Buy or rent: deciding on a home of your own

Three questions instead of one

Buy or rent is usually posed as a single question and then answered with a single number, the mortgage instalment against the cold rent. That regularly goes wrong. Behind the decision sit three separate questions, and each needs its own calculation:

1. Affordability. Can you carry the full owner's burden permanently: instalment, apartment fee, property tax, maintenance, plus a reserve for the unforeseen?
2. Wealth. Which route leads to more net wealth at the chosen end date: property minus remaining debt, or rent plus consistently invested capital?
3. Life planning. Does the object probably fit your life as long as the calculation needs it to? Job, family, health and mobility all weigh in here.

The first question is a precondition: an apartment you cannot permanently afford wins no wealth comparison, however good the yield looks. The second question is the decidable core calculation and the focus of this article. The third can flip the answer even when the numbers look good, because a forced sale after five years is the most expensive variant of all.

Germany remains a nation of renters

For context: Germany is the renters' country of the EU. Per Destatis/EU-SILC, 52.8 % of the population lived in rented homes in 2025, the highest share of all member states. The household-based ownership rate, 41.9 % as of 2022, also sits well below the EU level of roughly 68 % owner households. That is not fate but the result of supply, price levels and tenancy law. It also means the buy-versus-rent comparison is not a niche question here but the normal decision millions of households face every year.

The market is moving again, but not uniformly. The vdp price index reports +1.9 % for residential property in Q2 2026 year-on-year, condominiums +2.6 %. New contract rents rose faster at +3.2 %. The ImmoScout24 listing data show +4.1 % nationwide for purchase prices in Q3 2026, but quarterly declines in Berlin, Hamburg, Frankfurt, Munich and Stuttgart. A new price rally it is not, and the individual series contradict each other for methodological reasons. In the end your decision rests on the concrete object, not the index.

The price-to-rent factor: the first sort

The simplest screening number is the ratio of purchase price to annual net cold rent:

factor = purchase price / (monthly cold rent × 12)

At a factor of 20, the annual cold rent equals 5 % of the purchase price, at 25 it is 4 %, and the reciprocal is the gross rental yield. The common rule of thumb reads: under 20 cheap, 20 to 25 normal, above 25 expensive. DKB and Finanztip use this scale, and DKB explicitly counts the closing costs in the numerator. The factor is a first sort, not a decision: it knows neither interest nor maintenance nor your holding period.

Here is how the scale currently looks in the big cities. The basis is the ImmoScout24 WohnBarometer series for Q3 2026, purchase prices for existing condominiums against listing cold rents for existing apartments:

Nationwide, existing condominiums sit at €2,653/m² purchase price and €9.01/m² listing cold rent. The HWWI/Postbank Wohnatlas 2026 computes an average multiplier of 24.4 across Germany's regions and rates buying relatively cheaper than the previous year in 284 of 400 regions. The message of the table: in none of the eight largest cities does the factor fall below 20. As a blanket buy recommendation the rule of thumb is therefore of little use; it only sorts. And it compares standardised reference objects, not your concrete apartment against your concrete rental alternative.

Two traps with the factor: first, different data series must not be mixed. The Wohnatlas describes the data year 2025, the Baufi24 rental yield atlas the first half of 2026, municipal rent indexes capture existing contracts by their own methodology. Second, the factor measures the price level, not amortisation. An object at factor 25 in a strong location can make more economic sense than one at factor 18 with shrinking demand.

Why the instalment against the cold rent is not enough

The most common calculation error is the direct comparison of mortgage instalment and cold rent. It fails on three points:

• The instalment contains principal repayment. Repayment is not consumed money, it lowers the remaining debt. The interest portion alone is the true housing expense.
• The owner pays more than the instalment. Apartment fee, property tax, maintenance, insurance and administration come on top. Part of that the renter also pays via operating costs, but not all of it.
• The renter has capital free. The equity the buyer puts into the property, the renter can invest. These opportunity costs belong on the rent side of the ledger.

The clean assignment looks like this:

The double-counting error almost always hides in the apartment fee: it frequently includes an owners' association maintenance reserve. If you count the full fee and then the same reserve again as a separate maintenance item, the buy side is burdened twice. The owners' association budget shows the split. Conversely: non-recoverable administration and the reserve are true extra costs the renter does not have.

The clean calculation: net-wealth comparison

The standard procedure, also used by Finanztip and Stiftung Warentest, compares two households with identical setups: equivalent apartment, same starting wealth, same monthly housing budget. The buyer puts their capital into equity and closing costs, the renter invests the same capital. Every month the cheaper side invests the difference. At the end date:

buyer wealth = property value − remaining debt + savings − selling costs

renter wealth = invested capital + monthly differences

The wealth break-even is the first point in time at which the buyer is ahead and stays there. We ran this model through four scenarios with disclosed assumptions: 80 m², 20 % equity for the purchase price plus 10 % closing costs from own funds, 4.00 % nominal rate at 2 % initial principal repayment, apartment fee €425 (of which €100 association reserve), property tax €25, maintenance 1.5 % of the purchase price per year, rent growth 2.5 %, value growth 1.5 %, ETF return 6 %. The cold rents and square-metre prices for Munich and Frankfurt come from the WohnBarometer Q3 2026, cases A and B are stylised examples:

The result is sobering and important at once: under these assumptions, buying reaches the wealth break-even in none of the four cases within 40 years. After ten years, buyer wealth in case A sits at roughly €209,000 against roughly €385,000 for the renter. The reason is not that property is bad, but the combination of a high price-to-rent factor, high closing costs, the 1.5 % maintenance assumption and an ETF alternative computed at 6 %. Anyone who reads this as a blanket recommendation to rent overinterprets it just as much as anyone who derives a blanket buy from an ImmoScout24 headline.

Two notes on the honesty of the calculation: first, the 1.5 % maintenance on the full purchase price is deliberately conservative, because it also counts the land value, which needs no repairs. Second, the model assumes the renter actually invests the difference. Whoever consumes it loses the advantage, and the loan repayment becomes a forced savings plan that cannot be skipped.

What the renter does with the equity

The counter-position to buying is not nothing but an investment. The Verbraucherzentrale names roughly 7.5 % per year in euros since 1970 for the stocks in the MSCI World, and Finanztip computes its examples with 6 % as a rough orientation. Neither is a promise for the future: interim losses of up to 50 % are documented market experience, and there have been phases of ten to fifteen years without meaningful returns.

What that means concretely shows the compounding of the price equity from case A, without further deposits and before personal taxes:

The fair comparison is larger still: the renter can also invest the €40,000 of closing costs and starts with €120,000, plus the monthly differences. Conversely the same applies to the buyer after full repayment, who can then put their old budget into the ETF savings plan. The calculation rewards the same mechanism on both sides: consistent, long-term investing. The savings goal calculator shows how such a plan develops, the inflation calculator puts the nominal figures into real terms.

When buying wins and when it does not

The model calculation flips when the parameters shift. The most important levers from our sensitivity runs:

• Lower price-to-rent factor. An additional model case with a €120,000 purchase price at the same rent of €640 (factor 15.63) reaches the break-even in the base case after ten years, though with a lead of only about €70 after ten and about €33,800 after twenty years. The threshold is sensitive, not a purchase guarantee.
• Lower alternative return. If the renter computes with 2 % instead of 6 %, break-even years of 24 to 32 result in the four main cases. At 0 % investment return the break-even sits at 14 to 17 years. That is no advice to hold money at zero interest, but it shows the price of forgone returns.
• Higher rent growth. With rent growing at 3 % instead of 2.5 %, the gap narrows. In tight big-city markets that is not an abstract assumption.
• Rates and follow-up financing. The examples compute with 4.00 %. The Interhyp rate week of 5 to 11 Oct 2026 shows 4.22 to 4.62 % effective annual rate for ten-year fixes depending on loan-to-value, and Dr. Klein lists a top rate of 4.06 % nominal for 13 Oct 2026. Every percentage point on the follow-up rate after the fix shifts the calculation noticeably.

Regional studies paint the same picture. The Postbank Wohnatlas 2026 identifies 51 of 400 regions that combine a factor under 25 with forecast real price growth, such as the Wartburgkreis at a factor of 17.5. A sub-analysis of the same series finds cheaper credit burdens than net cold rent in 59 regions, mostly in eastern German districts. Both figures address different questions and are orientations, not object guarantees. Structurally weak regions offer cheap entry prices but also weaker resale and thinner job markets. The blanket formula cheap equals good does not work.

The running costs in detail

The affordability calculation comes before the yield comparison, and in practice it usually fails on underestimated ancillary costs. The main items:

Apartment fee. For condominiums, one property management firm names 3 to 5 €/m² per month as an orientation, so €240 to €400 on 80 m². It contains operating costs, administration and the owners' association maintenance reserve. Only administration and reserve are true extra costs versus renting; the renter pays the operating costs via their utility bill just the same.

Maintenance. The common rule of thumb of 1 to 2 % of the purchase price per year is a rough frame, not a measurement. The German II. BV sets adjusted allowances as of 1 Jan 2026 of €11.50/m²/year (building under 22 years) up to €18.62/m²/year (from 32 years) plus a lift surcharge, after an 8.37 % adjustment. The Verbraucherzentrale computes with around 2 % of the building substance per year, explicitly minus the land share. A building with a high land value does not need proportionally dearer repairs, a run-down old building needs more than any rule of thumb. Before buying: check component condition, renovation plan and existing reserve, not the average rate.

Property tax. After the reform, the municipality sets the multiplier, not the state. The spread between cities is wide: in the IW model household (single-family home, 126 m², built 1990), annual amounts in the 100 largest cities average €545, from €258 in Zwickau to €1,377 in Tübingen (data year 2025). Your municipality's multiplier and the concrete assessment decide, not the national average.

Operating costs and CO₂. The tenants' association reports average operating costs of €2.67/m²/month for the 2024 billing year. Under the CO₂ cost sharing rules the renter carries a tiered share between 5 and 100 % of the CO₂ costs depending on building type, with poorly insulated buildings relieving the renter at the landlord's expense. Owner-occupiers carry their CO₂ costs in full.

The housing cost calculator puts both sides fully side by side, the closing cost calculator computes transfer tax, notary and land register for your federal state, and the mortgage calculator shows instalment, repayment and remaining debt after the fixed period.

Law and taxes: the framework

A few legal facts shift the calculation systematically:

• Sale profit tax-free after ten years. Under § 23 EStG, a private sale profit is taxable if no more than ten years lie between purchase and sale. Exception: exclusively own residential use, alternatively owner-occupancy in the sale year and the two preceding calendar years. Three full years in a row are not required, the Federal Fiscal Court has ruled so. This deadline is a real reason why short holding periods are economically dangerous.
• Closing costs by federal state. The property transfer tax runs between 3.5 % (Bavaria) and 6.5 % (NRW, Brandenburg, Saarland, Schleswig-Holstein). On a €400,000 purchase price that is a €12,000 difference on its own. Notary and land register add around 1.5 %, plus a broker commission depending on the contract. In total, plan 7 to 12 % of the purchase price for closing costs; DKB names up to 15 % as an upper bound.
• Depreciation only for rentals. Owner-occupied housing allows no depreciation and no interest deduction; the tax privileges of the rental investment do not reach the owner-occupier.
• Leasehold as a special case. With a German leasehold (Erbbaurecht) you buy the building, not the land, and pay a ground rent, commonly 3 to 5 % of the land value per year. After the loan is repaid the rent keeps running; that is the central difference to full ownership.

What renting risks: the other side

The wealth comparison does not make renting the safe variant automatically. The tenancy-law counter-position:

• Rent increases. Under § 558 BGB the landlord may raise the rent up to the local comparative rent, by at most 20 % within three years, 15 % in tight markets. Over years this adds up noticeably, and new-let rents rise faster than existing-contract rents.
• Rent control with an expiry date. The state ordinances on the rent brake (Mietpreisbremse) must expire by 31 Dec 2029 at the latest. It caps only the initial rent on new lets and has exceptions, for instance after modernisation.
• Own use. Under § 573 BGB the landlord can terminate for personal need or for family members. The risk is real, though not every change of owner leads to a move. After a conversion to condominium ownership, blocking periods of three to ten years apply under § 577a.
• No design freedom. Pets, conversions, fittings, insulation: much of it depends on the landlord. That housing value is not measurable in money, but it is real.

Life expectancy belongs in the consideration too: Destatis names a further life expectancy at 65 of 21.2 years for women and 18.2 years for men for 2025. Whoever buys at 55 plans for a use phase that statistically spans 18 to 21 years, with all the uncertainties of health, care needs and mobility. A low-debt, barrier-free object fits that better than a large renovation project.

Life stages: the qualitative matrix

The number crunching does not answer everything. This matrix sorts the typical situations:

Finanztip names a planned use of ten to fifteen years as the key purchase check, as an orientation. That is no amortisation guarantee, but a realistic minimum horizon to spread the closing costs. If you cannot estimate your own holding period at ten years, you have already found the answer to the third question.

Common mistakes and myths

Rent is wasted money. The myth persists because the rent is gone at month's end while the instalment seemingly flows into ownership. In truth, buying also produces final expenses: interest, closing costs, administration, consumed maintenance, later selling costs. Only the repayment builds wealth. The fairer question is which household ends up with more wealth at equal housing quality and equal budget. The renter can win it by saving, and the buyer when the factor is low.

The ImmoScout24 headline. Publications along the lines of buying pays off in more than half of Germany compare mainly monthly instalments with projected rents. An overlap of these payment streams proves no amortisation of closing costs and forgone capital returns. In one of the analyses, the published Berlin table values also fail to match their own compounding logic, which we confirmed when re-checking. Read such studies as a first orientation, not as a purchase recommendation.

The 20 % equity trap. 20 % of the purchase price is not the same as 20 % of the total need. Whoever has only €80,000 liquid on a €400,000 price pays €40,000 of closing costs first and finances €360,000 instead of €320,000. That worsens the rate and the terms. The emergency fund calculation comes before the purchase calculation.

The reserve counted twice. Apartment fee plus a full maintenance rate overstates owner costs when the association reserve is already inside the fee. The association budget shows the split.

Emotion dressed as return. The personal housing value, the own garden, the design freedom, the school route, all of that may be a reason to buy. It is housing consumption, not an investment. Name both openly, and it does not flip the calculation unnoticed.

The process on one page

1. Answer the three questions: affordability, wealth horizon, life planning. If one fails, the rest is theory.
2. Define comparable objects: buy the same housing quality or rent it, do not compute the cheap existing tenancy against the dream semi-detached house.
3. Compute the factor: purchase price divided by annual cold rent. Under 20 is a good starting point, above 25 it gets tough.
4. Compute the closing costs: transfer tax, notary, land register, commission for your federal state, plus a reserve.
5. Clarify the equity: separately for price and closing costs, the emergency fund stays outside.
6. Run the financing: instalment, fixed period, remaining debt at the end of the fix, follow-up rate scenario.
7. Run the wealth comparison: both paths with equal starting wealth and equal budget, several scenarios for rates, rent and value growth.
8. Check the running costs: apartment fee with the association budget, maintenance by object condition, property tax from the assessment.
9. Check the legal frame: the § 23 EStG deadline, the tenancy law of the alternative, the contract with a leasehold.
10. Decide and document: which assumptions carry the decision, and where the calculation gets shaky.

The household budget calculator checks affordability in monthly terms, the rent affordability check the rent side, and the playbook house purchase & financing leads through the concrete financing planning after the direction is set. If you are just moving into your first own apartment, the playbook first apartment is the entry point, and the article house purchase & financing covers the purchase phase in detail.