Postbank study highlights affordability problem in bigger cities

A new study published by Germany's Postbank examines the price of residential housing compared to local income levels, and concludes that a) the cost of housing is still rising across the country, and b) the gap between income and house prices is getting bigger. The comprehensive study surveys 402 cities and regions across Germany.

The most expensive city is Munich where property owners pay an average of 21 years income per head for an average 100-sqm apartment. Also high are Freiburg im Bresgau (18.1 years), Landkreis Miesbach (17.6 years), while in Berlin and Hamburg it takes more than 15 years of average income to buy the same apartment.

At the bottom end of the scale are the regions Osterode in the Harz district (2.8 years of average local income), Vogtlandkreis (3.1 years), Wunsiedel in Fichtelgebirge (3.3 years) and in Kyffhäuserkreis (3.3 years). Among larger towns, Zwickau and Goslar take the least amount of work to afford the 100-sqm apartment, at 3.6 years.

The Postbank study also shows how property prices have risen faster than incomes over the past five years, highlighting Suttgart in particular, where income per head after accounting for inflation has risen by 2.5%, while property purchase prices have risen by 53% since 2012. Likewise Hanover, where property has risen by 44% over the period while income per head has risen by only 12%. Cologne, too, has seen 40% price rises while income has risen by only 12% in the period.

Although Munich has the highest prices per sqm, income levels in the Bavarian capital are also the highest in the country. Even here though price rises have outstripped rises in income, as they have in Hamburg and Düsseldorf. In Berlin property prices have risen similarly to Cologne and Düsseldorf, but income levels are much lower on average in Berlin than in both cities on the Rhine.

Another way of looking at the results presented in the Postbank "Wohnatlas" study is how much house an average earner can afford. This is where the results show clearly what average earners are up against.

A family with an average income in Munich can afford 75 sqm – making it very tough for two adults with two children, for example.  In Berlin or Frankfurt the same family could afford 100 sqm, in Freiburg 95 sqm. In the best-case scenario, the family could afford up to 120 sqm, assuming the willing cooperation of supportive banks. Here the Hamburg-based HWWI Weltwirtschaftsinstitut accompanied the Postbank study, and adapted their figures to local income and bank lending patterns.

Their assumption is that the family commit 40% of monthly income for interest and capital repayments, before utility charges, pay an average of 2.5% on their loan and have a mortgage repayment period of 20 years. With utilities, the total burden could approach 50% of household income.