Does it pay off in the long term to buy a property instead of renting it? According to a recent study, it does – even though the degree of affordability varies.
The Institute of German Business (IW in German) recently presented its study “Living in Germany 2019”, which contains forecasts on the development of real estate prices in Germany. The key findings of the report, which was commissioned by the Sparda Bank Association: in the long term it is cheaper to buy a property than to rent it in almost all of the 400 cities and municipalities investigated.
Especially in the new states of Germany it pays off to purchase real estate. The monthly rents and the monthly costs of a self-occupant compared (including the repayment of the building loan, land transfer tax and maintenance), rents are on average 38 percent higher. In the old states of Germany, the average cost advantage is still at 32 percent. In general, the savings are rising, especially in the metropolises: 34 percent in Berlin and 39 percent in Hamburg. In Stuttgart (29 percent) and Regensburg (15 percent), it is also more profitable to buy in the long term.
Especially in metropolitan areas, residential property is increasingly in demand. In major cities, buyers pay an average of around 264,000 euros for a living space of approx. 80 sq m. The largest are the apartments in Berlin (77 sq m) and in Cologne (76 sq m). In Munich, on the other hand, buyers get less than half of the average living space for this price, more precisely 39 sq m of living space. In the nationwide average, the living space is 111 sq m. If it comes to buying, Germans finance their property with an average loan of 214,000 euros – this corresponds to 81.05 percent of the average price. On average, the financing of residential property is 7.8 times of the annual salary in urban areas and 4.5 yearly salaries in rural areas (net).
In general, the analysts expect further positive developments in southern Germany, in the Rhineland and the metropolitan areas of Berlin, Hamburg, Frankfurt am Main and Wolfsburg. The high attractiveness of the metropolitan areas is a pull for more residents and will increase the already high demand for new construction further, according to the study.