A new analysis by the Cologne Institute for Economic Research (IW) and the Federal Institute for Building, Urban and Housing Research has revealed that Munich remains Germany’s most expensive city, exacerbating existing urban-rural economic disparities and raising critical questions about affordability and equitable growth. The study, reported by Spiegel, compares the cost of living – including rent, utilities and food – across all 400 districts and independent cities in Germany.
While seven major metropolitan areas – Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart – demonstrate an average cost of living approximately 11% above the national average, Munich stands out with a near 24% premium. The surrounding areas of the Bavarian capital also register high living costs, alongside cities like Freiburg (13.4% above average) and Heidelberg (10%). Conversely, Worms exhibits costs closest to the national average.
The primary driver of these price differences is housing. Rental costs in the seven major cities are, on average, nearly 50% higher than the national level. This data highlights a systemic issue: the failure of these metropolitan centers to adequately address housing supply to meet demand. As IW researcher Ralph Henger noted, “Municipalities must prioritize and actively encourage residential construction to make life in their cities more affordable.
The chasm between urban and rural Germany is vividly illustrated by the cost-of-living landscape. Regions in the Vogtland, Görlitz and other eastern areas, alongside rural districts in Lower Saxony like Lüchow-Dannenberg, Holzminden and Northeim, offer significantly lower price points – approximately 10% below the national average. However, the picture is nuanced. Industrial hubs like Wolfsburg, despite lower overall costs, also feature significantly high median incomes, placing it among the most financially attractive locations, suggesting income levels can offset affordability concerns for some residents.
While reduced population density naturally depresses rental costs in rural areas, the enduring issue remains a lack of affordable options within Germany’s most economically vibrant centres. Notably, the study concludes that the recent surge in inflation has had remarkably little impact on the established urban-rural price gradient, suggesting that inflationary pressures have affected all regions relatively equally. This raises concerns that the existing affordability crisis in expensive urban areas is being compounded by macroeconomic factors, potentially forcing out lower and middle-income residents and further exacerbating social segregation. The methodology relied on readily accessible online data sources, including those from the retail giant Rewe and the comparison platform Verivox, allowing for a comprehensive overview of regional cost variations.