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German home ownership house
The government is introducing ‘Baukindergeld’ to the tune of €1,200 per child per year for up to 10 years as an incentive for families to buy their own home, providing their joint income is less than €75,000. In addition, the government is offering an allowance of €15,000 per child.
There is still plenty of potential for much higher rates of home ownership in Germany – traditionally the country with the lowest rate in Europe, bar Switzerland – and it could well be headed to a rate of more than 50% from its current 43%, according to the LBS Landesbausparkasse, Germany’s largest building society.
The latest study by the LBS and market research group empirica shows that, theoretically, in ten of Germany’s 16 federal states three out of four households could afford to buy a dwelling, while in thirteen of the 16 states a rate of owner-occupiership of 50% or more would be possible.
In all the eastern states, as well as in Bremen, Lower-Saxony, Saarland, Rhineland-Palatinate and Schleswig-Holstein, the study concludes that three-quarters of households would be able to finance an average home. The least amount of people who could do this are in Berlin, but even there the amount who could become owners could at least double to 30%.
Empirica used data from the Federal Statistics Office relating to income and combined it with price data for second-hand single-family homes, coming to the conclusion that these rates of ownership could be reached in the respective federal states (Länder) if:
- Equity required was equal to a year’s income
- Financing costs were 6% per year (for interest and capital repayment)
- Repayments did not exceed 35% of net household income
The LBS study shows that the situation is different in the prosperous southern states of Bavaria and Baden-Württemberg, where prices are already high and there is less potential for the growth in home ownership. In Baden-Württemberg, for example, the rate is already 53% and therefore only 7% below its ‘potential’, whereas in Bavaria recent price rises may have actually pushed the ‘actual’ above the ‘potential’. Nonetheless, long term the overall rate nationally is headed upwards, concludes LBS, underpinned by new construction activity – up almost 46% compared to 2010 – and which was absorbed almost exclusively by new owner-occupiers.
