Buying a flat or house instead of renting would be the preferred choice for many people. At present, expensive financing is making the desire for home ownership more difficult. However, the general conditions are improving noticeably and the chances of home ownership are increasing.
If you do the maths and compare the monthly rent with the cost of financing your own property, you will see the first rays of hope. The standard rate for property financing, which is calculated from the key data of a loan amount of 300,000 euros, two per cent repayment, ten-year fixed interest rate and 80 per cent loan-to-value ratio, reached a low of 1,423 euros in August. The average loan amount is a different story: The amount that prospective buyers borrow from a bank to finance their property rose by almost seven per cent to 308,000 euros.
How expensive property financing becomes depends to a large extent on the framework conditions of the financial sector, and these are largely determined by the decisions of the European Central Bank, the ECB in Frankfurt. The ECB Governing Council must ensure that inflation returns to its target value of two per cent in the medium term. In September 2024, the ECB lowered the deposit rate by 0.25 percentage points to 3.5 per cent. This move has an impact on borrowing costs - and indirectly also on property purchase prices.
Experts largely welcome the move. The President of the ifo Institute, Clemens Fuest, described the ECB's interest rate cut as "justifiable". In view of falling inflation and the weak economic outlook, an easing of monetary policy was justified. Heiner Herkenhoff, Managing Director of the German Bankers Association, also considers the reduction to be appropriate. Nevertheless, the European monetary authorities cannot yet switch to "relaxation mode", according to Herkenhoff.
What does this mean for the property industry? The major bottleneck in property financing is slowly easing. As a result, more people will gradually be able to afford home ownership or carry out construction, remodelling and renovation work.
Photo: © u_mevs2b9d3l, Pixabay
