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Fewer and fewer Germans can afford to own their own home

Frankfurt - Rising mortgage interest rates, sharply rising construction costs and real estate prices: Fewer and fewer Germans can still afford to buy a home.

According to a new study by the data specialist FMH X and the analysis institute SWI Finance, which is available in advance to the Handelsblatt, many real estate buyers today have to “invest almost their entire assets in real estate in order to raise the average equity capital employed in 2022”. A look at the distribution of wealth in Germany shows "that only ten percent of Germans have so much wealth that they can currently handle it," says the study.

Only a few can finance real estate without inheritance
The construction or purchase of real estate is thus becoming increasingly unaffordable for many sections of the population . According to the study, almost half of those interested in real estate with a monthly income of 6,000 euros or more counted on a gift or inheritance.

Against this background, however, more than half of those surveyed expressed further interest in buying a home. For households that have less than 2,000 euros a month, the proportion was only 16 percent, the study shows.

Real estate financing: interest rates are climbing rapidly
Because loans for real estate buyers in Germany are becoming more and more expensive. The average effective interest rate for ten-year financing has recently risen above the three percent mark for the first time in more than ten years, as calculated by the Frankfurt-based FMH financial consultancy. Interest rates of more than three percent for ten-year construction loans were last seen on April 5, 2012.

The construction interest has almost quadrupled since the beginning of the year, as the comparison portal Check24 calculates. In the case of construction financing of more than 400,000 euros at an effective interest rate of 3.0 percent, this means higher costs of 78,831 euros up to the end of the ten-year term.

As a reaction, many buyers are therefore trying to stretch the financing of the dream property more. From the average maximum in 2018 with an average repayment of 4.2 percent, the rates fell by almost a quarter to 3.4 percent, according to the study.

At the same time, the average loan terms for inquiries have increased, which are now more than 30 years. "There are increasing signs that the situation for those interested in real estate is becoming increasingly critical," warn the authors of the study.

"Many people simply can't afford it anymore"
The growing gap in the buyer 's market is also evident when looking at the equity capital employed. From the first quarter of 2022, equity capital of over 200,000 euros for average construction financing was requested for the first time. In the first quarter of 2016, equity was still below EUR 80,000.

Against this background, fewer and fewer people in Germany could afford solid financing, according to the study. In practice, he is currently experiencing that customers who had planned a new building are refraining from doing so, said Andreas Brendel, a specialist in construction financing at real estate financier Dr. Small. "Many simply can no longer afford it and sell their property again."

According to calculations by the experts, anyone who is interested in construction financing today has an average net household income of well over 5,000 euros per month and is therefore one of the top 15 percent of the population in terms of income.

For the study, 20,000 inquiries from 2016 to 2022 from the mortgage lending calculators of Finanzberatung FMH and a representative online survey in June of around 2,000 people were evaluated.

Real estate financing: Buyers of real estate are looking for long-term fixed interest rates
Even high earners have to stretch themselves more and more financially to make a purchase possible. In 2020, the average share of the monthly installment in the family income was 22 percent. This value increased to 23.5 percent in 2021 and to 26.1 percent in 2022. Although the purchase of real estate has become up to 60 percent more expensive since 2016, the financing requested is still solid, the study authors judge. Although the monthly rate as a percentage of household income has increased slightly, it is still far from the critical threshold of 35 percent.

"So it doesn't appear that potential mortgage customers are operating at the limits of their financial leeway," say the experts. The fixed interest rate is still long at 13.4 years in the first quarter of 2022. As a result, long-term planning is maintained, which has a stabilizing effect on the entire market.

Source: Handelsblatt
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