Why can sellers of let properties no longer expect the prices of a few years ago?
Because the financing no longer supports them. The same base rent of €1,500 a month covers the loan payment on a purchase price of around €695,000 at the average interest rate of 2021, and on around €294,000 at today's interest rate for financing the full price. Anyone asking the price of that time today is asking the buyer to carry the difference between payment and rent themselves every month. This is calculated with 1.5% initial repayment and the whole purchase price as a loan.
Model calculation before tax, without purchase costs, running costs or equity. Not a valuation and not investment, tax or financing advice.
The two figures come from two different measurements. For 2021 it is the average of all loans taken out according to the Bundesbank (1.09%), because there is no comparable table by loan-to-value for that time; even in 2021, financing the full price was somewhat more expensive than this average. For today it is the rate on offer at a high loan-to-value according to Interhyp: 4.63% effective at over 90% loan-to-value and a ten-year fixed rate, offers from 28 September to 4 October 2026.
The calculation applies to let apartments and houses and takes the view of the person who buys and finances. For owner-occupiers the mechanism is related, but the calculation is a different one: there, income limits the payment. That is covered in the guide sale price and interest rates 2026. It works with 2% repayment and an owner-occupier's payment, which is why the amounts there differ from the ones here.
How does a buyer who finances do the sums?
They set two figures against each other: the monthly loan payment and the base rent (Kaltmiete, rent without service charges). The monthly payment is interest plus repayment, applied to the purchase price and divided by twelve. Two assumptions are built in: the whole purchase price is a loan, and “repayment” means the initial repayment rate. At a purchase price of €400,000, 3% interest and 1.5% repayment, that is 4.5% of €400,000, so €18,000 a year or €1,500 a month.
The price-to-rent multiple (Kaufpreisfaktor) sets the price against the rent: purchase price divided by one year's base rent. €400,000 at €18,000 annual base rent gives a multiple of 22.2.
Monthly payment
(interest + repayment) × purchase price / 12
This is what the bank receives every month.
Price-to-rent multiple
purchase price / annual base rent
This is how many years of base rent the purchase price costs. A multiple of 22.2 means a good 22 years of rent.
Multiple the rent carries
1 / (interest + repayment)
The result of the two lines before it.
Percentages go into the formulas as decimals: 3% is 0.03.
The third line follows from the first two. The multiple the rent carries is the price-to-rent multiple up to which the base rent covers the payment: 1 divided by interest plus repayment. At 3% interest and 1.5% repayment that is 1 / 0.045, so 22.2. If the multiple of an offer is higher, the rent does not cover the payment in this calculation.
Which multiple does the rent carry at which interest rate?
At 1% interest the rent carries 40 times the annual base rent, at 4% still 18.2 times, each with 1.5% repayment. In euros: €1,500 base rent a month covers the payment on a purchase price of €720,000 at 1% interest, and on €300,000 at 4.5%. The calculator starts with today's interest rate for financing the full price, 4.63%. Enter your own interest rate and repayment rate, and the point on the curve moves with you.
Calculator · model calculation
Up to which multiple does the base rent cover the loan payment?
Across: the interest rate. Up: the multiple the rent carries. The whole purchase price is treated as a loan.
At 4.63% interest and 1.5% repayment, the base rent covers the loan payment up to 16.3 times the annual rent.
In the example with €1,500 base rent a month, that is a purchase price of around €294,000.
The curve falls steeply at first and then flattens. At 1.5% repayment, the rent loses 11.4 points of multiple between 1 and 2% interest, and another 2.8 between 4 and 5%. One point of multiple stands for one year's base rent of purchase price.
| InterestInterest rate per year | MultipleMultiple the rent carries | PricePurchase price at €1,500 base rent |
|---|---|---|
| 4.63% (your input) | 16.3 | around €294,000 |
| 1.0% | 40.0 | €720,000 |
| 1.5% | 33.3 | €600,000 |
| 2.0% | 28.6 | around €514,000 |
| 2.5% | 25.0 | €450,000 |
| 3.0% | 22.2 | €400,000 |
| 3.5% | 20.0 | €360,000 |
| 4.0% | 18.2 | around €327,000 |
| 4.5% | 16.7 | €300,000 |
| 5.0% | 15.4 | around €277,000 |
| 6.0% | 13.3 | €240,000 |
| 7.0% | 11.8 | around €212,000 |
Purchase prices for €1,500 base rent a month, rounded to the nearest €1,000. Own calculation.
The steep start of the curve explains why the rise out of the interest rate low matters so much in this calculation: the first percentage points cost the most points of multiple.
How have interest rates developed since 2015?
Only the Bundesbank has a continuous series since 2015. For each month it reports the average interest rate on new housing loans, here for contracts with a fixed rate of over 5 and up to 10 years. It is a volume-weighted average of all loans taken out, including those with a lot of equity and the follow-on loans. Anyone financing the whole purchase price pays more: in August 2026 the Bundesbank average was 3.81%, while offers at over 90% loan-to-value were at 4.19 to 4.22% according to Interhyp.
From February 2015 to April 2022 the Bundesbank average was below 2%. 2020 and 2021 were the two years with the lowest interest rate in the whole series; the lowest monthly value is 1.02% in December 2020 and in March 2021. From March 2021 the rate rose in a good two and a half years to 3.92% in November 2023, fell back to 3.30% by January 2025 and stood at 3.81% in August 2026.
Interest rates · January 2015 to August 2026
The interest rate and what the rent carries on paper
Top: the average rate on new housing loans with a fixed rate of over 5 and up to 10 years. Bottom: the multiple the rent carries, calculated from it at 1.5% repayment.
| Year | RateAnnual average rate | MultipleMultiple the rent carries | PricePurchase price at €1,500 base rent |
|---|---|---|---|
| 2015 | 1.837% | 30.0 | €539,000 |
| 2016 | 1.596% | 32.3 | €581,000 |
| 2017 | 1.667% | 31.6 | €568,000 |
| 2018 | 1.718% | 31.1 | €559,000 |
| 2019 | 1.365% | 34.9 | €628,000 |
| 2020 | 1.092% | 38.6 | €695,000 |
| 2021 | 1.092% | 38.6 | €695,000 |
| 2022 | 2.409% | 25.6 | €460,000 |
| 2023 | 3.730% | 19.1 | €344,000 |
| 2024 | 3.528% | 19.9 | €358,000 |
| 2025 | 3.498% | 20.0 | €360,000 |
| 2026 (to August) | 3.693% | 19.3 | €347,000 |
| August 2026, provisional | 3.81% | 18.8 | €339,000 |
Annual average: simple mean of the monthly values, rounded to three decimal places. Multiple and purchase price are calculated from it for €1,500 base rent a month, purchase prices rounded to the nearest €1,000.
Source: Deutsche Bundesbank, MFI interest rate statistics, effective interest rates on housing loans to private households, new business, initial rate fixation of over 5 and up to 10 years, as at 1 October 2026, August 2026 provisional. Multiples and purchase prices: own calculation. View the time series at the Deutsche Bundesbank
Within the Bundesbank series, 2.72 percentage points of interest lie between the 2021 annual average and August 2026. For the example with €1,500 base rent, the rent therefore carries around €356,000 less purchase price on paper, around €339,000 instead of around €695,000. At today's interest rate for financing the full price it is around €294,000. The comparison is measured at the lowest point of the series. Against the years 2015 to 2018 the gap is smaller.
The Bundesbank and Interhyp report effective interest rates. For simplicity this page puts them into the calculation as the interest rate. With the slightly lower nominal rate, the purchase price carried would be around 1.6% higher.
What does a price from back then cost per month today?
In the worked example, around €1,259 more than the rent brings in. The example: an apartment with €1,500 base rent a month, offered at 30 times the annual base rent, so for €540,000. The multiple of 30 is an assumption for illustration, not a market figure.
Worked example · the same price, three interest rates
€540,000 purchase price, €1,500 base rent: payment against rent
| Interest | Payment a month | Base rent | Rent minus payment |
|---|---|---|---|
| 1.09% (2021, Bundesbank) | €1,166 | €1,500 | +€334 |
| 3.81% (August 2026, Bundesbank) | €2,390 | €1,500 | −€890 |
| 4.63% (today, Interhyp) | €2,759 | €1,500 | −€1,259 |
Worked example with 1.5% initial repayment and the whole purchase price as a loan, rounded to whole euros. Interest rates: Deutsche Bundesbank (see the interest rate history) and Interhyp (effective annual rate at over 90% loan-to-value and a ten-year fixed rate, offers from 28 September to 4 October 2026). Payments: own calculation. No statement on the value of any individual property.
At the average interest rate of 2021, the payment was around €334 below the rent. At today's interest rate for financing the full price it is around €1,259 above it, which is around €15,100 a year. Price, apartment and rent are the same. Only the interest rate has changed.
The middle row shows the Bundesbank average for August 2026. It is lower because it averages all loans taken out, including those with a lot of equity. In this example the rent only covers the payment again today at a purchase price of around €294,000, 16.3 times the annual base rent. Every additional tenth of a percentage point of interest widens the gap by €45 a month.
What does that mean per square metre?
The same calculation works per square metre. Every euro of base rent per square metre a month carries twelve times the multiple in purchase price per square metre: around €196 at today's interest rate for financing the full price, compared with around €463 at the average interest rate of 2021. Your own rent per square metre times the value from the table gives the purchase price per square metre that the rent carries. An example from Dresden: the average rent according to the Dresden rent index (Mietspiegel) 2025 is €7.33/m². On paper it carries around €3,394/m² at the interest rate of 2021 and around €1,435/m² today. That is the purchase price up to which the average rent covers the payment when the full price is financed, not a market value and not a price forecast. Actual purchase prices are higher; how they have developed is shown in the following sections.
| Interest | per € of rentPurchase price per euro of rent per m² | at €7.33/m²Purchase price per m² at €7.33/m² rent |
|---|---|---|
| 1.09% (2021, Bundesbank) | €463 | €3,394/m² |
| 3.81% (August 2026, Bundesbank) | €226 | €1,656/m² |
| 4.63% (today, Interhyp) | €196 | €1,435/m² |
Rent: City of Dresden, documentation of the Dresden rent index 2025, table 9 (arithmetic mean of the sample; the rent index is valid until 31 December 2026). Interest rates as in the worked example before. Purchase prices: own calculation with 1.5% initial repayment and the whole purchase price as a loan, rounded to whole euros.
Have purchase prices fallen as far as the curve?
What has actually happened to prices in Dresden and Leipzig?
Prices paid for condominiums gave way noticeably after the turn in interest rates, but far less than the calculation alone would suggest. The GREIX purchase price index evaluates notarised purchase contracts and allows two views. In euros, as stated in the purchase contract, prices in Dresden fell by around 14% from the peak in the 2nd quarter of 2022 to the low in the 1st quarter of 2024, and in Leipzig by around 9%. Adjusted for inflation, that is after deducting general price increases, the peak was already in the 1st quarter of 2022, and the fall to the low was around 21% in Dresden and around 17% in Leipzig.
Most recently Dresden was around 4% below the peak in euros, and around 15% adjusted for inflation. Leipzig is around 5% above the old peak again in euros, and still around 9% below it adjusted for inflation. The latest value is the 3rd quarter of 2025 for Dresden and the 2nd quarter of 2026 for Leipzig.
| Measure | Dresden | Leipzig |
|---|---|---|
| Prices paid in euros, as in the purchase contract (GREIX) | ||
| Peak (2nd quarter 2022) to low (1st quarter 2024) | around −14% | around −9% |
| Latest value against the peak | around −4% | around +5% |
| Prices paid, adjusted for inflation (GREIX) | ||
| Peak (1st quarter 2022) to low (1st quarter 2024) | around −21% | around −17% |
| Latest value against the peak | around −15% | around −9% |
Source: GREIX purchase price index, Kiel Institute for the World Economy and the expert committees for property values (Gutachterausschüsse), greix.de, data as at 6 August 2026, nominal series (in euros) and inflation-adjusted series; changes are own calculations.
What follows from this for sellers?
Anyone who asks the price of that time today is asking the buyer to carry this gap themselves every month. A buyer who does the sums will not pay that, or only at a discount. That is not down to the property and not down to negotiating: the financing does not support the price of that time.
I advise owners of let properties to know two figures before the first price discussion: the annual base rent and the multiple that the price they have in mind implies. Anyone who puts both next to the curve sees how a financing buyer reads the price. This calculation alone does not decide what an individual property is worth. Location, condition and tenancy agreement are part of it, and that is what the valuation is for.
What does the simple calculation leave out?
Four things, and each one shifts the result. I have deliberately kept them out here so that the effect of the interest rate alone becomes visible.
Purchase costs
Real estate transfer tax, notary and land register come on top of the purchase price and have to be paid for as well.
The owner's running costs
Management, maintenance and reserves come off the rent before the bank gets its payment.
Equity
Anyone putting in their own money needs a smaller loan, and the same rent then carries a higher purchase price.
Taxes
The calculation here is before tax, although rental income, interest and depreciation affect income tax.
Part 3 calculates with all four.
What comes next in part 2?
When the interest rate presses on the price, the rent remains as the lever. At 4.63% interest and 1.5% repayment, every additional euro of monthly base rent carries around €196 of purchase price on paper. That is an assumption for the calculation, because rent increases are limited by law.
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