Real Estate: To Buy or to Rent?

Does it pay off in the long run to buy rather than rent a real estate property? According to a study, this is the case – even if the degree of affordability varies.

Owner-occupiers save more in the long run. (Image:

With their study “Living in Germany 2019”, the Cologne Institute for Economic Research (IW) releases documentations and predictions on the development of real estate prices in Germany. The major realization from the report which was created on behalf of the association of “Sparda” banks: In almost all of the around 400 examined cities and communities it is more lucrative in the long term to acquire a real estate property rather than renting it.

Thus, real estate purchases are especially worthwhile in the newly-formed German states. Comparing monthly rents to the monthly costs of owner-occupiers (including the redemption of the building loan, real estate transfer tax and maintenance), rents lie 38 percent higher on average. In the old West German states, the average cost benefit lies at 32 percent. Especially in metropolises, the savings are rising: In Berlin it is 34 percent, in Hamburg even 39 percent. In Stuttgart (29 percent) and Regensburg (15 percent), purchasing is more lucrative in the long term as well.

Particularly in conurbations, residential properties are being increasingly requested. In metropolises, buyers nationwide pay on average around 264,000 Euro for an average living space of almost 80 sq m. Here, apartments are the largest in Berlin (77 sq m) and in Cologne (76 sq m). With 39 sq m in Munich however, buyers obtain less than half of the average area size. On nationwide average, living space amounts to 111 sq m. If it comes to a purchase, Germans finance their real estate property with an average loan of 214,000 Euro – this corresponds to 81.05 percent of the average price. For financing residential properties, 7.8 times the net annual household income is being spent on average in cities, while this factor amounts to 4.5 in rural districts.

In general, the analysts expect further positive developments in south Germany, as well as in the conurbations Berlin, Hamburg, Frankfurt am Main and Wolfsburg. This trend will partly take place in the Rhineland as well. The high appeal of the conurbations will thereby attract further inhabitants and increase the already high demand for new constructions even further, say the experts of the IW.

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