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The Property Market in Transition

Many people like to look back nostalgically at the housing market of 20 years ago, but was it really easier to buy a house then?

In 1990, interest rates were around nine percent - a period that is often romanticized - and property prices have almost doubled since 2010. For example, a 100 square metre apartment in Frankfurt cost around €300,000 in 2009, compared to over €600,000 today. Interest rates have risen, but are still lower than in the 1990s.

Although prices have risen significantly, according to the Institut der deutschen Wirtschaft (IW), which has compiled an affordability index using data from the Organisation for Economic Co-operation and Development (OECD), it is cheaper to buy a property now than in the 1980s because financing costs were higher relative to lower prices. In addition, the quality of housing has improved, with more living space, but construction costs have risen due to more expensive materials and stricter building regulations.

Young people are willing to sacrifice consumption for home ownership, but they are saving differently than before. They need more capital, often from family or heirs, and the ancillary purchase costs have also risen, depending on the purchase price.
Overall, there is a clear shift in the housing market, with both advantages and disadvantages.


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