Home & Living

Housing Comparatively Affordable in Germany

08.

August 2019

Housing Comparatively Affordable in GermanyThe affordability of housing is a topic that has dominated societal and political debates in Germany for a number of years now. In response to the rise in rents and prices, especially in the country’s major cities and metro regions, the body politic has increasingly intervened in the housing market by introducing measures like the so-called “rent freeze” or the “rent cap.” However, a look across the border would show that the housing costs in Germany are not particularly high but actually relatively low – and thus continue to have upside potential. This is the upshot of a recent survey conducted by Deloitte to compare residential rents and prices across Europe (source: www.haufe.de).  

Homeownership Is Relatively Affordable

According to the survey, condominiums here are more affordable than in many other European countries. While a flat of 70 square metres in Germany sells for five gross annual incomes on average, condominium prices in the United Kingdom equal 9.4 gross annual incomes. In the Czech Republic, you need to set aside 11.2 gross annual incomes to be able to afford a condominium of the same size (source: www2.deloitte.com).

Condominium prices have been going up in 15 out of 16 countries examined by Deloitte in Europe, Italy being the only country where selling prices have softened slightly. The annual price hikes in the analysed countries have averaged five percent in the years since 2015, and thus match the price growth rate for German condominiums in 2018. At the head of the field in 2018 was the Czech Republic with a growth rate of 16.8 percent. Next in line were Hungary (13.7 percent) and the Netherlands (9.3 percent).  

Low Rents in Germany’s Metropolises

Analogously, rent rates in the German metropolises are lower than in many other European cities. Even Munich, whose average square-metre rent of 10.50 euros makes it the priciest city in Germany, is not among the top 20 in Europe, according to the Deloitte comparison. Rather, the list is topped by Paris (27.80 euros) and the Norwegian towns of Oslo (25.30 euros) and Trondheim (21.30 euros). But cities in the United Kingdom, Spain, Poland, Denmark, Italy, the Netherlands and the Czech Republic all outrank the costliest German cities. Deloitte considers the comparatively affordable rent level in major German cities a sign that a continued upward trend in rent growth ought to be expected in Germany.

Inversely, Deloite found no evidence of a European real estate bubble. Since no major interest hikes are anticipated in the near future, and since borrowing does not show excessive levels in any of the examined European countries, there is no reason to expect a speculative bubble at this time.

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