Study: Real estate: Paris and Munich most expensive for buyers

According to the management consultancy Deloitte, rents and real estate prices in Germany will continue to rise next year. For buyers, Munich is now the second most expensive city in Europe, after Paris and ahead of London. According to Deloitte, “new construction activity in Germany is still below average compared to other European countries”.

For the industry study published on Friday, the experts compared the data from 68 selected cities in 23 European countries. Real Estate Leader Michael Müller said that prices for construction work had risen across Europe. Disrupted supply chains and scarce building materials increased the risks in the planning and execution of construction projects. A lack of staff and general inflation continued to drive up construction prices. However, rising interest rates could slow demand and price increases.

According to Deloitte, buyers of a new apartment in Munich had to pay an average of 10,500 euros per square meter last year. Only Paris was even more expensive at 13,462 euros. London, Oslo and Frankfurt were significantly lower with around 8400 euros, Amsterdam (7600 euros) and Copenhagen (7300 euros). According to Deloitte, buyers in Hamburg paid 6,900 euros per square meter and in Berlin 6,500 euros. On the other hand, things were good in the Bulgarian cities of Varna and Burgas on the Black Sea: New apartments there were available for around 900 euros per square meter on average.

In terms of monthly rents, Paris was also the most expensive with an average of 29.10 euros per square meter, followed by Oslo, London and Amsterdam. Munich came in tenth with 18.90 euros. Deloitte determined an average rent per square meter of EUR 15.90 for Frankfurt, EUR 14.30 for Berlin and EUR 13.60 for Hamburg.

Every eighth tenant is overburdened with housing costs

Although rents in Germany are comparatively cheap, around one in eight people living in a rented apartment in Germany is overburdened with their housing costs. This was the result of an evaluation by the Federal Statistical Office presented on Friday. Overburdening therefore means that all living expenses, including the recently sharp rise in energy costs, consume more than 40 percent of the disposable household income. That was the case for 12.8 percent of tenants last year. For the total population, the value was 10.7 percent.

With a tenant share of 50.5 percent of the total population, Germany is at the top in Europe. Only a few countries such as Austria (45.8 percent) or Denmark (40.8 percent) achieve similarly high values. As a result, cold rents have a high impact on inflation in these countries. They rose in Germany by 8.5 percent from 2015 to 2021 and thus somewhat more slowly than all consumer prices.

On average, people spend 23.3 percent of their income on housing, and the figure for renters is even 27.6 percent. According to the Federal Office, renting single-person households are most affected, as they have to spend an average of 35.4 percent of their disposable income on housing. On the other hand, childless couples have comparatively low costs at 23.7 percent. Low-income households in particular are suffering from the cost pressure. In the bottom fifth of the income bracket, more than a third (36.2 percent) live in a household that is constantly financially overburdened.

Only a few new apartments completed

In terms of stock, Germany is in the top third with 43.1 million apartments or around 51,800 apartments per 100,000 inhabitants. However, Deloitte still sees potential in new construction: last year in Germany only 372 apartments per 100,000 inhabitants were completed and only 299 new ones were started.

In many European countries, the acceptance of war refugees from Ukraine in solidarity was noticeable on the housing market, most notably in Poland, Slovakia and Hungary. “For the second quarter of 2022, the supply on the rental markets fell accordingly, as many apartments offered for rent are used to house Ukrainian refugee families,” the study says.