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The rental market is also under pressure: Real estate is often too expensive, even for high earners

Tenant market also under pressure
Real estate is often too expensive, even for high earners

The energy crisis and an impending recession are causing severe problems for the real estate market. Even high earners are finding it increasingly difficult to find affordable home ownership. The fact that fewer people are moving into their own homes is also affecting the rental market.

According to a study, home ownership is becoming less and less affordable, even for high earners. Expensive energy, high construction costs and interest rates would have led to significantly fewer people buying real estate, explained the Cologne Institute of the German Economy (IW). Nevertheless, real estate prices have hardly fallen.

The result: “Anyone who had a median income as a couple at the end of 2022, i.e. around 3730 euros net, and wanted to buy a single-family house could only afford 28 percent of the properties on offer,” the researchers explained. At the beginning of the year it was still 40 percent. Even for the highest-income fifth, less than half of the single-family homes advertised were affordable at 47 percent (previously 62 percent).

Purchasing real estate is becoming increasingly difficult, especially in metropolitan areas. For the richest fifth, i.e. a couple with a net income of more than 5000 euros, the number of affordable single and two-family houses in Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Munich or Stuttgart has more than halved, according to IW. The situation in the environs of the metropolises is similar. “Although significantly fewer people actually buy and there are more advertisements, the prices remain largely stable,” the researchers say.

Rents are rising faster than in previous years

This development has a negative side effect for tenants: Because fewer and fewer people are moving into their own properties, the pressure on the rental market is increasing, as the IW researchers explain. “As a result, rents in 2022 rose much more than in previous years.”

According to the report, housing policy must react to this development. In the current market phase, it is “more important than ever to shape active home ownership policy.” These included the introduction of a progressive real estate transfer tax with real estate tax exemptions for first-time buyers and owner-occupiers, the introduction of subordinated loans and mortgage insurance.

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