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Germany’s housing market stands out in Europe, not for soaring prices or luxury developments, but for its strikingly low home ownership rate. At just 41.8%, Germany has the second-lowest rate in Europe, ahead of only Switzerland, and far below the EU average of nearly 70%. This anomaly reflects a confluence of economic, cultural, and policy-driven factors that have long entrenched Germany as a nation of renters.
Dr. Wulff Aengevelt, managing partner of Aengevelt Immobilien, has recently warned that the home ownership rate is set to decline further, driven by eroding confidence in residential property as a stable investment. According to Aengevelt Research, this downward trend is most pronounced among younger generations. “The question of home ownership is usually a medium- to long-term decision-making process,” Aengevelt explains. “But rising land and construction costs, coupled with increasing regulatory burdens, now require a double-digit savings phase for many prospective buyers.”
Historically, the German rental culture is rooted in post-war housing policies that prioritised affordable, high-quality rental housing over ownership. Yet, Aengevelt’s analysis shows that confidence in property values has been shaken by sharp price declines—10-15% for condominiums and older properties since mid-2021—and forecasts of further reductions by up to 30%. Compounding this are rising energy efficiency mandates, which Aengevelt describes as “a campaign against home ownership,” devaluing older properties with high renovation costs and regulatory uncertainty.
Why is the home ownership rate in Germany so low?
Several barriers make home ownership less accessible in Germany. High transaction costs, such as land transfer taxes that can reach 6.5%, along with notary and agent fees, add significant expenses for buyers. Comparatively, countries like the Netherlands offer exemptions for first-time buyers or lower tax rates, easing the path to ownership. Regulatory burdens also play a role. Germany’s fragmented building laws and stringent municipal codes inflate construction costs, while a lack of designated building land further constrains supply. “The state subsidies for home ownership are often lower than in other EU countries,” explains Felix von Saucken of Colliers, highlighting Germany’s disadvantage.
Economic factors compound these challenges. Despite a decline in property prices, high financing costs and inflation have deterred many prospective buyers. Younger generations face particular hurdles, with saving for home ownership now a priority for just 33% of Germans, compared to 56% who prioritise retirement savings. Aengevelt attributes this shift to rising acquisition costs and a lack of trust in the market’s stability. “The disproportionate increase in costs has overburdened a growing share of the population, undermining faith in residential property as a retirement plan or inflation hedge,” he asserts.
Owning versus renting
Despite these barriers, some trends point to potential shifts. The IW Cologne’s Housing Cost Report shows that home ownership costs are becoming more competitive with rents in certain regions. In areas surrounding major cities like Berlin and Munich, owner-occupier cost advantages are increasing. Falling interest rates, coupled with rising rents, could attract more buyers in the coming years. However, as von Saucken warns, “We are a long way from ownership being cheaper than renting for most Germans. The additional purchase costs are simply too high.”
Experts agree that targeted policy interventions are needed to reverse the trend. Recommendations from Aengevelt Research include reducing land transfer taxes, introducing state-backed loans as equity substitutes, and increasing the supply of affordable building land. Without such measures, Germany’s rental culture will likely persist, exacerbating pressures on the rental market and further driving up rents.
Germany’s low home ownership rate is more than a statistical curiosity; it highlights the deep structural challenges in the housing market. Whether policymakers can address these issues and turn renters into owners will shape the future of Germany’s housing landscape.
