Home ownership rates stagnate across Germany

Home ownership rates continue to stagnate across Germany, with just 45% of the population owning its own home, according to research published this month by the Cologne Institute for Economic Research.

However, that’s not to say that there aren’t sizeable regional differences. Baden-Württemberg leads the way, with 53.8% of people owning their own home in the state. Berlin shows the lowest level of home ownership at just 18.4%, which still represents an increase of 7.5% over the past decade. Still, Germany is far behind many of its European counterparts, such as Hungary (86.3%), Spain (77.8%), Italy (72.3%) and the UK (63.4%). Only Switzerland’s rate is lower, at 42.5%, according to Statista.

‘The main problem is that house prices are rising faster than wages,’ Björn Seipelt, a housing policy and property economist at the Cologne Institute for Economic Research, told REFIRE. ‘The government has said it will introduce ‘Baukindergeld’ but that isn’t going to help most families to buy their own home. For most people, the issue is not the ongoing costs of buying a home but the initial down payment, land transfer tax etc. and ‘Baukindergeld’ doesn’t address that.

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.

Predictably, income plays a large role. Around 68% of the richest quintile owns their own home, compared to just 21% of the poorest fifth of the population. Age also needs to be factored in: 59% of the over 65s are homeowners, compared to just 13% of the under 35s. While many people may assume that Germany’s high rate of immigration has dented the owner occupier market, that is not actually the case – the weak level of home ownership pre-date migrants who have entered Germany in the last three years.

The need to put down a deposit that equates to at least 30% of the value of the home is the biggest barrier to investment, particularly given that only 11% of renters have savings of €50,000 or more. In addition, the high land transfer tax is exacerbating the problem.

‘There has been a lot of debate as to what needs to be done to make it easier to get on the housing ladder,’ Seipelt added. ‘One problem is that the property/land transfer tax is expensive and varies a lot from state to state. For example, it is 3.5% in Bavaria but almost double that at 6.5% in Berlin. One idea is to lower it across the board or to make first time buyers exempt from paying it if the home is worth less than €250,000. That could really make a difference.’ (ssk)