Cost of living – A study of 400 German districts

A new study by the German Economic Institute and the Federal Institute for Research on Building, Urban Affairs and Spatial Development has quantified the cost of living in all 400 districts and cities in Germany for the first time. Big data was used in the process. You can read everything you need to know here.

Collecting data on the cost of living in all German districts and cities was previously too time-consuming. However, the German Economic Institute (IW) and the Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR) have now succeeded in quantifying the cost of living more precisely for the first time. Big data was used for this. The institutes have been working for over three years to close the research gap with the help of automated data collection. A new price index has now been created and published as part of the study. It compares housing and living costs such as rent, electricity, gas and food for all German districts and independent cities.

The results of the study are exciting: they make it possible to see exactly how much it costs to live in Munich, for example, or in the Salzland district in Saxony-Anhalt. It quickly becomes clear that the cost of living in the countryside is cheaper than in the city – as expected. The national average for costs can be found in Braunschweig and in the district of Neumarkt in the Bavarian Upper Palatinate, which represent the index value of 100.

The most expensive place to live is Munich with an index value of 125, followed by the district of Munich (117), Frankfurt am Main (116) and Stuttgart (115). In contrast, life is particularly cheap in the Vogtland district of Saxony (index value 90), Greiz in Thuringia (90.5) and Görlitz (90.6). Pirmasens in Rhineland-Palatinate is the cheapest region in the west with a value of 90.7.

According to the study, the most important difference in the cost of living is housing costs. Without these, the index values would only range from 98 to 104, i.e. show very little variance. The favorable Vogtlandkreis clearly shows this. Here, housing is around 32 percent cheaper than the national average. Other costs are only 0.3 percent lower. In Munich, on the other hand, housing costs are almost 81 percent higher than the national average, which also has an impact on the surrounding districts.

Hamburg, Freiburg and Heidelberg are also among the most expensive cities. Berlin, on the other hand, is surprisingly affordable. According to the study, prices in the capital are only 5.5 percent above average. This puts Berlin in 38th place in the ranking of the most expensive districts.

The large price difference between cities and rural districts is remarkable. In eastern Germany in particular, it is possible to live very cheaply far away from the big cities. Nevertheless, the cost advantage of eastern Germany over western Germany is not too great at 4.3 percentage points. This is also due to the fact that even in the cheapest districts, the cost of living is only just under 10 percent below the national average.

Overall, the cost of living is below average in two out of three districts and independent cities. This affects slightly more than half of the population.

One result of the study is that purchasing power and prosperity are relative, as they are determined not only by income, but also by the regional cost of living. The highest disposable income can be found in Starnberg, where the cost of living is high but incomes are also above average. According to the study, the lowest purchasing power per capita can be found in Gelsenkirchen. It is 22.5 percent below the national average, which is only slightly offset by the cost of living, which is 5.1 percent below average.

The aim of the study is to ensure that life remains affordable everywhere in Germany. According to IW study author Christoph Schröder, it is helpful if the state covers housing costs for those in need. According to him, housing benefit is also important in order to take regional cost differences into account. The study on the cost of living also shows where regional policy could do more. For example, the high cost of housing in large cities could be a reason to direct demand more towards the surrounding areas, for example through better infrastructure and simplified redensification and building land planning.

The study shows the average cost of living in 2022 compared to the national average for all 400 German districts. To do this, the researchers used big data to automatically collect price data from freely accessible websites. Portals such as Rewe.de and Verivox.de were used. The data was then weighted according to average consumption, using the Federal Statistical Office’s basket of goods as a guide. This resulted in a regional price index.

The so-called web scraping methodology makes the study special. The data is automatically extracted from the websites of large chain stores and comparison portals. This ensures good data quality and a high degree of up-to-dateness. At the same time, it makes it easier to update the data regularly. Until now, there has been no regularly published regional price index for Germany. The study therefore closes a research gap.

In order to calculate housing costs, the researchers collected all available asking rents and converted them to existing rents. A model was used to come as close as possible to reality. The Federal Ministry for Economic Affairs and Climate Protection funded the project from July 2020 to May 2022.

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