Buying property as a young person – here's how it works

The dream of owning property isn't just for adults. Young people also long for an apartment in the city or a house with a garden, but they are often deterred by the financing. Nevertheless, the dream is achievable if you consider a few important aspects when building your wealth.

It's clear: cash gifts from relatives and painstakingly saved pocket money in a piggy bank aren't enough to buy a property. Young savers need one thing above all: patience. This pays off, as banks only offer favorable financing deals if you can contribute around 20 to 30 percent equity.

Fill the savings sock as early as possible

When should young people start saving for a property? The earlier, the better! Anyone planning to invest in a condominium in their mid-30s should start regularly setting aside money about ten years in advance. Let's assume you want to buy a 60-square-meter apartment in Berlin, which currently costs around €237,840 (as of summer 2024), plus about 10 percent for closing costs. To raise the recommended equity of at least 20 percent, you would need around €52,300. At a net interest rate of two percent, you would have to save about €445 per month to achieve this.

Not everyone can set aside this amount monthly. But even smaller contributions are beneficial in the long run. Those who benefit from an early inheritance or a gift are also fortunate. The increasingly popular ETF savings plans can also be used to build equity. An independent financial advisor can answer all your questions about this.

The good old building savings contract or the money market account?

Building society savings contracts offer virtually no interest during the savings phase. Therefore, they are not particularly suitable for building capital. Currently, fixed-term deposits or money market accounts are preferable. If sufficient equity is already available to purchase the property, a traditional mortgage loan should be used for the remaining amount. Don't hesitate to ask your financial advisor any questions you may have about this.

Buy in order to rent out?

Acquiring real estate as an investment, or purchasing property to rent out, can be worthwhile: increased rents also mean higher returns for the young investor. It is advisable to focus on easily rentable apartments in urban areas.

Conclusion: Plan well, think long-term

Buying a property as a young person requires careful planning and a long-term financial strategy. Saving, comparing loans, and a realistic assessment of one's financial situation are crucial. With a solid plan, expert advice from real estate agents and financial advisors, and a long-term perspective on one's own needs and the market, a property purchase can be successfully completed.

Are you looking to a property that fits your personal budget? Contact us! We'd be happy to advise you.

Notice

For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

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