What's the required income to purchase a property in Germany?
Buying a Home in Germany: A Comprehensive Guide
After a slight dip between 2022 and the end of 2024, home prices in Germany have begun to rise once again. The national average price for homes is around €4,161 per square metre, with some areas showing strong price growth potential.
Areas to watch include Leipzig's Plagwitz district, Hamburg's HafenCity, Bremen's Überseestadt, and Erfurt. These cities are attracting investors due to their promising real estate markets.
The Interhyp-IW affordability index suggests that home ownership affordability has improved in Germany, thanks to declining interest rates, income growth, and stagnating or falling real estate prices.
When considering buying a home, it's essential to factor in the required equity and additional fees. Lenders typically expect at least 10–20% equity, plus additional cash for fees, which amount to about 7–12% of the property price. These costs include land transfer tax, notary fees, land registry fees, and possibly real estate agent fees.
To maintain affordability, the ideal housing cost should not exceed about 28–35% of your monthly net income. The Cologne Institute for Economic Research defines buying as “affordable” if monthly housing financing costs remain within 35% of net income.
Mortgages can have varying Loan-to-Value (LTV) ratios up to 90–100% depending on your residency status and the property. Loan-to-Income (LTI) ratios may vary more for holders of the EU Blue Card or others.
For foreigners or self-employed persons, banks require proof of stable income such as payslips, tax returns, and residence permits; documentation influences approval and potential loan amount.
With a total monthly salary of €2,000, you can afford to pay back up to €630 monthly, which equates to a total loan of around €139,000. This figure takes into account the recommended limit of 40% of the net monthly salary or roughly 30% of the gross monthly salary for housing payments.
There is a loan-budget calculator available online that allows you to factor in kids and any additional equity or expenses you may have. With this tool, you can get a more accurate estimate of the mortgage you can afford.
It's important to note that the income required to buy a house in Germany generally depends on the purchase price and financing conditions. A common rule of thumb is that your yearly net income multiplied by 10 approximates the maximum mortgage amount you may get from lenders. For example, if your annual net income is €48,000, you could qualify for a mortgage up to about €480,000–€500,000, assuming you also cover the required equity and purchase-related fees.
With a net monthly salary of €3,000, you could feasibly be eligible for a loan up to around €270,000 in Germany. A couple with a combined net income of around €13,000 monthly could potentially finance a home worth one million euros. A couple with slightly-above average income earners could feasibly finance a €500,000 home with a gross income of €8,204 per month, or €4,100 per person per month.
Germany has the highest proportion of renters among EU nations, with 52.8% of residents living in rental accommodation. However, with the improving affordability of home ownership and the potential for strong returns on investment in certain areas, buying a home in Germany could be a worthwhile consideration for many.
[1] Source: Finanztest.de [2] Source: IW Köln [3] Source: Deutsche Wohnen AG [4] Source: Immobilien Scout 24 [5] Source: Deutsche Bank AG
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