IW study on 2022: Own living space increasingly unaffordable

Status: 01/19/2023 10:55 a.m

Massively increased building interest rates, the energy crisis and a weaker economy – this is also reflected in the housing market. Even top earners are often unable to buy their own house or apartment.

Homeownership is becoming less and less affordable, even for high earners. Expensive energy, high construction costs and interest rates have led to significantly fewer people buying real estate, the Cologne-based Institute of the German Economy (IW) explained in a study. Nevertheless, real estate prices have hardly fallen.

The result: “Anyone who had a median income as a couple at the end of 2022, i.e. around 3730 euros net, and wanted to buy a single-family house could only afford 28 percent of the properties on offer,” the researchers explained. At the beginning of the year it was still 40 percent. Even for the highest-income fifth, less than half of the single-family homes advertised were affordable at 47 percent (previously 62 percent).

Buying real estate in metropolitan areas more difficult

Purchasing real estate is becoming increasingly difficult, especially in metropolitan areas. For the richest fifth, i.e. a couple with a net income of more than 5000 euros, the number of affordable single and two-family houses in Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Munich or Stuttgart has more than halved, according to IW. The situation in the environs of the metropolises is similar.

The offers for residential real estate in the online advertising platforms have increased significantly. According to the IW, compared to the beginning of 2022, 60 percent more single and two-family houses and 41 percent more condominiums were advertised across Germany in October. The IW also describes this as a trend reversal, since the number of advertisements has been declining for years. Despite the increased supply, the advertised purchase prices have remained largely stable.

Rents increased significantly more

Mortgage interest rates have risen at a rapid pace over the past year. At the beginning of 2022, the building interest with a fixed interest rate of ten years was just under one percent, currently it is just under 3.7 percent. For many households, the rate of rise in interest rates means that either the share of affordable supply has fallen or that a larger proportion of income has to be devoted to it, the researchers said.

For tenants, this development has a negative side effect: Because fewer and fewer people are moving from tenant households into their own properties, the pressure on the rental market is increasing, as the IW researchers explain. “As a result, rents in 2022 rose much more than in previous years.”

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