Property: Is it still worth buying in Germany?

For many who have come to Germany to work or study, the desire to own property is natural.

Property: Is it still worth buying in Germany?

However, understanding whether it is a good time to buy property in Germany can make all the difference when it comes to finding your dream home. Together with German mortgage specialist Hypofriend, we discuss whether it still makes sense to buy in Germany and how to compare the costs of buying with those of continuing to rent.

Work with the experts when it comes to buying property in Germany as a foreigner. Discover what you can afford with Hypofriend 

So, what is the situation in Germany? 

Compared with other European countries, Germany has become more affordable when it comes to buying property. Germany avoided the worldwide property boom of the early 2000s. This is thanks to a number of factors, such as the construction boom following reunification in 1990, and the slowing in population growth. 

There’s no denying it, however – house and apartment prices are rising across the country.

Between 2010 and 2020, prices for both two-person apartments and single-family apartments have risen by 65 percent, according to the ‘Häuserpreisindex‘ of the Federal Statistical Office. This price rise is not uniform, however. There is a clear disparity between urban and rural areas, with apartments and homes in rural areas generally being cheaper and showing slower growth. Neither is the price uniform across the cities. As you can see in Table 1 (below), Munich and Frankfurt are well ahead of Berlin.

Table 1 (Supplied)

What are the significant costs of owning property in Germany?

German borrowers generally enjoy the lowest annual interest rates in history – falling around 6.5 percent to one percent for a ten year mortgage, since 2000. However, it is the combination of interest rates and the annual cost of maintaining a property (around three quarters of a percent, including administrative costs) that comprise the real costs of owning a property in Germany. 

Ok, what makes more sense – renting or buying? 

It’s a simple question of comparison. If you are annually paying more in rent as a percentage of your property’s value, than you would be in interest rates and property maintenance, then you know it makes far more sense to purchase. 

But there is more. Any property will accrue in value, over the long haul more or less in line with inflation. With recent moves by the European Central Bank, shifting its inflation target to two percent, property buyers can expect in the long run a three percent value increase each year or more, as history shows.

This increase in value is compounded each year – what that means is that the annual value increase applies to the gains from previous years. Hold on to your home for 30 years at a three percent annual increase in value, and you can expect an increase in property value over that period of 143 percent!

It goes to show that buying is by far the better path to wealth creation.

Photo: Getty Images

Home ownership means wealth creation. Discover how Hypofriend can make this happen 

How do I know whether it’s still a good time to buy? 

A good way to know whether it’s still a good time to buy, is to understand how much an apartment or home costs per square metre (sqm), when renting or buying. Below (Table 2), you can see the average price per sqm for apartments in major German cities (for those between 60-80sqm).

You then need to compare the purchase price per sqm, including annual interests and maintenance costs, with the rental price per sqm. If the actual purchase price is below the calculated break-even price, it typically makes a lot more sense to buy. 

For example, if you rent in Berlin with a sqm cost of €13.68, this corresponds to a sqm purchase price of €7,137, taking into account annual interest rates and maintenance costs of 1.5 percent, and the minimum purchase costs of eight percent are spread over the usual minimum stay of 10 years. The current average purchase price per sqm for Berlin is €5,212. Therefore, in this scenario, buying makes more sense than renting, even ignoring any appreciation gain.

Please note: Since major cities and metropolitan areas are very diverse, rental and purchase prices can vary greatly in different parts of the city. 

Table 2

So, is it still the right time to buy? 

With hindsight, it is always easy to say, ‘Oh I wish I would have bought five years ago’. Going forward it is also easy to assume that prices will decline, therefore making buying more affordable.

Alas history tells us that house prices rarely decline. It takes a lot for this to happen – usually due to a sudden increase in interest rates or a small economic depression. For now, it would appear that is not on the cards. 

Renting is still by and large much more costly than buying. If you consider inflation and house price appreciation, buying is still the clear winner for anyone willing to hold on to their property. 

Thinking about buying? Hypofriend are the mortgage experts for expats, who can provide you with advice and assistance through every step of the property buying process, all in plain English. They have made it their mission to make the German mortgage market transparent, and to make the mortgaging process a sound financial decision, so you can enjoy your new home without worries. 

Start your conversation with Hypofriend today, and see how your homeownership dreams can come true

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Living in Germany: Newsreader’s giggles, your go-to German word and German Unity Day

In this week's roundup we talk about a German newsreader's fit of giggles, your 'comfort' German word, Oktoberfest and why German Unity Day could have been scrapped as a weekday public holiday.

Living in Germany: Newsreader's giggles, your go-to German word and German Unity Day

Living in Germany is our weekly look at some of the news and talking points in Germany that you might not have heard about. Members can receive it directly to their inbox on Saturday.

Why we love German newsreaders 

The news is a serious business, but things lightened up this week thanks to German newsreader Susanne Daubner’s laughing outburst. In what was a very relatable moment, Susanne, from ARD’s Tagesschau, was trying to report on a summit being held on the chemical industry in Germany, but found something her colleague Sven Lorig said so funny that she launched into giggles – known as a Lachflash in German – and couldn’t stop. Susanne said after that she “couldn’t really explain” what happened. She said she was engrossed in her news report but heard her colleague in the background talking and thought: “Oh dear I’m already on air.” She added: “And then I just had it to laugh. It felt like it lasted forever.” The moment went viral on social media, with many saying it made them laugh out loud.

It reminded us of the moment last October when another ARD German newsreader Annette Dittert sparked a roar of laughter. When Dittert was reporting on the chaotic incidents that happened in the run up to former British Prime Minister Liz Truss’ resignation, she used strong English swear words – something which would be extremely unusual on anglo TV. While describing the chaotic scenes in the House of Commons, Dittert said that the former PM’s deputy whip Craig Whittaker vented his frustration by saying he was “f**king furious and I don’t f**king care anymore” (without blanking out the swear words). Who said Germans don’t have a sense of humour?

Tweet of the week

What’s your go-to German word to ensure you sound engaged in a conversation?

Where is this?


Photo: picture alliance/dpa | Peter Kneffel

We couldn’t resist sharing another photo of Oktoberfest with you. Revellers at the Wiesn have enjoyed blazing sunshine since the festival started on September 16th. It runs up until October 3rd – and just under a week later, on October 8th – Bavarians will go to the polls to vote on their new state parliament. Our columnist Brian Melican this week reported from the Wiesn and gave a fascinating overview of the uneasy political situation in Bayern. And for all those in Hesse – which is voting on the same day – check out our guide to the elections here.

Did you know?

This Tuesday, October 3rd, marks 33 years since reunification and almost 34 years since the fall of the Berlin Wall. It is a public holiday for people in Germany. Because it falls on a weekday this year, it means most people get the day off work and shops and businesses will be closed while Germans spend time with their loved ones or simply take a day of relaxation. But did you know that former German Chancellor (and the now disgraced) Gerhard Schröder tried to remove the Tag der Deutschen Einheit (German Unity Day) as a national holiday in 2004?

 He wanted to move it to a Sunday to give fewer people the day off. In a letter defending his plan, Schröder wrote: “the holiday should not be abolished, but moved to the first Sunday of October every year.” Citing economic reasons, he explained he was committed to reducing the number of national holidays. Unsurprisingly, this wasn’t a very popular suggestion, and it remained on October 3rd. We wish you a wonderful German Unity Day!