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homes cost 5.4x what the average person earns in one year Wow, that sounds insanely cheap from a European perspecive. In Germany, which is the richest cou

homes cost 5.4x what the average person earns in one year Wow, that sounds insanely cheap from a European perspecive. In Germany, which is the richest country in Europe, the average working person earns €2000 (after taxes) per month, so €24000 per year. Times 5.4 that is €129600. You can only dream about buying a house for that price here. The price of a house is ten times that. Even if it is not in a big city. Am I missing something?

deleted 5y ago
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k8sToGo 5y ago
Richest country in Europe? GDP per Capita is much higher in Switzerland. In fact, it is almost double. But houses there are also very expensive. Basically unaffordable if you don't get help from either a second high income or money from parents etc.
- WildGreenLeave 5y ago
  Switzerland is in Europe, but not in the European Union or the European Economic Area, it is in the Schengen area. So it depends a bit on which list you are taking. Also, parent said it is the richest in EU which of total value (GDP) is correct, but by GDP per capita isn't. But, Switzerland isn't first on the list either if you take GDP per capita because that spot is taken by Luxemburg. (Which is 27th on the GDP list) But parents point still stand, on a median income it is really hard to find a proper place in Europe. Source: https://en.wikipedia.org/wiki/Financial_and_social_rankings_of_sovereign_states_in_Europe#Countries_by_GDP_(nominal) https://en.wikipedia.org/wiki/Financial_and_social_rankings_...
  - k8sToGo 5y ago
    Thanks for correcting and educating. Now I know :)
- izacus 5y ago
  And a house in Switzerland will cost you way north of 1mil CHF at average wage of 60k CHF (5 years of which is 300k CHF which doesn't buy you a shed in most cities). So his point kinda stands.
hectormalot 5y ago
I think it’s somewhat closer and you probably shouldn’t include taxes. Dutch median income (per-tax) is: 36’500 (2020) 5.4 times that is about 200k. Avery’s Dutch houses are now 400k (and growing 10%+ y/y). So there’s definitely a gap, but more like 2x than 10x. This still means the median person can’t afford to live in the city center one of the big cities, but rural areas can be relatively affordable.
medvezhenok 5y ago
It might be skewed a little bit since the average person probably lives in a city (or very close) and the average standalone house is probably not found in a city, so the comparisons are a bit misleading. If you look at the price of homes in cities, the multiplier is likely higher than 5.4x. Taking Cambridge, MA as an example (though it's certainly more expensive than average) - median house is ~1.4M in 2018 (probably higher now), and median _household_ income is ~75K USD per year - for Cambridge, giving a multiplier of something like 20x (household income, not counting taxes - not individual)
cheriot 5y ago
One difference is that in the US income is always stated in pre-tax numbers.
- dudul 5y ago
  In what countries is it not customary to do so? I lived in 4 counties, including 3 in Europe and when talking about income the custom was always to use pre tax income. A more meaningful difference is what individuals do not have to pay for in Germany.
  - dzhiurgis 5y ago
    In countries where your employer pays your tax, i.e. most of Europe.
  - DeathArrow 5y ago
    >In what countries is it not customary to do so? I lived in 4 counties, including 3 in Europe and when talking about income the custom was always to use pre tax income They realized they speak with an American so they tried to adjust. People are using after tax income in Europe because it's easier to assess the purchasing power.
    - dudul 5y ago
      I was not born an American. My first jobs were in Europe and salary negotiations were always done with gross income. Good job putting labels on people you know nothing about though.
  - CaptainMarvel 5y ago
    In the UK, employers pay National Insurance based on their employees salaries and this is not shown on the employees’ payslips. This is a tax on the income of workers which almost no one in the UK even realises exists. The “gross” salary number is post this tax.
- deleted 5y ago
  [deleted]
Ginden 5y ago
> In Germany, which is the richest country in Europe As of 2019, there were 8 Europan OECD countries with higher average wages. https://en.wikipedia.org/wiki/List_of_countries_by_average_wage https://en.wikipedia.org/wiki/List_of_countries_by_average_w...
- ChuckNorris89 5y ago
  Well, you're both right. Just because Germany is the richest country in the EU doesn't mean it's citizens are the richest. In fact average wages in Germany are very low when you account for stuff like housing prices.
- littlecranky67 5y ago
  The problem is that is hard to define/measure "richness" of a country. You can use monthly income or financial wealth as a metric, you have to decide between average and median etc. For example, in 2018, 45 single super-rich germans possessed the same amount of wealth as the poorest 50% of germans [0]. Using the median of distributed wealth would not express that, and if you cut off outliers by looking at percentiles and then averaging would also not express that. [0]: https://www.spiegel.de/wirtschaft/soziales/vermoegen-45-superreiche-besitzen-so-viel-wie-die-halbe-deutsche-bevoelkerung-a-1189111.html https://www.spiegel.de/wirtschaft/soziales/vermoegen-45-supe...
cheschire 5y ago
German houses are not, on average, 1.2 million euro. There are plenty that are, but it really depends on your area. If you are within an hour of Frankfurt then much of that was driven by the influx of companies that had been preparing for brexit. There are houses for cheaper, but they tend to be in less desirable locations. Same in America, there just happens to be way more “less desirable” places. Lots of land in the 90 minute commute radius. In my experience Germans tend to outright dismiss options that are less than ideal, always searching for the eierlegende Wollmilchsau.
- detaro 5y ago
  you are misreading the number by 10x.
  - cheschire 5y ago
    I don't think I'm misreading 129,600, times ten, is 1,296,000. Did I misunderstand which number they were asserting was 10x? I re-read the post, still looks like they're implying a 1.2 million euro price average for housing even outside of cities.
    - Nitrolo 5y ago
      I think they meant ten times the average income, i.e. 240.000€, which sounds about right to me, obviously going higher near big cities.
      - zefool 5y ago
        The average income in Germany is most certainly not in the 200Ks, and if that sounds about right to you, you need to seriously adjust your priors.
- ArtTimeInvestor 5y ago
  German houses are not, on average, 1.2 million euro. How do we check? I just went Immobilienscout and tried a random small city "Tübingen" which has a population of only 80k: https://www.immobilienscout24.de/Suche/de/baden-wuerttemberg/tuebingen-kreis/tuebingen/haus-kaufen https://www.immobilienscout24.de/Suche/de/baden-wuerttemberg... Looking at these prices, €1.2M seems like a good ballpark number.
DeathArrow 5y ago
You are exaggerating a bit. The awerage wage in Germany after tax is € 2439 [1] The average house price seems to be € 376 000 [2] That means 13 years worth of salary which is kind of much. As to why is this the case I see two reasons but I am sure there are more: Houses in Europe are built with better standards and built to last more. You can pass the house to your kids, no problem. It will be in very good shape and probably worth more than you've paid for it. The biggest issue is land. Europe is small and crowded and it becomes more crowded due to increasing migration. So the land is scarce. Also many EUsians like to live in the city, close to center if possible in contrast with USians which might be glad to live in suburbia. US has good roads uniting the suburbs with the city and the price of gas is small. US is a vast place so land is not exactly a problem. Another issue is socialist policies (even from the CDU) which means high taxation, resulting in lower incomes and less investments in developing real estate. [1] https://housinganywhere.com/Germany/average-salaries-in-germany-2021 https://housinganywhere.com/Germany/average-salaries-in-germ... [2] https://www.iamexpat.de/housing/real-estate-news/where-can-you-buy-house-germany-average-income https://www.iamexpat.de/housing/real-estate-news/where-can-y...
- _ph_ 5y ago
  The problem is, the average house price is a bit misguiding. The number might be correct over the total of Germany, but you won't be able to find a house at the average price near Munic for example. People with an average job in those regions have zero chance of buying a house. Land might be somewhat scarce, but that isn't the huge cost driving point. The problem is the process by which land is assigned for building - there is a lot of land which just cannot be used for building. New building areas are sometimes opened, but always trailing the demand, keeping the price up. Also, the density of new buildings could be higher. It is grotesqe that in an area with lacking housing new single homes get approved. Also, why are cities allowed to approve additional office buildings without ensuring that the housing capacity is extended for all those new office workers? Easy way to enforce that would be mixed use buildings, where you have a comparable work and living capacity.
zz865 5y ago
You're right that US isn't as bad as other countries. US though has higher property taxes, in most states 1-2% of the value of the house each year. This makes houses less affordable, and prevents crazy high prices.
flurben 5y ago
the reason your figures aren't comparable is because the U.S. figures being used : a. Are not incomes for just a single-wage earner, they include the combined income for a household (of 2.53 people on average) b. Are referred to in pre-tax figures, not post-tax. c. Are not just wage income, but include non-wage income like dividends, capital gains, small business income, fed/state/local government transfers, etc. d. Are using the median, not the average (mean).
- ketzu 5y ago
  Trying to get a bit closer: [1] says median household income is apparently 4.8k€/month, so around 58k€/year (before tax). Average housing prices seem to be between 250k and 400k (couldn't find a good source). That would be 4.3~6.9 ratio. (edit: Quality of this estimate is probably still low.) Personally, I believe (affordability of) average housing prices to be a very useless statistic, due to the extreme regional and local variation in housing prices (and incomes). But maybe I am wrong about that and it is a good indicator. [1] https://de.statista.com/statistik/daten/studie/261850/umfrage/brutto-und-nettoeinkommen-je-privatem-haushalt-in-deutschland/ https://de.statista.com/statistik/daten/studie/261850/umfrag...
IkmoIkmo 5y ago
> Am I missing something? Yes, a few things. For one, Germany isn't the richest in Europe. But that's besides the point. Typically price to income measures not prices per person, but per household. After all, the average house isn't lived in by one person. particularly homes that are bought (average buyer is a family, or an investor renting to multiple people), leading to an income that's the sum of typically at least two adults. Second, these figures are virtually always pre-tax. Third, these figures often reference to price to income of buyers, depending on the study. The average income in the Netherlands for example is about 37k leading, 5.4x would for example get you to 200k. But the average income includes unemployed, students, retirees, disabled etc. The average salary of working individuals (i.e. the home-buying population) is substantially higher, particularly if you filter out the population which is eligible for cheap subsidised social housing (about 1/3rd of all housing stock in the Netherlands). At that point you get to >50k salaries, with families of two earners often bringing in 100k and able to afford 540k homes at price to income levels of 5.4x. Fourth, interest rates in certain EU countries is substantially lower than in the US. I just bought a house at sub 1.5% rates (Netherlands), about half of what you see in the US. Denmark had negative rates, I believe. This pushes up the max mortgage / home price to higher figures than the US, at the same monthly fees (and thus same affordability). In that sense it's not any cheaper per se, once you figure in that the US has more expensive financing costs than some EU countries, including Germany. Fifth, the average buyer isn't a 25 year old fresh from college with a new job, but instead actually 45 years old. In fact, the average buyer isn't a first-time buyer, but has bought and sold a home before and has some equity, some savings, a retirement fund, perhaps a small inheritance from his parents, buying with a partner in the same situation. In other words, people are typically bringing in quite a bit of equity and are able to afford more than they can borrow.
seattle_spring 5y ago
In the US we always talk about salaries before tax, not after. If you want to compare affordability ratios, you'd want to use the same strategy for European incomes.

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k8sToGo 5y ago

Richest country in Europe? GDP per Capita is much higher in Switzerland. In fact, it is almost double. But houses there are also very expensive. Basically unaffordable if you don't get help from either a second high income or money from parents etc.

WildGreenLeave 5y ago
Switzerland is in Europe, but not in the European Union or the European Economic Area, it is in the Schengen area. So it depends a bit on which list you are taking. Also, parent said it is the richest in EU which of total value (GDP) is correct, but by GDP per capita isn't. But, Switzerland isn't first on the list either if you take GDP per capita because that spot is taken by Luxemburg. (Which is 27th on the GDP list) But parents point still stand, on a median income it is really hard to find a proper place in Europe. Source: https://en.wikipedia.org/wiki/Financial_and_social_rankings_of_sovereign_states_in_Europe#Countries_by_GDP_(nominal) https://en.wikipedia.org/wiki/Financial_and_social_rankings_...
- k8sToGo 5y ago
  Thanks for correcting and educating. Now I know :)
izacus 5y ago
And a house in Switzerland will cost you way north of 1mil CHF at average wage of 60k CHF (5 years of which is 300k CHF which doesn't buy you a shed in most cities). So his point kinda stands.

hectormalot 5y ago

I think it’s somewhat closer and you probably shouldn’t include taxes. Dutch median income (per-tax) is: 36’500 (2020) 5.4 times that is about 200k. Avery’s Dutch houses are now 400k (and growing 10%+ y/y). So there’s definitely a gap, but more like 2x than 10x. This still means the median person can’t afford to live in the city center one of the big cities, but rural areas can be relatively affordable.

medvezhenok 5y ago

It might be skewed a little bit since the average person probably lives in a city (or very close) and the average standalone house is probably not found in a city, so the comparisons are a bit misleading. If you look at the price of homes in cities, the multiplier is likely higher than 5.4x. Taking Cambridge, MA as an example (though it's certainly more expensive than average) - median house is ~1.4M in 2018 (probably higher now), and median _household_ income is ~75K USD per year - for Cambridge, giving a multiplier of something like 20x (household income, not counting taxes - not individual)

cheriot 5y ago

One difference is that in the US income is always stated in pre-tax numbers.

dudul 5y ago
In what countries is it not customary to do so? I lived in 4 counties, including 3 in Europe and when talking about income the custom was always to use pre tax income. A more meaningful difference is what individuals do not have to pay for in Germany.
- dzhiurgis 5y ago
  In countries where your employer pays your tax, i.e. most of Europe.
- DeathArrow 5y ago
  >In what countries is it not customary to do so? I lived in 4 counties, including 3 in Europe and when talking about income the custom was always to use pre tax income They realized they speak with an American so they tried to adjust. People are using after tax income in Europe because it's easier to assess the purchasing power.
  - dudul 5y ago
    I was not born an American. My first jobs were in Europe and salary negotiations were always done with gross income. Good job putting labels on people you know nothing about though.
- CaptainMarvel 5y ago
  In the UK, employers pay National Insurance based on their employees salaries and this is not shown on the employees’ payslips. This is a tax on the income of workers which almost no one in the UK even realises exists. The “gross” salary number is post this tax.
deleted 5y ago
[deleted]

Ginden 5y ago

> In Germany, which is the richest country in Europe As of 2019, there were 8 Europan OECD countries with higher average wages. https://en.wikipedia.org/wiki/List_of_countries_by_average_wage https://en.wikipedia.org/wiki/List_of_countries_by_average_w...

ChuckNorris89 5y ago
Well, you're both right. Just because Germany is the richest country in the EU doesn't mean it's citizens are the richest. In fact average wages in Germany are very low when you account for stuff like housing prices.
littlecranky67 5y ago
The problem is that is hard to define/measure "richness" of a country. You can use monthly income or financial wealth as a metric, you have to decide between average and median etc. For example, in 2018, 45 single super-rich germans possessed the same amount of wealth as the poorest 50% of germans [0]. Using the median of distributed wealth would not express that, and if you cut off outliers by looking at percentiles and then averaging would also not express that. [0]: https://www.spiegel.de/wirtschaft/soziales/vermoegen-45-superreiche-besitzen-so-viel-wie-die-halbe-deutsche-bevoelkerung-a-1189111.html https://www.spiegel.de/wirtschaft/soziales/vermoegen-45-supe...

cheschire 5y ago

German houses are not, on average, 1.2 million euro. There are plenty that are, but it really depends on your area. If you are within an hour of Frankfurt then much of that was driven by the influx of companies that had been preparing for brexit. There are houses for cheaper, but they tend to be in less desirable locations. Same in America, there just happens to be way more “less desirable” places. Lots of land in the 90 minute commute radius. In my experience Germans tend to outright dismiss options that are less than ideal, always searching for the eierlegende Wollmilchsau.

detaro 5y ago
you are misreading the number by 10x.
- cheschire 5y ago
  I don't think I'm misreading 129,600, times ten, is 1,296,000. Did I misunderstand which number they were asserting was 10x? I re-read the post, still looks like they're implying a 1.2 million euro price average for housing even outside of cities.
  - Nitrolo 5y ago
    I think they meant ten times the average income, i.e. 240.000€, which sounds about right to me, obviously going higher near big cities.
    - zefool 5y ago
      The average income in Germany is most certainly not in the 200Ks, and if that sounds about right to you, you need to seriously adjust your priors.
ArtTimeInvestor 5y ago
German houses are not, on average, 1.2 million euro. How do we check? I just went Immobilienscout and tried a random small city "Tübingen" which has a population of only 80k: https://www.immobilienscout24.de/Suche/de/baden-wuerttemberg/tuebingen-kreis/tuebingen/haus-kaufen https://www.immobilienscout24.de/Suche/de/baden-wuerttemberg... Looking at these prices, €1.2M seems like a good ballpark number.

DeathArrow 5y ago

You are exaggerating a bit. The awerage wage in Germany after tax is € 2439 [1] The average house price seems to be € 376 000 [2] That means 13 years worth of salary which is kind of much. As to why is this the case I see two reasons but I am sure there are more: Houses in Europe are built with better standards and built to last more. You can pass the house to your kids, no problem. It will be in very good shape and probably worth more than you've paid for it. The biggest issue is land. Europe is small and crowded and it becomes more crowded due to increasing migration. So the land is scarce. Also many EUsians like to live in the city, close to center if possible in contrast with USians which might be glad to live in suburbia. US has good roads uniting the suburbs with the city and the price of gas is small. US is a vast place so land is not exactly a problem. Another issue is socialist policies (even from the CDU) which means high taxation, resulting in lower incomes and less investments in developing real estate. [1] https://housinganywhere.com/Germany/average-salaries-in-germany-2021 https://housinganywhere.com/Germany/average-salaries-in-germ... [2] https://www.iamexpat.de/housing/real-estate-news/where-can-you-buy-house-germany-average-income https://www.iamexpat.de/housing/real-estate-news/where-can-y...

_ph_ 5y ago
The problem is, the average house price is a bit misguiding. The number might be correct over the total of Germany, but you won't be able to find a house at the average price near Munic for example. People with an average job in those regions have zero chance of buying a house. Land might be somewhat scarce, but that isn't the huge cost driving point. The problem is the process by which land is assigned for building - there is a lot of land which just cannot be used for building. New building areas are sometimes opened, but always trailing the demand, keeping the price up. Also, the density of new buildings could be higher. It is grotesqe that in an area with lacking housing new single homes get approved. Also, why are cities allowed to approve additional office buildings without ensuring that the housing capacity is extended for all those new office workers? Easy way to enforce that would be mixed use buildings, where you have a comparable work and living capacity.

zz865 5y ago

You're right that US isn't as bad as other countries. US though has higher property taxes, in most states 1-2% of the value of the house each year. This makes houses less affordable, and prevents crazy high prices.

flurben 5y ago

the reason your figures aren't comparable is because the U.S. figures being used : a. Are not incomes for just a single-wage earner, they include the combined income for a household (of 2.53 people on average) b. Are referred to in pre-tax figures, not post-tax. c. Are not just wage income, but include non-wage income like dividends, capital gains, small business income, fed/state/local government transfers, etc. d. Are using the median, not the average (mean).

ketzu 5y ago
Trying to get a bit closer: [1] says median household income is apparently 4.8k€/month, so around 58k€/year (before tax). Average housing prices seem to be between 250k and 400k (couldn't find a good source). That would be 4.3~6.9 ratio. (edit: Quality of this estimate is probably still low.) Personally, I believe (affordability of) average housing prices to be a very useless statistic, due to the extreme regional and local variation in housing prices (and incomes). But maybe I am wrong about that and it is a good indicator. [1] https://de.statista.com/statistik/daten/studie/261850/umfrage/brutto-und-nettoeinkommen-je-privatem-haushalt-in-deutschland/ https://de.statista.com/statistik/daten/studie/261850/umfrag...

IkmoIkmo 5y ago

> Am I missing something? Yes, a few things. For one, Germany isn't the richest in Europe. But that's besides the point. Typically price to income measures not prices per person, but per household. After all, the average house isn't lived in by one person. particularly homes that are bought (average buyer is a family, or an investor renting to multiple people), leading to an income that's the sum of typically at least two adults. Second, these figures are virtually always pre-tax. Third, these figures often reference to price to income of buyers, depending on the study. The average income in the Netherlands for example is about 37k leading, 5.4x would for example get you to 200k. But the average income includes unemployed, students, retirees, disabled etc. The average salary of working individuals (i.e. the home-buying population) is substantially higher, particularly if you filter out the population which is eligible for cheap subsidised social housing (about 1/3rd of all housing stock in the Netherlands). At that point you get to >50k salaries, with families of two earners often bringing in 100k and able to afford 540k homes at price to income levels of 5.4x. Fourth, interest rates in certain EU countries is substantially lower than in the US. I just bought a house at sub 1.5% rates (Netherlands), about half of what you see in the US. Denmark had negative rates, I believe. This pushes up the max mortgage / home price to higher figures than the US, at the same monthly fees (and thus same affordability). In that sense it's not any cheaper per se, once you figure in that the US has more expensive financing costs than some EU countries, including Germany. Fifth, the average buyer isn't a 25 year old fresh from college with a new job, but instead actually 45 years old. In fact, the average buyer isn't a first-time buyer, but has bought and sold a home before and has some equity, some savings, a retirement fund, perhaps a small inheritance from his parents, buying with a partner in the same situation. In other words, people are typically bringing in quite a bit of equity and are able to afford more than they can borrow.

seattle_spring 5y ago

In the US we always talk about salaries before tax, not after. If you want to compare affordability ratios, you'd want to use the same strategy for European incomes.