In most regions of Germany, real estate purchase prices are rising continuously. Cities like Munich, Frankfurt and Stuttgart have already achieved above-average prices per square meter and prices continue to rise. In east German cities, however, real estate prices are much cheaper than in other metropolises. Yet few people there own home – significantly fewer than in the west.
Image: Buying real estate in East Germany has advantages and disadvantages. Image source: falco / pixabay.com
Reasons for the low ownership rate in the east
There are several reasons why a significantly lower proportion of the population in eastern Germany owns their own home than in western Germany. The situation is, among other things, historical.
Private asset accumulation was only possible to a limited extent in the GDR. Most of the apartments in multi-family houses were publicly owned or owned by cooperatives. In addition, the citizens were not allowed to convert rented apartments into condominiums.
Private housing, on the other hand, related to the GDR mainly on single-family houses and two-family houses. However, there were also strict requirements here.
Since property ownership was uncommon in the GDR, hardly any property was inherited. Most of the residents of the new federal states still live in tenancy.
In West Germany, on the other hand, many citizens were able to amass and save money in the wake of the economic miracle. They invested it in gold, stocks and, of course, in real estate.
Today, the income situation contributes partly to the fact that there are fewer real estate properties in eastern Germany than in the west. The income ratio between East and West shows serious differences. In the economically strong west, employees currently earn on average around 15 percent more than in the east. You therefore have more collateral and usually get cheaper loans from the banks.
Advantages of buying a house in East Germany
Nevertheless, there are several reasons that speak for buying a house in East Germany. These include:
• Significantly lower prices than in western Germany
• Wide range of properties
• Good investment as a pension
• No more rent payments
The main argument for buying a house in East Germany is the low price. A study by immowelt determined the purchase prices per square meter in the first half of 2020 in cities with more than 100,000 inhabitants. In the most expensive cities in eastern Germany, the square meter prices are as follows:
• Jena: 3,410 euros
• Rostock: 2,810 euros
• Dresden: 2,510 Euro
• Leipzig: 2,400 euros
The most expensive cities in West Germany have significantly higher property prices per square meter:
• Munich: 8,100 euros
• Frankfurt a. M.: 5.920 Euro
• Hamburg: 5,060 euros
• Stuttgart: 4,690 euros
Another advantage that speaks in favor of buying a house in East Germany is the good availability of the infrastructure: On average, the residents do not wait that long for a doctor’s appointment or daycare space, the city centers and shops are not as overcrowded, there are several and cheaper parking options parks and playgrounds are not so heavily frequented – ideal for families with children.
Disadvantages of buying a house in the east
Everything has its two sides, including buying real estate in East Germany. Real estate prices are much cheaper than in the west, but increases in value over the years cannot be taken for granted. Rural regions in particular are characterized by emigration and vacancies. Here prices will hardly rise in the near future either.
With young people moving to the big cities, many regions are outdated. In addition, the job supply and salaries in the east are not as good as in the west. As a result, there is a high probability that homebuyers will have to take long commutes.
Approach real estate buying sensibly
No matter whether in the east or in the west – buying a property should be well thought out. The first thing to do is to make a cash drop. The more equity is available, the cheaper the interest on the loan will be. Then you deduct the purchase price, the ancillary costs and the costs for renovation work from the equity – what remains is the amount that must be financed with a loan. It is important to compare offers from different credit institutions – the differences are sometimes enormous.
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