Capital investments

Owner-Occupiers Live Far Cheaper than Tenants


May 2020

The cost advantage of inhabiting a condominium rather than a comparable rental flat equalled 48.5 percent in 2019 – this is the upshot of this year’s ACCENTRO Housing Cost Report. For the purpose of the Housing Cost Report, now already published in its fifth edition, the IW Economic Institute compares the housing costs paid by owner-occupiers with those paid by tenants. According to the survey, owner-occupiers pay less for housing in virtually every district in Germany. The gap between the costs of owner-occupiers and the costs of tenants actually widened further since the previous year.

Moreover, the cost advantages of owner-occupiers are limited not just to rural areas or regions with low purchase prices, but are in evidence even in rather high-priced cities across Germany. In the “Big Seven” cities, the cost advantage of owner-occupiers over tenants ranges from 35.1 percent (Berlin) to 59.5 percent (Cologne).  

Promoting Homeownership would Make Sense

The IW institute identified several reasons explaining why homeowners pay less for housing than tenants. As a result of the drop in mortgage interest, the anyway very low costs for homeownership have decreased even further. Although selling prices have continued to go up, the price growth is more than offset by the savings implied by the interest rate cuts. Tenants, of course, do not benefit from the interest rate advantage, so that the cost gap between owners and tenants has widened even further.

The survey therefore concludes that the government should continue to support people’s bid for homeownership. Since the required equity capital represents the main hurdle for most who seek homeownership, the IW institute proposes government-guaranteed subordinated loans and a reform of the real estate transfer tax, for instance. This would lower the threshold specifically for households with low- and middle-income.

No Overvaluations in Evidence on Market

Due to the great housing cost advantage of homeowners over tenants, the IW research institute concludes that Germany’s residential real estate market is not overvalued. Even the potential for setbacks created by the coronavirus crisis is limited, according to the survey, and the IW considers a massive erosion of prices by 20 percent or more (as predicted by the empirica research firm, for example) less than likely. Instead, the survey’s authors assume that condominium prices will more or less flatline this year, generally speaking.

One of the reasons for the stable housing market, according to IW, is the interest rate development, because interest rates are more likely to fall than to rise. To support its assessment, IW cites the measures taken by the ECB, among others, arguing that these cause interest rates both for short and long fixed-interest periods to soften, as the experiences with the financial crisis and the sovereign debt crisis have shown. Another argument would be the growing imbalance between savings and investments, which also has a softening effect on the level of interest rates. Finally, IW points to previous surveys, which revealed real interest rates tend to decline in the wake of pandemics. You can find the free download of the ACCENTRO Housing Cost Report at

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