Struggling to Afford Real Estate in Metropolitan Areas and Alpine Regions
In a recent report, the Institute of the German Economy in Cologne and credit intermediary Interhyp have released the "Affordability Index" to measure the affordability of residential property based on the ratio of local real estate prices to respective incomes. This index provides valuable insights into the affordability of housing across Germany.
The findings reveal that while houses are more affordable compared to 2023, the situation is not ideal. Real estate prices have risen in many places, slightly deteriorating affordability, according to Interhyp CEO Jörg Utecht.
The report indicates that the seven largest German cities and their surrounding areas remain unaffordable for most residents. Munich, for instance, has an index value of 59, making it one of the least affordable cities. In Munich, an income of 80,000 euros corresponds to the 35% threshold for affordability, according to IW real estate expert Michael Voigtländer.
However, the picture is not entirely bleak. Smaller major cities like Wolfsburg, Saarbrücken, Bremerhaven, Magdeburg, and Bremen are significantly cheaper. In fact, the most affordable municipality for real estate buyers in Germany is Holzminden, located in the southernmost part of Lower Saxony, with an index value of 174.
The nationwide average in Germany currently stands at exactly 100 points. Bavaria, home to many affluent individuals, has an index value of 84, while the most affordable federal state is Saarland with an index value of 151.
Despite these findings, the situation is not expected to improve due to the continued low level of new housing construction in Germany. "The only thing that helps is building," said Interhyp CEO Utecht.
While specific affordability rankings for municipalities are not available from the report, cities like Leipzig are often highlighted for their competitive pricing and growing appeal, which might make them more affordable compared to major hubs like Munich. Cities like Cologne and Düsseldorf are noted for their balanced markets, offering relative affordability with strong employment opportunities.
It's worth noting that the Tegernsee area in the Miesbach district of Upper Bavaria is one of the most expensive regions, home to ex-FC Bayern president Uli Hoeneß and numerous other millionaires.
For precise affordability indexes from the Institute of the German Economy in Cologne and Interhyp, it would be best to consult their specific reports or publications directly. However, the general trend suggests that housing affordability varies significantly across Germany, with smaller cities and rural areas offering more affordable options for those looking to buy real estate.
Economic and social policy discussions might include arguments about the need to increase housing construction to improve affordability, considering the ongoing issue of high real estate prices, particularly in major cities like Munich, despite some affordability improvements in smaller major cities. Finance plays a crucial role in this context, as affordability is largely determined by the ratio of real estate prices to respective incomes. Lifestyle choices, such as living in more affordable cities or rural areas, could be influenced by this affordability index and the overall housing market conditions.
