Composite by REFIRE
Germany’s position at the bottom of the EU home-ownership table is hardly news. Pestel Institut research published this month puts the proportion of owner-occupier households at 43.5% in 2025, the lowest in two decades. The Federal Statistical Office supplied broadcaster WDR with a lower figure of 41.9%, reflecting differences in how ownership is measured, but neither number changes Germany’s exceptional dependence upon rented housing.
The Pestel study, commissioned by the corporate foundation of Bausparkasse Schwäbisch Hall, attributes the decline to higher construction and financing costs, inadequate public support and the abolition of Baukindergeld in 2021. Almost three-quarters of Germans aged between 25 and 45 now rent.
More revealing than the national ownership rate, however, is the barrier preventing many younger households from changing tenure. Germany does not have only a housing-affordability problem. It has a mortgage-entry problem: a substantial number of tenants could support the monthly repayments but cannot accumulate the capital needed to buy.
The 6% and the 39%
The 2026 LBS-Empirica Affordability Barometer found that just under 6% of younger tenant households possess sufficient equity to purchase a home, down from around 10% fifteen years ago. Yet 39% have enough net income to cover the resulting mortgage payments.
That does not mean income has ceased to be an obstacle: most younger tenants would still struggle with the monthly financing burden. But among those who could carry it, many are excluded by what they must produce before a bank will offer them a mortgage.
Research by the Kiel Institute, working with GREIX, shows how formidable that initial hurdle has become. Its model assumes that households save 20% of disposable income and earn a 1.7% return on those savings. On that basis, the median German household needed 9.37 years between 2015 and 2024 to accumulate the equity required for a purchase.
The regional range was enormous, from 3.79 years in Kyffhäuserkreis in Thuringia to 27.55 years in Starnberg outside Munich. Miesbach and the districts surrounding Munich also exceeded 20 years. These are modelled rather than observed saving periods, but they illustrate how differently the ownership market operates within Germany.
Much of the disparity reflects local property prices. Part of it, however, is created directly by policy. Land transfer tax (Grunderwerbsteuer) ranges from 3.5% in Bavaria to 6.5% in North Rhine-Westphalia, Schleswig-Holstein, Brandenburg and Saarland. Together with notary and land-registry charges, these ancillary costs account for a median 1.46 years of saving — more than 15% of the total period needed to assemble the equity.
In Berlin, saving for those costs alone takes an estimated 3.39 years. Once estate-agent fees are included where applicable, total purchase costs can reach 12%. On a €400,000 home, that means finding as much as €48,000 before accounting for the equity contribution towards the property itself. The money does not reduce the mortgage principal and, for an owner-occupier, does not create a corresponding asset.
Pestel proposes a federal home-ownership plan intended to help at least 200,000 additional households buy their first home each year. Even that would raise the ownership rate by only around 0.3 percentage points annually, underlining how slowly Germany’s tenure structure would respond.
IfW Kiel identifies transaction costs as a more immediate lever. Targeted relief for first-time owner-occupiers, particularly from land transfer tax, would reduce the amount of cash required at completion without waiting for property prices, construction costs or wages to move. The institute also suggests shifting part of the burden from the one-off transfer tax towards recurrent property taxation.
There is no free lunch. In a supply-constrained market, sellers may capture part of a tax reduction through higher prices. Research cited by IfW nevertheless suggests that a meaningful proportion of the relief can remain with purchasers. Federal reform would be required for targeted exemptions, while individual states retain control over their general tax rates.
Not every tenant is a frustrated homeowner
Pestel and IfW approach low ownership largely as a problem to be corrected. Evidence reported by REFIRE in April complicates that interpretation. Estate agency network RE/MAX found that 31% of Germans had no interest in buying a home, more than double the European average of 15%.
Respondents cited satisfaction with their current circumstances, reluctance to assume maintenance and long-term financial obligations, and the flexibility of renting. Germany has a mature and comparatively secure rental culture; it would be wrong to treat every tenant as an owner-occupier awaiting rescue.
Preferences are not necessarily formed independently of opportunity, however. A household expecting to spend a decade assembling a deposit may rationally decide that ownership is neither desirable nor realistic. The survey cannot tell us how much of Germany’s attachment to renting reflects genuine choice and how much represents adaptation to an inaccessible market.
Pestel director Matthias Günther makes the social case for ownership more starkly. “Old-age poverty is tenant poverty,” he says, pointing out that almost 90% of owner-occupier households aged 65 or over live debt-free, while tenants remain exposed to rising housing costs throughout retirement. More than 97% of recipients of basic income support in old age are reportedly tenant households.
Those figures show a powerful association, not simple causation. People who reach retirement as debt-free homeowners will generally have accumulated greater income and wealth during their working lives. Ownership both protects against housing costs and reflects advantages acquired earlier.
Nor does broader access inevitably imply widespread borrower distress. Failed property financing was identified as the main cause in 1.1% of over-indebtedness cases in 2024, down from 2.8% in 2015. That does not justify abandoning Germany’s prudent mortgage underwriting, but it weakens the suggestion that helping more households across the equity threshold must necessarily create large numbers of financially reckless homeowners.
REFIRE: Germany’s rental market is partly sustained by households wealthy enough to pay the rent but not wealthy enough to stop paying it. Many can carry a mortgage but cannot first absorb years of saving, substantial transaction costs and the equity demanded by lenders.
That provides durable demand for rented housing, but it is not an uncomplicated advantage for residential investors. The longer households remain excluded from ownership, the greater the political pressure over rents, transaction taxes, wealth inequality and housing costs in retirement.
Reducing land transfer tax on its own would not transform Germany into a nation of homeowners. It could, however, allow some mortgage-capable tenants to begin accumulating housing wealth of their own rather than continuing to finance somebody else’s.