The financial burden for property buyers in Germany has noticeably increased over the past year, according to an analysis by eXp Germany. The estimated monthly financing rate for an average property saw an increase of 16.5 percent. This development results from the interplay of rising property prices and higher financing costs, which leads to a noticeably higher monthly expenditure for prospective buyers acquiring residential property.
For this analysis, eXp Germany considered the average property price, the resulting financing requirement based on an assumed equity share of 15 percent, the average construction loan interest rate, and the resulting monthly loan instalment. These values were then compared with data from the corresponding period of the previous year to quantify the changes.
Development of Cost Factors
The study found that an average property in Germany currently costs 402,700 EUR. This represents a price increase of 14.2 percent compared to the previous year. With an assumed equity share of 15 percent, buyers must provide an average of 60,405 EUR themselves. This results in an average financing requirement of 342,295 EUR.
Given a current average financing interest rate of 3.77 percent, the estimated monthly loan instalment is 1,764 EUR. Year-on-year, the monthly burden has thus increased by 16.5 percent or 251 EUR per month. Converted to an annual basis, this means additional financing costs of over 3,000 EUR.
Implications for the Property Market
Mark Ritter, Managing Director of eXp Germany, stated that the financial burden for property buyers has undoubtedly increased over the past year. Buyers are currently confronted with two simultaneous developments: higher property prices and increased financing costs. However, this does not mean that demand will disappear. Rather, buyers are now making more conscious decisions and calculating more precisely.
Ritter further emphasised that those who commit to a significantly higher monthly financing rate in the long term pay greater attention to an appropriate price-performance ratio and are less willing to compromise on a property or accept an inflated price. Therefore, the fundamentals of a successful sale are more important than ever for sellers: realistic price positioning, high-quality property presentation, and professional marketing. Especially in a market with increased financing costs, these factors are crucial to reach serious and financeable buyers.
