For 100 square meters, ideally with your own garden, in Germany you have to take a lot of money out of your pocket. The most expensive properties are located in the south, in Munich, but also in the north, in the Nordfriesland district. A small house of this size costs around one million euros. Almost no one has that much money in their pocket, but even financing through a loan would be unaffordable for most people.
In addition to the actual purchase price of one million euros, there are several additional costs. The most important factor is the real estate transfer tax, which, according to the state, amounts to between 3.5 and 6.5 percent of the purchase price. In addition, an intermediation commission of at least 3.57 percent is charged, as well as notarial and cadastral registration expenses. As a general rule, you can add 12.5 percent to the purchase price. For a property valued at one million euros, it would be an additional 125,000 euros.
A gross salary of 23,500 euros per month is required
The typical German home buyer finances this, according to data from the service provider Dr. Small currently with an equity of around 13.6 percent. It would be about 153,000 euros that you should have already saved. The remaining amount goes towards a real estate loan. According to an evaluation by the financial company Interhyp, its interest rates currently average 3.54 percent with a 15-year fixed interest rate. Additionally, the initial repayment currently averages 1.82 percent. Together, this results in a monthly loan payment of 4,340 euros for the million-dollar house.
Most Germans only earn that much gross money per month. But taxes aside, you'll also want to spend your salary on more than just loan payments. That's why financial experts recommend limiting your monthly payment to a maximum of 30 percent of your monthly net income. If 4,340 euros were 30 percent of your net income, you would have to earn 13,033 euros net each month. What this means for your gross income varies greatly depending on your living situation; For example, what tax bracket you are in, if you have children, if you are a member of a church, etc.
For example, as a single person without children but belonging to a church in North Rhine-Westphalia, you would have to receive around 23,500 euros gross per month to reach that net amount. This will not surprise you, but according to the IW Cologne not even one percent of Germans can do it. Even if you and your partner join forces to buy a property together, you would both have to be in the top percentage of German income earners.
In the countryside it is only affordable for couples.
If you want to buy your dream home, you need to narrow down your dreams. One possibility would be to avoid the most expensive areas of Germany. While Munich and Sylt are, as can be seen, unaffordable, the average for 100 square meters is 675,000 euros according to the Postbank Wohnatlas 2024 in the 7 main cities: Munich, Berlin, Hamburg, Frankfurt, Stuttgart, Cologne and Düsseldorf. This could be paid with a gross monthly income of about 15,000 euros. As a couple, you can do this if you are both among the top 6 percent of earners in the country.
In all other major cities in the country, the average price of 100 square meters, including additional costs, falls to around 350,000 euros. To finance it, a monthly net amount of 4,562 euros is needed. This can be achieved as a single person in the top five percent of Germans and as a couple with a middle income. Buying a house is even cheaper in medium-sized cities, up to 100,000 euros or in rural areas. In this case, the average, including additional costs, is 317,000 euros per 100 square meters. For this, a monthly net amount of 4,132 euros is enough. That's still a lot for a person on one income, but absolutely affordable for a couple on two incomes.
The alternative would be to downsize your dreams, but that just shows how unrealistic they are for a home. With 80 square meters (more like a three-bedroom apartment) instead of 100 square meters, you save about 135,000 euros in costs in major cities, 70,000 euros in all other large cities and about 63,000 euros in medium-sized cities and rural. districts, with a corresponding reduction in the costs of financing the necessary income. The third option is to beat the typical financing terms, either by putting up significantly more equity than 13.6 percent or by spending more than 30 percent of your net income on the loan. In both cases, you will have to significantly restrict yourself in other areas of your life.
Why is real estate so expensive?
The fact that real estate is so unaffordable for so many people is due to two phenomena. While European Central Bank (ECB) interest rates and therefore average real estate interest rates were low during the 2010s, property prices skyrocketed. From 2016 to 2022 alone, it increased by an average of more than ten percent annually. This is also influenced by the fact that very few new apartments have been built in Germany for years. The low supply drives up prices. Although purchase prices fell by an average of around ten percent last year, the level is still very high. On average, there has been a 66 percent increase since 2016.
While purchase prices are already extremely high, interest rates have also increased since the ECB announced the interest rate change in 2022. Meanwhile, the average rate was above four percent, but has now become to calm down This has two effects: The higher the interest, the lower the initial repayment can be if you do not want to exceed a certain monthly rate. While the current average is 1.82 percent, in 2017 it was around 3 percent. This considerably extends the term of real estate loans. If all other parameters remain the same, it will now take you almost seven more years to pay for a house.
Second, higher interest rates make buying a home considerably more expensive. If the level were 2.5 instead of 3.5 percent – all other parameters unchanged – your monthly rate would fall by about 20 percent. Calculated over the entire term, total house costs and interest would be about 8.5 percent lower.
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