Capital investments

Homeownership Still Worth it Almost Anywhere


May 2019

In 94 percent of Germany’s cities and districts, homeowners pay lower housing costs than tenants. This is the gist of the new ACCENTRO Housing Cost Report 2019 that was compiled by the IW German Economic Institute in Cologne. According to the report findings, average owner-occupiers across Germany pay 40 percent less than tenants in comparable flats. The experts consider the persistently low level of interest rates the main reason behind it because it keeps mortgage financing affordable.

On the whole, the comparison of housing costs paints a heterogeneous picture, though. On the one hand, homeowners retain a significant cost advantage over tenants even in metropolises like Berlin (27 percent) or Munich (38 percent). On the other hand, there are economically undeveloped regions where tenants spend less on housing than owner-occupiers. These include Saarland in addition to wide swathes of the Ruhr.  

Rising Prices Barely Affect the Advantages of Homeownership Yet

For the first time, the IW research institute also conducted a long-term comparison for the Housing Cost Report. It used data provided by the Organisation for Economic Co-operation and Development (OECD) on the development of property prices since 1970. As it turned out, the mean rate of increase amounted to a mere 0.23 percent annually. However, the IW Economic Institute also determined recently on behalf of the Sparda banks that real estate became more expensive in 99 percent of all German municipalities over the past years (source:

Then again, the increase has had barely any influence on the cost comparison between renting and buying. For the time being, the status quo is here to stay, according to IW’s assessment, and this even in the event of an interest rate hike. In the case of Berlin, the neutral interest rate—meaning the limit where rents and prices are balanced in terms of the running cost burden—is 2.9 percent. In Hamburg (3.3 percent) and Munich (3.5 percent), the rates are actually far above the current standard rate of sometimes less than one percent (source:   

Majority of Households Fails to Take Advantage of the Favourable Conditions

At the same time, however, the experts noted that few people are in a position to take advantage of the favourable terms of financing. The number of first-time buyers, meaning persons who are buying their very first home, is in decline, for one thing. Moreover, the time they decide to move ahead comes later and later in life. But the survey also found that home buyers are getting wealthier. The IW institute takes this to means that, notwithstanding the sound parameters, many are unable to come up with the equity capital required.

The survey thus confirms the latest figures released by the Federal Statistical Office, which suggest that the number of property owners has failed to go up in Germany (source: For the experts, this permits but one conclusion. The steps taken by the German Government to ease the way to homeownership for first-time buyers are falling short of the mark. The survey advises Germany’s policymakers to step up their efforts – because the ACCENTRO Housing Cost Report projects that prices, rather than softening, will keep rising in the foreseeable future.

You can find the free download of the ACCENTRO Housing Cost Report at Home Ownership Report

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