Property Values

House Prices Through the Roof

Good luck with that apartment search. Source: DPA
Good luck with that apartment search.
  • Why it matters

    Why it matters

    If house prices continue to rise, life in Germany’s major cities will become unaffordable.

  • Facts


    • Home prices in Germany’s seven major cities have greatly surpassed income increases.
    • University cities, such as Freiburg, also have seen a sharp rise in real estate prices.
    • Rents, meanwhile, have not risen accordingly.
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Thanks to the low interest rate policies favored by Mario Draghi, the president of the European Central Bank, many Germans are finally realizing the dream of homeownership.

But for many low-income residents in major German cities, the dream is already over. With real estate prices rising faster than income, owning an urban home or apartment is becoming prohibitively expensive.

In relation to annual income, home prices in seven cities – Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart – has risen by a third in the past five years, according to a study by market research institute Empirica for Handelsblatt. The numbers show that home prices in Munich are the furthest removed from the income levels.

In the Bavarian capital, residents must pay on average 7.6 times their average yearly income to buy a well-equipped apartment of 80 square meters (861 square feet). That level has risen by more than half since 2009.

However, since low interest rates have compensated for higher prices, there is no talk of a bubble in German real estate. Not even Andreas Dombret, a member of the executive board of the Bundesbank responsible for financial stability, sees this risk.

“We do not consider the current rise in prices problematic; lending is not growing excessively, and the standards for lending have not loosened,” he said Wednesday. “Measured by this criteria, we do not see a bubble.”

He did, however, agree with the position of those who warn against the massive planned purchase of government bonds by the ECB. He said this has led to “the world being somewhat risky for real estate investors.”

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