Hefty German Housing Bills: Every Fourth Euro Spent on Shelter
Housing expenditures account for a fourth of every euro spent by Germans.
Living expenses in Germany are a significant burden, more so for folks with lower income. A startling statistic reveals that compared to other European countries, Germany is quite pricey when it comes to housing costs.
On average, Germans part with an astounding 25 cents of every euro on housing expenses. This staggering figure is based on data from Eurostat, evaluated by the Federal Statistical Office (BSW) upon request. The BSW critically noted that housing costs are nearly unparalleled in affordability across Europe.
Last year, Germans spent 24.5% of their income on rent and other housing costs. This is a whopping 5.3 percentage points more than the EU average. Although there has been a slight improvement since 2023, Germany remains a top European outlier when it comes to housing costs.
In countries like France, Austria, or the Netherlands, housing expenses are a good deal lower. Even Germany’s risk-of-poverty population spent an average of 43.8% of their income on housing—almost half of their earnings!
Denmark Tops Europe's Expensive Housing List
According to 2024 statistics, Denmark and Greece reported higher housing-cost shares (26.3% and 35.5%, respectively) than Germany. Sweden's level was roughly the same as Germany, whereas Cyprus (11.4%), Malta (12.5%), Italy, and Slovenia (both 13.6%) reported own some of the lowest housing costs in Europe (with the EU average being 19.2%).
BSW chairwoman Sahra Wagenknecht commented that countries like France and Austria manage to maintain lower housing costs, emphasizing the need for a nationwide rent cap and a higher share of non-profit housing in the market. She believes it's doable to make housing more affordable in Germany.
Reasons for High Housing Costs in Germany
- Improper Supply to Demand Balance: Despite some recent price reductions, the demand for housing continues to outweigh supply, particularly in affordable segments. This mismatch has contributed to the inflated housing costs[1][3].
- Regional Variations and Suburban Growth: Although city center property prices have decreased somewhat since 2022, the outer suburbs and residential areas remain pricey. This is partially because buyers are drawn to these areas due to changing housing preferences and increased work-from-home opportunities[1].
- Inflation and Interest Rates: Interest rate rises since 2022 have influenced city center apartment affordability, pushing buyers toward higher-yielding suburban properties. Meanwhile, inflation-related real wage losses have reduced affordability, reducing the pool of potential buyers capable of buying expensive city center housing[1].
- Comparative Price Levels: Although Germany's house price growth (14.1% over ten years) is relatively modest compared to countries like Portugal or Hungary, it still contributes to concerns about affordability. Germany also spends less on housing subsidies than countries like the Netherlands, which may affect affordability measures[5].
- Housing Market Characteristics: Germany has a thriving rental market, with a significant number of residents renting rather than owning. This can sometimes lead to upward pressure on rents and overall costs due to stronger demand[2].
Proposed Measures to Alleviate Housing Cost Burden
- Expanding Housing Supply: Proposed strategies focus on boosting new housing construction, especially affordable units, to bridge the gap between supply and demand. Developing properties in suburban and less central areas is part of this plan, as these areas have seen less dramatic price declines and continue to be popular among buyers[1].
- Attracting More Investment: Reforming urban planning rules to streamline the housing construction process, reduce bureaucracy, and decrease construction costs is another proposal being considered[3].
- Interest Rate and Financing Adjustments: While interest rates are determined by monetary policy, there is increasing focus on how financing conditions affect affordability. Measures like targeted government support or subsidies for first-time buyers or low-income households may be considered, although Germany has less housing subsidy spending than some neighboring countries[5].
- Implementing Stronger Rent Regulation: Tightening rent controls and providing more tenant protections are being debated or implemented in German cities, aiming to limit excessive rent increases and safeguard housing affordability[2].
- Countering Inflation and Income Effects: Broader economic policies aimed at containing inflation and improving real wage growth can indirectly impact housing affordability, helping more people qualify for housing and alleviating financial distress[4].
In summary, housing costs in Germany are high due to issues with the balance between supply and demand, changing buyer preferences, and regional variations. Proposed solutions focus on expanding the supply of housing, streamlining the construction process, refining financing conditions, and managing rental market stability to improve affordability[1][5][3].
- Apartment
- Germany
- Europe
- Statistics
- Federal Statistical Office
- BSW
- Sahra Wagenknecht
- The European community is considering policy changes to address Germany's elevated housing costs, as per data from Eurostat, with an average of 25 cents of every euro spent on housing.
- Vocational training programs could be employed to equip the workforce with the skills needed to construct more affordable housing, helping alleviate the housing cost burden in Germany, a country where over 24% of income is spent on housing expenses.
- Sahra Wagenknecht, the BSW chairwoman, emphasizes the need for a nationwide rent cap and a higher share of non-profit housing in the market, pointing to countries like France and Austria as examples of lower housing costs.
- In the coming years, personal-finance management becomes crucial for people in Germany as housing costs remain high; vocational training in finance may offer individuals the necessary tools to navigate the challenges of the housing market.