Home ownership in Germany: Falling prices finally make dreams come true!

Home ownership in Germany: Falling prices finally make dreams come true!

The currently published affordability index shows a positive development on the German real estate market: home ownership has become more affordable on average across the country. Loud ftd.de Interhyp and the German Economic Institute (IW) analyzed 400 districts and independent cities to achieve this result.

The index looks at the monthly loan payment for one- and two-family houses in relation to the monthly net income of a model household. An index value of 100 points indicates that 35% of income goes towards the loan payment, which is considered the threshold for affordability. The index for Germany is currently slightly over 100 points (as of April 2025) and has improved since a low of 87 points in autumn 2022.

Regional differences in affordability

Particularly noteworthy is the improvement that was found in 392 of 400 districts examined. This results primarily from lower real estate interest rates and moderate price developments. However, compared to the peak of 174 points in 2015, it is important to note that affordability is still under pressure at the moment.

In the seven German metropolises, the index is 80 points, well below the 100 threshold. Munich has the biggest burden with only 59 points, while Hamburg does slightly better with 90 points. For large cities with over 100,000 inhabitants, the index is exactly 100 points, which is considered a measure of affordability. At the same time, the surrounding regions of these cities achieve an index of 111 points, which offers positive prospects for the housing market.

Need for political action

Despite this positive development, the experts at Interhyp complain that numerous challenges remain. High demand meets a still low supply, which leads to rising prices. Policy stimulus is needed to stabilize improvements in affordability. Suggestions to solve this problem include measures such as replacing equity and promoting new construction as well as speeding up planning and approval processes.

In summary, home affordability in Germany has seen a positive development, but it is important to continue working on solutions to support this trend. The detailed analysis in the affordability index shows that regions in the east and north of Germany offer cheaper purchasing options, while the most expensive cities are located in Upper Bavaria. More than 45% of the model households do not live in the expensive metropolises, but in large cities or the surrounding areas and could benefit from these developments.

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