Europe’s property boom lowered inequality, ECB says

FRANKFURT (Reuters) – Wealth inequality declined in the euro zone over the past five years, confounding some expectations, as a large middle class with widespread property ownership benefited from a house price boom, the European Central Bank said on Monday.

The new data comes after the ECB faced years of criticism that a decade of ultra-low interest rates and copious asset purchases mostly favoured wealthy people with ample financial assets.

Critics also said that while low rates benefited homeowners, they also fuelled a housing boom that has made property, including renting, unaffordable for the poorest households.

But the ECB found that the gap between the top 5% and bottom 50% of society has actually been on a narrowing path for years.

“The significant rise in euro area household net wealth observed in national accounts over the past five years was accompanied by a slight decrease in inequality, partly because homeowners, who account for more than 60% of the population, benefited from increased housing prices,” the ECB said.

Homeowners’ net wealth increased by 27% in the past five years while the net wealth of non-homeowners grew by 17%, mainly owing to the rise in deposits observed over this period, the ECB said in a new experimental statistic on the distribution of household wealth.

The figures do not yet account for the recent drop in house prices as data becomes available with long lags, so some reversal is still possible as ECB rates are now at record highs and property prices are declining in many euro zone countries.

The ECB said that median household net wealth increased by about 40% since 2016 to just above 150,000 euros.

(Reporting by Balazs Koranyi; Editing by Ros Russell)