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Real estate in Germany is much more affordable than it was 25 years ago


According to the new affordability index from credit experts, Germans can currently afford significantly more property than they did in 1995. However, the value has been falling for years. In the meantime it has reached the level of 2005. That means almost 15 years ago Germans could afford about as much real estate as they do today. The reason may be rising prices again.

Affordability has increased significantly since 1995

The affordability of real estate in Germany has improved by 41.1 percent since 1995. This is shown by the new affordability index of the specialist portal A report by the Globalization and Monetary Policy Institute of the Federal Reserve Bank of Dallas, which publishes real estate prices in 25 selected states in five different continents, served as the database. The loan experts use this to calculate the affordability of real estate once a year.

According to this, Germans pay 60 percent more for real estate than they did in 1995. In contrast, however, there is a 125.8 percent increase in net income. As a result, real estate is 41.1 percent more affordable for Germans than it was 25 years ago.

2005 similar level as today

However, it is also clear from the index that Germans were able to afford roughly as much property in 2005 as they do today, despite increased incomes. Because the index value has been falling for years.

For 2005, the index value was set at 100. A value of over 100 in the affordability index means that real estate has become more affordable, or that nominal real estate prices have risen less than net income. Conversely, the value is below 100 if nominal real estate prices have risen faster than net income. In Germany, this value is currently 100.58 points, around the level from 15 years ago.

Significant differences between Luxembourg and Spain

According to the index, Luxembourg properties can currently afford the least. The property prices there have risen nominally by a whopping 400 percent, while income has risen by only 89.4 percent in the examined 25 years. At 49.52 points, the value in Luxembourg is 62 percent lower than in 1995.

It is the other way around in Spain. Here the rise in property prices is 137.5 percent, while the increase in net income is higher at 170.5 percent. With an affordability index of 163.46 points, the dream of owning a home on the Iberian Peninsula can be fulfilled better.

Real estate prices have been rising again for years

The declining value in the affordability index of Germany for years indicates an increase in real estate prices. The business magazine Capital also explains that prices on the German real estate market have developed spectacularly in recent years. This is especially true for metropolises. However, there is also good news. In many regions of Germany you still get a lot of space for your money despite higher prices. The reason for this is the low interest rates, which at least partially offset the price increase, explains the magazine with reference to the latest real estate price index from the analysis company Empirica. According to this, the square meter of living space currently costs less than 2,000 euros in the vast majority of German districts.

Image Sources: KT Stock photos /

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