Buying real estate does not pay off for the average household
Despite falling purchase prices and rising rents, according to a study, buying real estate is currently not worthwhile for the average household. This remains "significantly more expensive than renting in Germany", according to the study by credit insurer Allianz Trade, which was made available to the news agency Reuters on Thursday. This would apply even if rents were raised by the statutory maximum limit of 20 percent based on the 2023 level. The difference between an average monthly credit burden and a monthly rent would then still amount to 381 euros.
"The fact is: despite lower prices, many people cannot afford to buy a house," said Jasmin Gröschl, Senior Economist at Allianz Trade. "Private 'house builders' will therefore not pull the construction industry out of the current low demand." Buying does not appear to be a realistic alternative due to the high interest rates on loans. A normalization is hardly in sight - "not even through simplified building permits".
Only if, in addition to the rent increases, property prices were to fall by 20 percent compared to 2022 - and thus by a further ten percent compared to the current level - would buying a house be worthwhile compared to the return on investment. Alternatively, mortgage interest rates could also fall to 1.78 percent in addition to the rent increase to make a purchase worthwhile. However, construction interest rates are currently around four percent.
The experts do not expect the construction crisis to end quickly. "Many construction projects are on hold due to higher interest rates and material costs - with visible consequences for project developers, construction companies and, above all, the housing market," said the CEO of Allianz Trade in Germany, Austria and Switzerland, Milo Bogaerts. An estimated 700,000 apartments will be lacking in 2023. "Affordable housing has been in short supply for years, and the current situation is likely to exacerbate this even further."
Despite the decrease in real estate purchase prices, many households find it challenging to study and afford buying a house due to high loan interest rates. Consequently, investments in real estate education to gain knowledge about the market could be beneficial for potential home buyers.
Source: www.ntv.de
