Study: Affordable Homes in Germany Now Mostly Found in Rural Areas

Finding an affordable single-family home in Germany is increasingly challenging, with a new study by the IW Köln economic institute indicating that such properties are now predominantly located in rural and economically disadvantaged regions. The research highlights stark contrasts in housing prices across the country's sixteen federal states.

Homeownership is most affordable in states like Saarland, Schleswig-Holstein, and Saxony-Anhalt. In these areas, a typical model household spends roughly a quarter of its net income on monthly mortgage payments. Conversely, major metropolitan areas such as Berlin, Bavaria, and Hamburg present a much steeper financial hurdle, where mortgage payments can consume around 40% or more of net income, according to data from financing broker Interhyp, which commissioned the study.

The "Affordability Index" developed by IW Köln economists, including Michael Voigtländer, analyzes single-family home prices in all 400 German districts and cities. The index considers a family with two children and an income at the 70th percentile, meaning higher than 70% of German households. Monthly housing expenses up to 35% of net income are considered sustainable. An index value below 100 signifies unaffordability, while a value above 100 indicates affordability.

While the national average index stands at 103, regional differences are immense. Munich and its surrounding areas, long known for their high costs, are among the least affordable. However, smaller cities and their neighboring districts offer more accessible options, with model households typically spending about a third of their income on mortgage payments, remaining within the affordability formula. Even within states like Bavaria, significant regional variations exist, with areas like Steinburg in Schleswig-Holstein (index 187) and Rhön-Grabfeld in Bavaria (184) showing much higher affordability than the least affordable region, Garmisch-Partenkirchen (index 53).