Our figure of the month 05/2019: Living in Bavaria becomes more expensive


In Germany, average earners have to spend a constantly rising share of their income on the dream of a detached house as a family home. Although the positive situation on the German labour market is leading to a steady rise in wages, the purchase price trend for single-family homes has been more dynamic than the wage trend in Germany for the last seven years. As a result, an average earner has to spend 8.9 times his annual gross salary on an existing average single-family home (125 m², built 1949 or more recent, medium residential location and regular equipment). The year before, the price-income-ratio was still 3.4% lower. The above-average price development can be explained by low interest rates, low alternative investments and a lack of suitable living space including building sites. The resulting demand pressure is further increasing by the capacity bottlenecks in the construction industry.


comparison of allfederal states shows a strong variance in the price-income-ratio (PIR) over Germany (see fig. 1): Bavaria has the highest PIR with spendings amounting to 17.3 times the average yearly income for the purchase of a single-family home, followed by Baden-Wuerttemberg with a ratio of 14.0 and Hesse, where 11.7 times the average wage have to be spent on buying a single-family home with the quality criteria mentioned. Thuringia has the highest affordability with a PIR of only 6.0, followed by Saxony-Anhalt (6.6) and the city state Bremen (6.7). Compared with the previous year, affordability has not improved in any single federal state. This means that purchase prices have developed stronger than wages all over Germany.

It is striking that, when looking at the different development in the federal states, the gap between the development of house prices and income in Bavaria as the most expensive and Thuringia as the most affordable federal state is constantly increasing. Figure 2, which indicates the difference between the state-specific PIR and the federal average (red-dashed zero line), reveals how the development in these selected federal states have continuously diverged since 2006.

Besides, population in Thuringia increases, which is accompanied by an increased demand for living space. The transaction volume, which, however, also includes commercial purchases in addition to residential property purchases, has recently even risen by 38% in Thuringia! In Bavaria, the increase in transactions over the same period was only below average at +7% (federal government: +7.1%).


More favourable conditions on the labour market in Bavaria as well as the high quality of life attributed to the geographical proximity to the Alps and Italy substantially exceed the capacities of the Bavarian housing market. Thus, housing demand rises in the long term. As long as the population pressure towards Bavarian cities and the low interest rate situation persist, a further drift away from the national average is to be expected.

Other figures can be found here.

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