Caught in the rent

Real estate in Germany increasingly belongs to the elderly. The proportion of young people among the owners has halved in the past 20 years. The additional purchase costs are a problem.

Apartments in Frankfurt

SFor years, Germany has been one of the worst performers in Europe when it comes to the proportion of property owners. Only around half of the people in this country own an apartment or a house, only fewer in Switzerland.

But there is little to suggest that this is changing so quickly, on the contrary. In 2000, 31 percent of all households that owned a property were aged up to 45 years. In 2019, this age group made up only 15 percent of the owners.

Dissuasive purchase prices

The proportion of households with residents over 65 years of age has meanwhile increased from 27 to 40 percent. According to the study carried out by the Institute of German Economy in Cologne (IW) on behalf of the FDP-affiliated Friedrich Naumann Foundation, they typically bought their home in the 1980s and 1990s. And further: “The progress that has been made in home ownership since reunification runs the risk of being gambled away if younger households are not able to buy more homes again.”

Demographic change explains the declining proportion of younger owners only to a small extent, says real estate specialist Michael Voigtländer from IW Cologne. “The high purchase prices are off-putting,” says real estate specialist Michael Voigtländer from IW Cologne. On the other hand, because of the still low interest rates on real estate loans, interested parties could also afford more.

From his point of view, the crux lies in the ancillary purchase costs. Buyers must have saved these at least as equity. The largest item is the real estate transfer tax, which many federal states have recently increased significantly. Together with the costs for brokers, notaries and land registry, the actual price of the property would add up to 11.75 percent additional costs.

Most banks also require that a certain proportion of the purchase price is covered by equity. With an average property price of 300,000 euros, buyers would therefore have to have at least 60,000 euros. “However, this only applies to around 15 percent of tenants,” states the study.

In order to increase the share of younger property owners in particular, the institute recommends taking a look at Great Britain. There is an exemption for the real estate transfer tax. In addition, the following applies: the higher the purchase price, the higher the tax rate. This would particularly relieve those households that buy cheap apartments. “As before, a flat rate could be applied to rented apartments.”

In addition, the economists advise politicians to give real estate buyers more support in their financing. “Credit insurance, as established in France, Belgium and especially the Netherlands, is particularly recommended.” This insurance continues to pay the monthly installments for a certain period of time, for example in the event of unemployment or divorce.

However, such proposals rarely appear in the parties’ previously known programs for the Bundestag election. Rather, the Greens want to pass the demand at their party congress at the weekend that individual federal states may set upper rent limits, as Berlin has tried in vain with its rent cap.