Why buying property is currently not worth it for many Germans - financial experts warn that the costs are too high

Why buying property is currently not worth it for many Germans - financial experts warn that the costs are too high

According to a report by www.tagesschau.de,

Although rents are rising and purchase prices for real estate are falling, buying is currently not worth it for many Germans. Building is also too expensive for many private individuals in Germany. According to a study by the credit insurer Allianz Trade, purchasing property for an average household is currently “significantly more expensive than renting in Germany”. Even if rents were increased by 20 percent, the difference between the monthly loan burden and the rent would still remain high.

The senior economist at Allianz Trade, Jasmin Gröschl, emphasizes that many people cannot afford to buy a house despite falling prices. This is mainly due to the high loan interest rates, which make purchasing unattractive. In order to make purchasing more attractive again, real estate prices would have to fall by 20 percent compared to 2022 or mortgage interest rates would have to fall to 1.78 percent. However, building interest rates are currently around four percent, which continues to make buying a house unprofitable.

Furthermore, an estimated 700,000 apartments are missing, which further exacerbates the situation. The construction projects are on hold due to higher interest rates and material costs, which has a negative impact on the housing market. The lack of new building projects and the stagnating housing construction mean that there are fewer and fewer building permits for apartments. This not only puts a strain on the construction and real estate industries, but also leads to bankruptcies in these sectors.

Overall, the current situation shows that the real estate market in Germany is facing major challenges. A significant adjustment in prices and interest rates is required in order to make buying and building real estate attractive again and to relieve the pressure on the housing market.