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Real estate prices are rising sharply: Who can still afford that?
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Wiesbaden/Frankfurt – The dream of owning your own four walls is becoming more and more expensive. And it doesn’t matter whether you’re looking in the city or in the country.
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In cities like Stuttgart, home ownership is unaffordable for most people. © Marijan Murat/dpa
According to the Federal Statistical Office, buyers had to pay eleven percent more than a year earlier in 2021 for apartments and houses. In the fourth quarter, residential real estate prices rose by 12.2 percent, the fastest since 2000.
Demand is high, supply scarce. Coupled with low building interest rates, this has been driving prices on the real estate market for a long time. This trend has accelerated in the past year. From 2019 to 2020, apartments and houses had become 7.8 percent more expensive on average.
Word has gotten around that home ownership in cities like Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart or Düsseldorf is hardly affordable anymore.
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Now the trend towards more home office during the Crown-Pandemic also boosted the demand for living space in rural areas.
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Large price increases on land
In addition to the outskirts, the country is also benefiting from the real estate boom. © Julian Stratenschulte/dpa
“The new records on the real estate market are favored by the fear of a rise in interest rates and rising inflation. Many Germans are taking refuge in concrete gold and are increasingly including the cities in the second row, after metropolises like Munich are already considered overvalued,” Eva recently analyzed Grunwald, head of Postbank’s real estate business.
“The corona pandemic has only strengthened the desire for one’s own home and expanded the radius.” Accordingly, the prices for one- and two-family houses in sparsely populated rural districts rose particularly sharply in the final quarter of 2021, as the Federal Office announced: plus 15.9 percent compared to the same quarter in the previous year.
Condominiums in these regions increased in price by 13.2 percent. In more densely populated rural areas, prices for single and two-family houses rose by 14.5 percent, and condominiums rose by 11.2 percent.
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According to Postbank calculations, Germany’s most expensive patch remains Munich.
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Bundesbank warns of overvaluations
Munich is Germany’s most expensive real estate market. (Archive image) © Felix Hörhager/dpa
Nowhere else did buyers pay as much for a square meter of living space last year as in the Bavarian state capital: an average of 9,732 euros for an existing apartment. In Frankfurt, therefore, 6586 euros per square meter were due, in Hamburg 6489 euros and in Berlin 5528 euros.
According to Postbank figures, the most expensive district in Germany with square meter prices of 7977 euros in 2021 was the district of Nordfriesland, which includes the North Sea islands of Sylt, Föhr and Amrum and holiday resorts on the coast such as St. Peter-Ording. Otherwise, the list of the ten most expensive districts only includes districts from the commuter belt around Munich and from the holiday areas in the foothills of the Alps.
The Bundesbank has been warning of overvaluations on the real estate market for years. The price increases in Germany and other European countries recently also alarmed the EU Risk Council ESRB.
“The overvaluations in residential real estate increased,” the Bundesbank stated in its monthly report for February.
“According to the latest estimates, real estate prices in cities in 2021 were between 15 percent and 40 percent above the price indicated by socio-demographic and economic fundamentals.” In 2020, the range was still 15 to 30 percent.
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Title photo: Marijan Murat / dpa
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