Our figure of the month 12/2021: Buying property has become more expensive for the tenth year in a row


Wage increases cannot keep up with the increase of property prices, which means that affordability continues to decline. This is measured by the price-income ratio (PIR) and shows that in 2021, an average wage earner in Germany has to pay more than the tenfold of his gross annual wage to buy a single-family house[1]. Fifteen years ago, it was still possible to buy a single-family house with 7.5 times of the annual gross wage (see green line in figure). The development of the affordability of flats[2], which is not figured here, shows an even more dynamic increase in PIR than the purchase of single-family houses.

Both forms of ownership have a noticeable increase in PIR in the past two years in common (see blue bars in figure). On the one hand, this is the result of the weak wage development, which was slowed down as a result of the Corona pandemic; on the other hand, the price of ownership has risen continuously despite the pandemic. The price development is due to the low interest rates, little alternative forms of investment as well as the lack of suitable living space as well as building land. The resulting pressure on demand is further increased by capacity bottlenecks in the construction industry. This puts additional pressure on property price development. In order to slow down the price dynamics and making housing prices more affordable, the future coalition is supporting cost-cutting measures such as modular and serial construction. The new government also wants to support households with lower incomes in financing. It remains to be seen whether they will achieve their declared goal of increasing the ownership rate in Germany (46.5 %).

[1] Single-family house from stock, built from 1949 onwards, medium equipment and location, approx. 125 sqm

[2] Condominiums from stock, built from 1949 onwards, medium furnishings and location, approx. 75 sqm.

Other figures can be found here.

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