Owning your home is generally considered a sensible contribution to your personal pension scheme, and a particularly effective protection against old-age poverty. A recent survey conducted by the Pestel Institute just confirmed that this is indeed the case. According to the survey, old-age poverty is tenant poverty more than anything else. The survey concludes that homeownership should therefore be more actively sponsored (source: ww.handelsblatt.com).
The survey illustrates its point by introducing a comparison of the respective housing cost burdens. For nearly two out of three tenant households that include residents 65 years and older, the housing costs consume more than 30 percent of the income, according to the survey. And the share has gone up noticeably in recent years: In 1996, only 38 percent of the elderly tenant households had reported housing cost burdens higher than 30 percent. Among homeowners, the share of households who spend upward of 30 percent of their income on housing is barely ten percent (source: www.immobilien-zeitung.de).
On top of that, the Pestel survey revealed that living is more affordable for homeowners in the long run than for tenants. It points out that ownership will protect you from rental growth – while tenants can expect, and have to cope with, rent hikes all the time, the capital cost burden for homeowners remains the same or indeed declines over time when you take inflation into account (source: www.bak.de).
According to the Pestel Institute, a total of 7.2 million tenant households in Germany principally have the potential to opt for homeownership. But the rate of homeownership in Germany is barely going up. Among those aged 25 to 40, it has actually been in fast decline since 2002.
The situation is extremely unfortunate insofar as this represents precisely the age period that is decisive for wealth-building. If you acquire a condominium during this stage in your life, you will have ample time and not be under too much pressure to repay a mortgage loan before you reach the age of retirement. Another aspect to consider is that there are more than four million tenant households in Germany who could potentially go for homeownership.
The survey derives several political demands from its diagnosis that seek to promote the acquisition of residential property by private individuals. One of them is the demand for a government surety bond for condominium buyers, which happens to be one of the initiatives originally written into the coalition agreement of the Federal Government. Such a surety bond would take the place of the equity capital paid down, and would thereby lower one of the main hurdles standing in the way of a condominium acquisition. In addition, the Pestel Institute proposed the creation of special loan schemes, such as for buyers of flats of 60 to 70 square metres, that include long fixed-interest periods and an interest rate of 1.5 percent.