How soaring German property prices are out of reach for buyers

Though Germany is traditionally a nation of tenants, the soaring cost of rent and the attractiveness of owning property means many are considering investing in their own home. 

But according to a new survey conducted by mortgage broker Interhyp, most tenants who are currently renting in Germany believe they will never be able to afford to buy a flat or house in their local area. 

The survey of 1,000 buyers and prospective buyers shows that the majority find the prices daunting and many consider buying a property in their own region either "unaffordable" or "barely affordable".

Average property costs €540,000

According to the mortgage broker, house prices have gone up by 10 percent each year for the past two years in a row, leading many renters to see home ownership as an increasingly distant dream.

Data from Interhyp suggests that price rises in the real estate market have continued unabated this year and may even be accelerating. 

In the first quarter of 2022, the average cost of building or buying a property, including ancillary costs, was €540,000  - an increase of 14 percent against the same quarter last year. 

In 2021, meanwhile, the increase in the first quarter was nine percent against the previous year. In metropolitan areas, the average prices are significantly higher than elsewhere. In Munich, one of Germany's most expensive cities, the average house price stands at €905,000, while the average property in Hamburg costs €750,000.

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High prices are 'off-putting' 

Though Germany's real estate market has long been considered a stable investment, it appears that spiralling prices are causing would-be buyers to lose confidence.

According to Interhyp's survey, 65 percent of renters feel deterred from purchasing by the high property prices, while 44 percent think that the cost of property has become increasingly divorced from its actual value.

"Many of those we surveyed have the feeling that prices are rising 'unceasingly into the immeasurable'," explained Jörg Utecht, CEO of the Interhyp Group.

More worryingly, more than three-quarters (77 percent) of respondents believe that there's a real estate bubble in Germany, with 58 percent blaming the low interest rates set by the European Central Bank (ECB) for the current property boom.

Not everyone agrees that prices are increasing due to low-interest mortgages, however: 46 percent believe low housing stock and faltering construction levels are responsible, while 36 percent say its down to speculators and investors. 

READ ALSO: EXPLAINED: The hidden costs of buying a house in Germany

Inheritance and gifts are key

For many people who are trying to calculate the affordability of buying, it's important that they don't have to sacrifice their entire lifestyle to pay off a mortgage, Utecht said. 

"People do want a property, but not at any price," he said. "Above all, they want solid, bearable and manageable financing, where holidays and restaurant visits are still possible."

When it came to the factors that respondents thought could assist them in buying a home, 40 percent said their DIY or renovation skills could help, 35 percent said luck would be a factor and a third (33 percent) said a persistent search could be decisive.

For more than a quarter of Germans (27 percent), an inheritance, a gift or the support of parents is a prerequisite for being able to afford a deposit or mortgage, while 67 percent were also forced to rely on their own savings. Unsurprisingly, 77 percent also had to rely on a loan of some kind.

The average value of the respondents' savings was €128,000, the average 'gift' received was €94,000 and the average inheritance was €158,000.

"The high purchase prices can often only be afforded through inheritance, donation or high savings," comments Utecht. "Those who cannot fall back on funds from the family usually need a high income and quite a few years to build up savings before a property purchase is possible."

State aid was also considered to be a crucial part of helping first-time buyers get on the property ladder: 42 per cent of the buyers surveyed had used subsidies from the federal government, the state or local authorities to help purchase their first home.

READ ALSO: Where in Germany can you still snag a home for under €100k?