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> 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. |