electricity, and heat. Thus, these expenses continue to be the largest portion of people’s fixed costs. However, Austria is still on the lower end of the spectrum compared to other European countries – on average, housing costs amount to 33.5% in Europe and 42.3% in Hungary. Housing is affordable for residents of Malta: They only spend 9.9% of their disposable income on housing-related costs on average. Expenses for transportation (12.6%) are on the second place among the fixed costs for Austrians, which puts Austria at the second place of the list, only topped by Finland (13.0%). This expense category includes the costs of acquisition and operating costs for private vehicles as well as expenses for transportation services such as trains, flights, and taxis. The share of transportation costs in the overall fixed expenses is lowest for people aged 60 and up in Lithuania, at 4.3%. The third-ranked expense category for Austrian retirees is food and non-alcoholic beverages, which accounts for 12.3%. Austrians have it good here as well – the European average is 20.4%. The residents of Estonia spend the most on food and beverages with over 30% of all expenses, while eating and drinking is most affordable in Luxembourg, with a share of 9.9%.
Net rents increasing faster than running costs
According to Statistics Austria, the average gross pension is € 1,254 per month in Austria (14 times a year). “Anyone looking to maintain or improve their standard of living in retirement should reduce the biggest driver of costs across Europe – housing expenses – at an early stage,” emphasized Gremmel. Net rents and running costs differ not only in terms of their absolute amount but also with regard to the long-term development: While – according to Statistik Austria – the average net rent (without running costs) in Austria was € 4.20 per square meter in 2009, it amounted to € 5.60 in 2017 – an increase of 33%. In contrast, running costs have seen more moderate development – from € 1.70 per square meter to € 2.10 per square meter in 2017, which represents lower growth of roughly 24%. “It’s hard to predict today what the relationship between the rents and running costs for properties will be like in 2050 – which also holds true for actual pension amounts – but the feeling of owning a property that is fully paid off will presumably be just as reassuring then as it is today,” explained Gremmel.
Rising life expectancy: home ownership as comfort factor
In order to plan ahead and reduce the running costs for residential properties compared to rent, BAWAG P.S.K. currently offers various options for its customers to secure the current low interest rates when taking out a mortgage. BAWAG P.S.K. customers with top credit ratings and adequate securities currently pay just a variable interest rate of 0.875% p.a. – the lowest interest rate in Austria at the moment. The fixed interest rate for a term of 15 years is also low at roughly 2.0% p.a. Customers can also arrange grace periods – for instance during the construction or renovation of their home – in order to avoid paying for a mortgage payment and rent at the same time. BAWAG P.S.K. is currently offering terms of up to 35 years for mortgages, with a maximum age of 80 at the end of the term. “Austrians tend to underestimate their life expectancy. On average, people who are 60 years old today are very likely to live past the age of 81,” said Gremmel.
BAWAG P.S.K. generally advises customers to optimize their own financial situation and that of their family in a personal consultation with their advisor at the branch. The bank offers a best price guarantee as part of its “KreditBox Wohnen” mortgage package: If customers present a European Standard Information Sheet from another Austrian bank for an identical loan agreement with more favorable conditions (processing fee, markup on the indicator or fixed interest rate) within four weeks of concluding their loan agreement, BAWAG P.S.K. will adjust its conditions to match the more favorable conditions at the customer’s request. “We help our customers to optimize not only the financing itself but also subsidies and safeguarding measures – which can also reduce costs in the short term and over the long run,” said Gremmel.
Manfred Rapolter (Head of Communications, Spokesperson)
Tel: +43 (0) 5 99 05-31210