Rent vs. Buy: The Honest Calculation

Buying property makes financial sense only when four conditions are met: price-to-annual-rent ratio under 20, 10+ years living horizon, 20-30% down payment, and reserve fund after purchase. In most German cities, the first condition fails — the price-to-rent ratio is 30-40 annual rent payments [1].

Psychological Dimension

The desire to buy an apartment after relocation is understandable: you want stability after a period of uncertainty. But in Germany, rental protection is legally stronger than in many countries of origin — evicting a tenant is extremely difficult [2]. The urgency feels acute, but the decision should be made considering the German context, not origin-country experience.

Kaufnebenkosten: Transaction Costs 7-15%

Kaufnebenkosten (additional costs when buying) are mandatory payments on top of the property price. They amount to 7-15% of the cost and are not recovered when selling [3].

Cost	Typical Amount	Note
Grunderwerbsteuer (transfer tax)	3.5-6.5%	Depends on federal state [4]
Notary	~1.5%	Legally required
Grundbuch (land registry)	~0.5%	Property registration
Maklerprovision (agent commission)	0-7.14%	Not always applicable [5]
Total transaction costs	7-15%	One-time at purchase
Annual maintenance	1-2% of value	Repairs, Hausgeld, taxes [6]

Example: When buying a €400,000 apartment in Berlin (Grunderwerbsteuer 6%), transaction costs will be €40,000-50,000. This amount disappears at the moment of purchase — if you sell at the same price, you're down by this amount.

Price-to-Rent Ratio: Key Indicator

The price-to-rent ratio shows how many annual rent payments the property costs. Formula: purchase price ÷ annual rent of comparable housing [7].

Ratio	Interpretation
Under 20 annual rents	Buying may make economic sense
20-25 annual rents	Gray zone, depends on mortgage rate
Over 25 annual rents	Renting often better from NPV perspective

Reality of German cities: In Munich, Berlin, Frankfurt, this ratio is 30-40 [8]. This means that when buying for €400,000, comparable rent would be €10,000-13,000 per year (€830-1,080/month). At this ratio, a renter investing the difference often accumulates more capital over 10-15 years.

Criteria for Buying: Four Mandatory Conditions

Buying makes economic sense only when all four conditions are met simultaneously:

Criterion	Threshold	Why Important
Living horizon	10+ years	Transaction costs only pay off with long ownership
Down payment	20-30% of cost	Avoid PMI, get better rate, reduce underwater mortgage risk
Debt-to-income ratio	Payment under 35% of net income	Financial stability if job loss occurs [9]
Reserve fund	6-12 months expenses remain after purchase	Cover unexpected repairs, Hausgeld

Phase appropriateness: Buying property is a Ladder phase decision (year 2+), not Boat. In Boat phase, the priority is capital resilience, not optimizing ownership vs renting.

German Context: Why Renting Works

In Germany, the homeownership rate is 51% — one of the lowest in Europe [10]. This is not a sign of poverty, but the result of a functioning tenant protection system:

• Kündigungsschutz (eviction protection) — owner cannot evict without valid reasons
• Mietpreisbremse (rent control) — growth under 10% over 3 years in most cities [11]
• Long-term contracts — renting for 10-20 years in one apartment is common

This is structurally different from many countries of origin, where tenants are defenseless against landlords.

Honest Calculation

Both paths — renting with investing the difference and buying — can create capital. The result depends on math (price-to-rent ratio, mortgage rate, price growth), not emotions. In German cities with high price-to-rent ratios, renters often accumulate more over 15 years.

Sources

1. Bundesbank (2024). "Wohnimmobilienpreise und Mieten in Deutschland". Monatsbericht Januar 2024. https://www.bundesbank.de/de/publikationen/berichte/monatsberichte

2. Bürgerliches Gesetzbuch (BGB), § 573 "Ordentliche Kündigung des Vermieters". https://www.gesetze-im-internet.de/bgb/__573.html

3. Immobilienverband Deutschland IVD (2024). "Kaufnebenkosten beim Immobilienerwerb". https://ivd.net/ratgeber/kaufnebenkosten

4. Bundesministerium der Finanzen (2024). "Grunderwerbsteuer nach Bundesländern". https://www.bundesfinanzministerium.de/

5. Gesetz über die Verteilung der Maklerkosten (2020). "Bestellerprinzip bei Wohnimmobilien". https://www.bmj.de/

6. Stiftung Warentest (2023). "Nebenkosten beim Eigenheim: Mit diesen Kosten müssen Sie rechnen". Finanztest 11/2023.

7. Deutsche Bundesbank (2023). "Preis-Miet-Verhältnisse in deutschen Städten". Monatsbericht Oktober 2023.

8. F+B Forschung und Beratung für Wohnen, Immobilien und Umwelt (2024). "Mietrendite deutscher Wohnimmobilien". https://www.f-und-b.de/

9. Verbraucherzentrale (2024). "Baufinanzierung: So viel Kredit können Sie sich leisten". https://www.verbraucherzentrale.de/wissen/geld-versicherungen/kredit-schulden-insolvenz/baufinanzierung

10. Eurostat (2023). "Distribution of population by tenure status". https://ec.europa.eu/eurostat/

11. Gesetz zur Dämpfung des Mietanstiegs (Mietpreisbremse), § 556d BGB. https://www.gesetze-im-internet.de/bgb/__556d.html