High homeownership rates mean that the average Spaniard is much richer than his northern european counterpart

The controversial conclusion of a study on the average capital of European citizens per country, elaborated by the European Central Bank (ECB) and published last Tuesday, is that the average Spaniard is richer (and much more so) than his German counterpart.

At a time when southern Europe calls for the “solidarity” of its supposedly wealthier northern neighbors, it is surprising to learn that, in fact, in terms of private capital, things are not what they seem. According to figures from the ECB, the average net assets (minus all debts) of an average  Spanish citizen totaled 291,400 euros, compared with the 195,200 for Germans, 233,400 for the French, 170,200 for the Dutch or 275,200 for the Italians (the second highest). If these data are correct (in Spain they were collected in 2008, before the housing bubble had fully burst), it would mean that the average Spaniard is 50% richer than the average German, 25% richer than the French and 71% richer than an average citizen from the Netherlands.

This is not all. In fact, if we look at the medium -that is, those Spaniards located in the middle of an imaginary list going from the richest to the poorest, the difference is even greater: the median in Germany is 51,400 euros, 115,800 euros in France and 103,600 euros in the Netherlands of EUR, while in Spain it totaled 182,700 euros followed by 173,500 euros in Italy.

While the Germans account for 28.7% of European households, they have only 24.3% of Europe’s wealth, while the Spanish, with 12.3% of households, have 15.6% of the EU’s capital.

Incidentally, a special case in all these comparisons is Cyprus. Its citizens, with an average of € 670,900 (266,900 euros of medium) are the second richest in the EU after Luxembourg.

The key to these surprising data is the different ownership structure between citizens of one country or another. Spaniards and Italians have a huge love of bricks and mortar. That is, they want to own their homes. And the truth is that they do: 82.7% of the Spanish and 68.7% of Italians own their own homes, compared with 44.2% of Germans and 55.3% of the French.

The average capital among Spanish homeowners is 337,900 euros, after deducting outstanding mortgage debt; while the capital of non-homeowners is 68,900 euros. German homeowners average capital is higher, 381,200 euros. The problem is that many Germans do not own property.

Obviously, other factors should be taken into account. First, the average income in Spain is still well below that of its northern neighbors. And this is important, because homeownership’s burdens become heavier when the family’s income is lower. On the other hand, we must keep in mind that one has to live somewhere.

Furthermore, it should be noted that only 5.6% of Spaniards have mutual funds, compared with 17% of Germans or Dutch, and only 23% have private pension plans, compared to 46% of Germans and 50% in the Netherlands. These will mean, in the future, that citizens from these countries will have higher incomes, but also face an extra expense that homeowners will not have to face.

So, the question is: which is better, having a larger capital but a lower income, or having a higher income in exchange for lower equity?