Home ownership – an investment in the future

Investing in real estate is a safe investment for the future. This is proven by long-term calculations. The criteria for a profitable real estate purchase change over time - currently they seem to be poor. But in the long run, home ownership definitely pays off. 

For both tenants and buyers, housing is becoming more expensive every year. The Hamburg Institute of International Economics (HWWI) has calculated how high the income shares are that have to be spent on average for the net cold rent or for loan repayments. The calculation was based on certain comparable criteria. The experts found 83 regions in Germany where buyers in 2022 will only have to spend a maximum of five percent of their net household income more on financing than on rent. 

As a rule of thumb, no more than 30 per cent of disposable household income should be spent on housing. Since this also includes ancillary housing costs, households should rather orient themselves towards the 25 per cent line. In practice, however, this has become difficult for average earners. Compared to the previous year, buying opportunities have worsened. The main reason for this development is the sharp rise in interest rates compared to the previous year. 

Although asking prices fell noticeably last year for the first time in a long time, condominiums currently cost almost 64 per cent more at their peak than in 2018, according to an analysis by immowelt, which compared the average asking prices for existing flats in selected major German cities as of 1 July 2018 and 2023. According to the study, home ownership has become more expensive in all 76 cities analysed - in 57 cities even by at least 30 percent. By comparison, the inflation rate between June 2018 and 2023 is just under 19 percent.

The housing market in Germany will continue to be characterised by high demand and low supply for a long time. The result is high property prices and rents. However, owners have the advantage over tenants that they can calculate housing costs years in advance and build up assets at the same time, while tenants have no influence on the development of rents. 

(Photo: © Günter Moritz320, Pixabay)