Renting vs Buying — The Real Math for Median Earners

Renting vs Buying — The Real Math for Median Earners

A €350,000 flat costs €35,245 before the first mortgage payment leaves your account. Property transfer tax, the notary, the land registry and the agent's half are paid in cash at closing, they buy no square metres of anything, and they are the reason the American rule about breaking even after five years does not survive the trip to Germany.

So there are two tests, not one. The first asks whether you can put €105,245 on the table without wrecking everything else. The second asks whether you will still be in the same city by the time the transaction costs have been absorbed. Buying fails the first test for most median earners and fails the second for anyone who moves. Renting fails neither, and builds no equity while it waits.

The first 10% buys nothing

On top of the €35,245 you need €70,000 to reach the 20% down payment that keeps a mortgage cheap. That is €105,245 in cash before you own anything. At a median household income of roughly €3,000 net a month, saving that while paying €1,100 in rent takes most of a decade, which is exactly the period in which people move, change jobs and have children.

There is a second cost waiting at the other end. Selling through an agent costs roughly another 3.57% of the price, so a buy-and-sell round trip runs to about 13.6% of the purchase price. On this flat, €47,740. That is what you have lost on the day you sign, measured against an identical household that kept the cash.

What ownership costs every month

The mortgage is the visible part. The Annuität on a €280,000 loan at 3.6% with 2% initial repayment is €15,680 a year, or €1,307 a month, and it stays there for the fixed-rate period. The invisible part is the Hausgeld, around €300 a month for an apartment, which covers the building's running costs and the maintenance reserve whether or not anything is broken.

Both totals include utilities and building costs, so the €507 difference is like for like. That gap is not a rounding error; it is the entire rent-versus-buy argument compressed into one number, because it is the amount the renter can invest instead.

For a house rather than a flat, replace the Hausgeld with a reserve of 1% to 1.5% of the property value per year. It arrives in lumps: a new heating system, a roof, a bathroom. Owners who treat the maintenance reserve as optional are simply deferring a bill at interest.

Ten years of that Annuität come to €156,800. Of that, €90,800 is interest and €66,000 reduces the loan, leaving €214,000 outstanding. Paying a mortgage is not the same as building equity, and in the first decade the difference is the larger half of the payment.