Modern detached house with garden and clean lines. - ©© Y-Boychenko/Depositphotos.com

Is renting an alternative to buying?

Inflation and rising interest rates have left many property seekers feeling that they cannot afford to buy a home. Even for high earners, the rental market appears to be more attractive. However, if rental and purchase prices are converging as they are at present, it is worth comparing the two options. What can property seekers do now?

According to a study by the German Economic Institute (IW), even the richest fifth of Germans are currently finding it more difficult to find affordable real estate. A net monthly income of €5,000 is often no longer enough for a couple to finance a property.

At the end of last year, only 47 percent of the properties on offer were affordable for the highest-earning fifth of society. At the beginning of 2022, the figure was 62 percent. At the end of last year, a couple with a net income of around $3,730 could only afford 28 percent of the properties on offer.

Renting is hardly cheaper than buying

The low affordability is a result of inflation, higher interest rates, construction costs, and consumer prices. The IW study shows that in the top seven cities of Berlin, Hamburg, Munich, Cologne, Frankfurt am Main, Düsseldorf, and Stuttgart, fewer properties were affordable at the beginning of this year, even though more properties were on offer than last year. By contrast, the number of affordable properties more than halved between the beginning and end of 2022.

When people turn from the purchase market to the rental market, this contributes to increasing pressure on the rental market. This leads to higher rents. As a result, rents rose more sharply last year than in previous years. In some cases, rental apartments are hardly any cheaper than owning your own four walls.

What can property seekers do now?

If property seekers adapt to the current market situation, it is still possible to finance a property. Purchase prices have already fallen. Real estate experts even assume that asking prices will have to fall further in order to meet financing requirements.

It may well be worth simply making an offer. Due to the changed situation on the real estate market, many sellers are willing to negotiate. Alternatively, property seekers can also place a search request with a local reputable estate agent. The professionals know how to explain to property sellers what price is currently realistic.

It is also advantageous to have a sufficiently high equity ratio. This should be around 20 to 30 percent of the purchase price of the property. Anyone looking for a property would therefore be well advised to seek the assistance of both a financing expert and a real estate expert. This increases the chances of finding a suitable and, above all, affordable property. A local, reputable real estate agent knows where to find affordable properties—they may even have something suitable in their database. They can also advise you on financing and recommend an independent financing expert.

Would you like assistance in finding and financing a property? Contact us! We will be happy to advise you.

Note

For reasons of better readability, the generic masculine form is used in this text. Female and other gender identities are expressly included insofar as this is necessary for the statement.

Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific case.

Photo: © Y-Boychenko/Depositphotos.com

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Is renting an alternative to buying?

Renting is hardly cheaper than buying

What can property seekers do now?

Are you looking for a new home? Get in touch with us!

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