Construction costs are currently skyrocketing

On German construction sites, prices have risen as quickly as they have not for more than 50 years. According to the Federal Statistical Office, prices for construction services including VAT were 17.6 percent higher in May than a year earlier. This was the highest increase since May 1970, when they had risen by 18.9 percent over the year, the agency reported on Friday. In the previous reporting month of February 2022, the increase was 14.3 percent.

Reasons are scarce and expensive materials as well as high demand. The price increase was particularly strong in metal construction work (+23.6 percent) and concrete work (+23 percent).
...the increase in construction prices is a result of exploding building material prices, on which companies either are left holding the bag, or face an increased risk that investors will shy away from new projects,“ said CEO Tim Oliver Müller.

We just had that last week, from #5718 ;)

But today there is a study from FMH in the media:
Over the years, real estate prices in Germany have outpaced incomes, the study authors report. Since 2016, real estate prices have risen by 61.7 percent, while the average disposable income has only increased by 13.7 percent.

And now comes the interesting part:
Over the years, the proportion of equity that homebuyers bring in has risen faster than property prices. In financing inquiries, equity was still on average around 90,000 euros in 2016, and just under 190,000 euros in the first half of this year. The equity ratio increased from 26 to 34 percent during this period.

Sounds paradoxical at first, but on second glance actually quite logical. The installment is limited by income, so to keep the loan from becoming too large, more equity is required.

Sounds paradox at first, but on second thought actually quite logical. The rate is limited by the income, so in order for the loan not to be too large, more equity capital is needed.

Firstly that, but also due to the very strong stock markets of recent years, many buyers had the opportunity to increase their equity capital more quickly.

I think most of it will be inherited...

I also think that most of it does not come from the stock market. Germany is not a stock market country and even among the younger ones, many only entered in 2020 shortly before the supposed peak of this cycle ;)

From DIE WELT:

"The solid financings currently being observed could be afforded by fewer and fewer people in Germany. 'New construction or purchase of real estate is increasingly becoming an exclusive market where only the wealthiest tenth of the population gathers.'

There is much to suggest that the average person interested in construction financing today is completely different than five years ago. According to his calculations, those interested in construction financing today already have an average net household income of over 5000 euros per month. Potential homebuyers thus represent the top 15 percent of the population."