Sky-high property prices in urban centers and Alpine resorts are nearly unaffordable for the average person.
In the German real estate market, smaller major cities such as Wolfsburg, Saarbrücken, Bremerhaven, Magdeburg, and Bremen offer a more favourable outlook for property enthusiasts, according to the Affordability Index by the Institute of the German Economy in Cologne and credit intermediary Interhyp. However, the seven largest German cities remain less affordable, with Munich being the most expensive, followed by Hamburg.
The alpine region in Upper Bavaria, including the Tegernsee, is the least affordable place for homeownership in Germany. On the other hand, Holzminden, located in the southernmost part of Lower Saxony, is the most affordable municipality for real estate buyers in the country.
The affordability of residential property is measured by the ratio of local real estate prices to respective incomes. The index value for affordability is set at 100 by IW Cologne, referring to the upper end of the middle income group. Saarland is the most affordable federal state with an index value of 151, followed by Bavaria with 84 points, and Berlin with 87.
The situation is not expected to improve as the construction of new apartments in Germany remains at a low level. Annual increases of 3-5% are expected in both purchase prices and rents, according to IW real estate expert Michael Voigtländer. Despite decreased real estate prices and increased incomes, owning a home remains barely affordable for most residents of the seven largest German cities and their surroundings.
For instance, in expensive Munich, an income of 80,000 euros corresponds to the 35% threshold for affordability. Single and two-family homes are affordable in smaller major cities and many rural areas, at least for the income group that typically has an interest in buying real estate.
Berlin is noted for being the most liquid housing market, with significant demand and limited supply, contributing to higher rents and property values. Leipzig, on the other hand, is considered more affordable and is experiencing rapid growth, making it an attractive option for buyers and renters alike. Major cities like Berlin and Munich are less affordable, while cities like Leipzig offer better value for both renters and buyers.
For precise rankings from the Affordability Index, direct access to the specific report or data would be necessary. It's worth noting that the index does not provide specific information about the most and least affordable municipalities for real estate buyers in Germany.
In conclusion, the German real estate market presents a mixed picture, with affordability varying significantly across cities and regions. Prospective buyers should carefully consider their financial situation and the specific market conditions before making a decision.
- Investing in residential property in smaller major cities, such as Holzminden in Lower Saxony, might offer a more favorable outcome for personal finance due to its lower real estate prices compared to other parts of the country.
- In the realm of finance, owning a single or two-family home in many rural areas and several smaller major cities, like Leipzig, could be a more achievable goal for individuals typically interested in real-estate investing, providing better value compared to cities like Berlin and Munich.
- Despite decreased real-estate prices and increased incomes in the German housing market, individuals looking to invest in the seven largest cities and their surroundings might find it difficult to afford homeownership due to the high prices, and should consider their financial situation carefully before making a decision.
