Market development study
Apartment prices are a particular burden for owner-occupiers
4/27/2022, 9:26 p.m
The boom in the housing market is causing prices to skyrocket. A study shows that owner-occupiers are particularly affected – for a sample apartment they have to pay more than 20 monthly salaries more than ten years ago. Rising construction interest rates could further increase the burden.
According to a study, in order to be able to cope with the record prices for real estate, owner-occupiers in particular have to stretch more and more financially. An average apartment with 100 square meters cost owner-occupiers 71 times their net household income in 2021, according to a study by the mortgage lender Hüttig & Rompf. In 2012, ten years earlier, buyers’ households in Germany would have had to pay 50 times their monthly net income for such a property.
According to the analysis, owner-occupiers in particular suffered from the fact that incomes had risen much more slowly than real estate prices. For this purpose, Hüttig & Rompf has evaluated more than 60,000 real financing cases from the past ten years across all locations, property types and buyer types. Investors also had to shoulder higher burdens for real estate, but got off lighter: They paid an average of 45 net monthly income for a 100 square meter apartment, compared to 33 ten years ago.
According to the information, the proportion of investors has risen from 17 to 30 percent within ten years. They are usually particularly high-income: while owner-occupiers had an average monthly net household income of 5715 euros in the analysis in 2021, investors had 8175 euros. In addition, investors usually buy smaller and correspondingly cheaper apartments, as they are easier to rent out.
Rising trend in interest rates
A lack of investment alternatives and rising inflation have increased the flow of investors into the real estate market, said CEO Ditmar Rompf. According to the study, one square meter of living space cost an average of 3,958 euros in 2021 – 78 percent more than in 2012. Nevertheless, the monthly burden on households has only increased slightly: In 2021, owner-occupiers had to spend around 23.9 percent of their net household income on interest and repayments, in 2012 it was 21.6 percent.
For investors, the monthly burden fell slightly to 11.5 percent of net income. “This is due to the growing demand for smaller properties and the low interest rates,” said Rompf. Recently, however, construction interest rates have skyrocketed – and the trend is still rising. Experts from FMH Finanzberatung expect mortgage interest rates for ten-year financing to rise to 3 percent in the summer months. Most recently it was around 2.1 percent.
More expensive loans are likely to reinforce the trend that not everyone can afford financing and dampen real estate demand, Rompf expects. Even a relatively small increase in interest rates could increase the monthly burden by hundreds of euros.