Envato, REFIRE
Germany’s position as a nation of renters has long been a distinctive feature of its housing market. Yet, a new study by the Pestel Institute, presented at the recent "Bau" International Trade Fair in Munich, paints an even grimmer picture: home ownership rates are falling further, exposing structural weaknesses that threaten both economic stability and social cohesion. While home ownership remains a central pillar of wealth building in most European countries, Germany’s approach appears increasingly inadequate in addressing the needs of its population.
According to the Pestel Institute, only 43.6% of residential units in Germany were owner-occupied in 2022, down from 44.9% in 2011. This decline marks a stark departure from the steady increases observed from the late 1960s until 2010. The regional disparities are striking: while rural districts in southern and southwestern Germany boast the highest ownership rates, major cities such as Berlin (15.8%) and Frankfurt (19.7%) anchor the lower end of the spectrum. Frankfurt’s stagnant ownership rate over the past decade contrasts sharply with a 10.3% rise in the city’s population, underscoring the scale of the challenge. Similarly, other cities in the Rhine-Main region, such as Wiesbaden (26.9%) and Offenbach (22.2%), exhibit higher ownership rates than Frankfurt but remain far below the national average. In contrast, rural districts like Südwestpfalz in Rhineland-Palatinate lead the country with significantly higher rates of ownership.
The east-west divide further complicates the picture. While ownership rates in western Germany fell across the board between 2011 and 2022, they rose modestly in eastern Germany. However, the eastern states still lag far behind, with an average ownership rate of just 33%, compared to 46% in the west. This disparity can be traced to historical factors, including the legacy of the former GDR’s focus on state-owned housing and the subsequent slow growth of private ownership.
Private ownership and long-term pensioner security
The implications of these figures are profound. “An ownership rate of 50% or more, as seen in countries like Austria and Sweden, would bring greater social stability,” said Matthias Günther, head of the Pestel Institute. “Home ownership is a vital tool for retirement planning, and rising rents are increasingly pushing older tenants into financial distress.” The connection between ownership and long-term security is particularly concerning as demographic trends point to a growing population of retirees dependent on fixed incomes.
Economic barriers to ownership remain formidable. High transaction costs, including land transfer taxes that reach up to 6.5%, deter prospective buyers. Unlike other European countries, where first-time buyers benefit from exemptions or reduced rates, German buyers must bear these costs entirely out of pocket. Financing challenges compound the issue: households with limited equity find it difficult to secure loans, and rising regulatory burdens inflate construction costs, further limiting supply. Dr. Wulff Aengevelt of Aengevelt Immobilien has highlighted how younger generations face a “double-digit savings phase” before even considering a purchase.
Cultural and historical factors also play a role. Germany’s post-war housing policies prioritised affordable rental housing, embedding a rental culture that persists today. However, as Günther points out, “This trend was reversed in the late 20th century with steady increases in ownership, until rising costs and regulatory overreach began to reverse the gains post-2010.”
The study’s findings reveal a critical generational divide. Among households led by individuals under 50, ownership rates fell by four percentage points between 2011 and 2022, to just 30.5%. In contrast, households headed by those over 50 saw a rise of 4.1 percentage points, reaching 57%. This demographic shift indicates that younger Germans are increasingly locked out of ownership opportunities, amplifying socio-economic disparities.
Solutions to encourage higher levels of ownership
Experts have proposed a range of solutions to halt the decline and encourage ownership. These include reforming land transfer taxes, introducing state-backed equity substitutes, and reducing costly municipal construction regulations. Direct subsidies, such as those targeting families or first-time buyers, could also play a significant role. “Compact homes, which offer smaller living spaces and plots, could be a practical solution for urban areas,” suggested Günther. “These would save space and provide a more affordable path to ownership.”
Market dynamics offer some glimmers of hope. Falling property prices in some regions have improved the cost competitiveness of ownership versus renting. The IW Cologne’s Housing Cost Report highlights that ownership costs are becoming more favourable in areas surrounding major cities like Berlin and Munich. Yet the additional transaction costs remain a decisive obstacle. “We are a long way from ownership being cheaper than renting for most Germans,” noted Felix von Saucken of brokers Colliers.
The falling ownership rate is more than a statistical anomaly; it reflects a deeper structural imbalance in Germany’s housing market. Without decisive intervention, the nation risks entrenching its status as a tenant country, with far-reaching consequences for social and economic stability. As the Pestel Institute warns, reversing this trend will require nothing less than a coordinated policy offensive and a rethinking of entrenched housing strategies.