In June, Postbank and the Hamburg Institute for International Economics conducted the Housing Atlas 2020 study. Analysts calculated how many annual rents are required to be paid in different regions of Germany to spend a total amount equivalent to the purchase price of the same real estate unit. The higher is the result, the more expensive is the property.
This analysis showed an overall average increase in the ratio of annual rent to the purchase price of real estate in Germany. In 2018, it was equal to 22.9, and in 2019 – already 24 annual rents. A few years ago, this figure was only 17.5.
Moreover, the results of this analysis revealed a large gap between individual cities and regions in Germany. In 2019, Munich, which is considered a city with particularly expensive real estate market, reached a score of 37.2. Hamburg scored of 36 and Frankfurt am Main had a score of 33.5.
An absolute leader in this rating was the resort island of Sult in Northern Friesland. It scored a record number 71.9 of annual rents to reach the purchase price.
The Big Seven
According to the study, the rent to purchase ratio showed high results in the seven largest cities in Germany: Munich, Hamburg, Berlin, Frankfurt, Dusseldorf, Cologne and Stuttgart. Furthermore, compared to 2018, it showed an increase in numbers, which indicates a certain trend towards overheating the prices on real estate market.
Authors of this study advise all interested buyers to be careful about investing in real estate, especially in expensive German cities.
“If real estate prices are much higher than the annual rent, it may be a sign that the expected future profit has already been added to the purchase price, at least partly,” said a Postbank expert. This means that future growth in the cost of housing may be lower than used by property owners in previous years.
