Is renting an alternative to buying?

Inflation and rising interest rates mean that many people looking for real estate feel they cannot afford it. The rental market also appears to be more attractive for high earners. However, if rental and purchase price rates are approaching the current level, it is worth making a comparison. What can property seekers do now?

According to a Study by the German Economic Institute (IW) it has become more difficult to find an affordable property, even for the richest fifth of Germans. A net income of 5,000 euros per month is often no longer enough for a couple to finance a property.

At the end of last year, only 47% of properties on offer were affordable for the highest-income fifth of society. At the start of 2022, the figure was 62 percent. A couple with a net income of around €3,730 could only afford 28% of the properties on offer at the end of last year.

Renting is hardly cheaper than buying

The low affordability is the result of inflation, higher interest rates, construction costs and consumer prices. The IW study shows that fewer properties were affordable in the top 7 cities of Berlin, Hamburg, Munich, Cologne, Frankfurt am Main, Düsseldorf and Stuttgart at the beginning of this year, although more properties were on offer than last year. In contrast, the number of affordable properties more than halved between the beginning and end of 2022.

When people turn from the buying market to the rental market, this contributes to increasing pressure on the rental market. This causes rents to rise. Last year, rents rose more sharply than in previous years. In some cases, rental apartments are barely cheaper than owning your own four walls.

What can real estate seekers do now?

If property seekers adapt to the current market situation, it is still possible to finance a property. Purchase prices have already fallen. Real estate experts even assume that asking prices will have to fall even further in order to meet financing requirements.

It may well be worth simply making an offer to buy. Due to the changed situation on the real estate market, many sellers are willing to negotiate. Alternatively, property seekers can also place a search request with a local quality estate agent. The professionals know how to explain to property sellers what price is currently realistic.

A sufficiently high equity share is also an advantage. This should be around 20 to 30 percent of the purchase price of the property. Anyone looking for a property is therefore well advised to seek advice from both a financing expert and a real estate expert. This increases the chances of finding a suitable and, above all, affordable property. A local quality estate agent knows where affordable properties can be found - they may already have a suitable one in their database. They can also advise on financing and can recommend an independent financing expert.

Would you like support in finding and financing a property? Please contact us! We will be happy to advise you.

Note

For reasons of better readability, the generic masculine is used in this text. Female and other gender identities are explicitly included where this is necessary for the statement.

Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific individual case.

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