For the past nine years, the ACCENTRO Housing Cost Report has analyzed the costs of owner-occupied residential property and compared them with rental costs. It has established itself as an indispensable tool for investors and prospective buyers who want to understand and strategically leverage the German real estate market.
This year’s Housing Cost Report shows that residential real estate in Germany continues to represent an attractive long-term investment. The study, conducted in collaboration with the Institut der deutschen Wirtschaft e. V. (IW), calculated average owner-occupier costs of 13.14 euros per square meter for the year 2023. This means that, despite higher interest rates, buying a home was more affordable than renting in 127 of Germany’s 401 districts and independent cities.
Buyers with sufficient equity can take advantage of attractive opportunities in this market. The report highlights the long-term opportunities and potential returns for investors in the German residential real estate market.
Turning Point in Owner-Occupier Costs
The cost of homeownership rose again in 2023 compared to the previous year. This was primarily due to high interest rates on debt. The shift in interest rates in the real estate market in 2022 and the further rise in interest rates in 2023 led to disadvantages compared to rental costs. However, a turning point is emerging for 2024. With falling interest rates and rents for new leases continuing to rise, the relative advantages of homeownership will continue to grow.
Significant Regional Differences
The ACCENTRO Housing Costs Report 2024 reveals significant regional differences in owner-occupier costs. Some counties, such as Oder-Spree and Dahme-Spreewald, offer substantial cost advantages. Particularly in the areas surrounding the top seven cities, homeownership remains more affordable than renting despite higher interest rates. These regional differences offer a wide range of opportunities for investors, as owning a home remains more cost-effective in many rural areas.
Moderately falling interest rates influence purchasing decisions
The report forecasts that interest rate cuts starting in 2024 could significantly lower owner-occupancy costs. Scenario analyses show that a 50-basis-point interest rate cut every six months starting in mid-2024 would reduce owner-occupancy costs to an average of 9 euros in 2025.
The improved affordability of homeownership is likely to attract more buyers and lead to an increase in transaction volume in the second half of 2024.
Attractive Long-Term Returns
The return triangle developed for the ACCENTRO Housing Costs Report 2024 illustrates the average annual returns in the housing market. Between 1970 and 2023, they achieved a real total return of 5.4 percent in Germany. This underscores the stability of home ownership’s value. Historically, total returns have recovered quickly following crises. The data suggests that total returns in the 2020s will be at a historically above-average level, as there are far too few apartments available in many metropolitan areas.