© JSB - Fotolia.com
Eigentum, Eigenheim
The evidence that ever more Germans are making the leap to home ownership can be seen in the current rate of ownership – now at 46%, up from 43% as recently as 2008. and heading for 50%, according to Michael Voigtländer, professor at the prestigious Institut der Deutschen Wirtschaft (IW).
The question of whether to rent or to buy has become increasingly common in Germany over the past couple of years, as interest rates remain at rock-bottom levels and swathes of traditional renters are now calculating that it might make sense to buy. The evidence that ever more Germans are making the leap to home ownership can be seen in the current rate of ownership – now at 46%, up from 43% as recently as 2008. and heading for 50%, according to Michael Voigtländer, professor at the prestigious Institut der Deutschen Wirtschaft (IW) in Cologne, and occasional guest columnist in REFIRE.
However, home ownership won’t progress smoothly at an even rate across all regions in Germany, says Prof. Voigtländer. A new study produced by Voigtländer and his colleague Michael Schier at the IW has analysed all 402 administrative regions across Germany over the past five years to highlight in which towns and regions renting would have proved more attractive than buying. The researchers consider a number of factors including local rental and price trends, relevant property taxes, maintenance costs, write-off possibilities, and of course mortgage interest rates, which have fallen from 4.4% to 2.6% over the period – fixed for five or ten years.
In 2013 it was more profitable to own rather than rent in 27% of German towns and regions, in contrast to 2009 where this would only have been true in 7% of places, they say. They see little negative influence on the market from the pending Mietpreisbremse, or rental cap, due to be introduced later this year, and in fact attribute the comparative stability and flexibility of the residential market to the balanced mix between rental and home ownership in Germany, compared to countries with much higher owner-occupancy rates.
The comprehensive study concludes that there has been a proportionally greater mover to home ownership in eastern Germany, where the relative advantages of ownership are highest in Brandenburg, Saxony, Saxony-Anhalt and Thuringia. Home ownership beat renting in every single municipality in these states in 2013. This also applied to several regions of North Rhine-Westphalia, Lower Saxony, Rhineland-Paltinate and Saarland in the western part of the country.
The IW researchers advise that renting is more advantageous in Bavaria and much of Baden-Württemberg, as it is in most of Germany’s very biggest cities, where rapid price rises tilt the odds back in favour of renting. However, they conclude that in much of Germany the yield difference is less than 0.5%, making it very much a matter of personal circumstances as to which is better. On balance, buyers tend to favour family homes, while the trend is to move into the cities where renting is still marginally more favourable. This should act as a brake on Germany becoming suddenly a nation of committed homeowners, they conclude.
