A new price index study by the German Economic Institute (IW) has revealed which German cities and regions have the highest cost of living and where in the country one can live more frugally.

Munich locals paying 25,1 percent more to live

The newest price index from the IW, which looks at rental prices and consumer costs for food, clothes and services, has drawn up a list of the German cities and regions which are the most pricey to live in. Overall, the index looked at 400 regions across the federal republic.

Based on prices from 2022, Munich unsurprisingly came in as the most expensive German city in which to live. In the capital of Bavaria, the cost of rent and living is 25,1 percent higher than the German average. These costs are also spreading out into Munich’s surrounding rural areas: in Starnberg, Fürstenfeldbruck, Dachau and Landkreis Ebersberg, inhabitants are paying 16,7 percent more to live than the national average costs, making these areas the second most expensive region in which to live.

Third among the most expensive areas came Frankfurt, where locals are paying 15,7 percent more, then Stuttgart, with rental and living costs 14,8 percent over the national average. Hamburg came in last of the top five - in the port city living costs are 11,5 more expensive than in Germany overall.

Berliners are paying 5,5 percent more for rent and living costs

In the past few years, Berlin has become a lot more expensive over a very short period of time. But still, in comparison to Germany’s other major cities, where costs are well over the national average, Berliners are still only paying 5,5 percent over that average. When it comes to the cost of rent and utilities alone, however, Berliners pay 17,8 percent more.

In fact, of the five cities and regions that are below the national average, the vast majority are in eastern Germany. Locals living in Vogtland, Saxony, enjoy the cheapest cost of living in the country, 9,5 percent lower than the national average. This is followed by Greiz, Görlitz, Salzland and, the only western city among the cheapest, Pirmasens, where inhabitants’ living costs are somewhere between 9,5 and 9,3 percent below the national average.

All that said, those working in eastern German states are still paid less than their western counterparts, and over 30 years after reunification, this income inequality is growing, rather than lessening. 

According to 2022 figures from the Federal Statistical Office (Destatis) workers in the Neue Bundesländer (new states) earn an average of 13.000 euros a year less than those working in the western states. In the west, the annual gross salary of full-time employees was an average of 58.085 euros, compared to 45.070 euros in the new states. Statisticians believe that the main reason for the inequality is that workers in western German states are more likely to receive big bonuses at work.

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