Home & Living

Declining Number of First-Time Buyers in Germany


July 2018

In 2016, nearly 600,000 households in Germany acquired residential property for the first time. This is the upshot of a recent survey published by the IW German Economy Institute in Cologne. It means that the number of tenants who opted for homeownership suffered a drop compared to previous years. As recently as 2013, the number of first-time buyers equalled 800,000 in Germany (source: iwkoeln.de).

The number of tenants who manage to make the transition to owner-occupancy is dwindling particularly in the cities. Just 1.2 percent of the urban households bought homes in 2016. The number still stood at 1.6 the previous year. Conversely, the first-time buyer ratio in the countryside has perked up from around 1.1 percent to 1.8 percent.

According to the IW Economic Institute, the high capital requirements are the main reason that keeps more and more tenants from becoming homeowners. Due to the high incidental acquisition costs, which break down into a steadily increasing real estate transfer tax, the estate agent fee and notarial fees, buyers in Germany need to bring more equity to the table than in other European countries. It is hardly surprising therefore that the share of owner-occupying households is the lowest anywhere in the European Union at just 45 percent.

Vast Majority of Germans Favours Homeownership

This explains why the researchers of the IW Economic Institute call for more political incentives that would help a greater number of households to contemplate homeownership. For one thing, a reform of the real estate transfer tax would facilitate the acquisition of property. The IW Institute proposes a graduated rate of the sort used in the United Kingdom where buyers of low-priced flats benefit from tax concessions whereas buyers of luxury condominiums are charged more. On the other hand, the Institute considers credit default guarantees by the government an efficient way to lower the equity capital requirement when buying a home. Mandatory long fixed-interest periods as well as minimum payment rates would keep the financial exposure of the government low, according to the survey.

The arrangement also represents what most Germans wish for. According to the latest Interhyp housing survey, a clear majority would prefer not to rent anymore (source: wohntraumstudie.interhyp.de). No less than 76 percent of the respondents would like to become homeowners. Key reasons behind the desire for homeownership include the freedom to choose your own design, the added security in retirement, and the independence from landlord and rent payments. The survey also found that 91 percent of those who already acquired a home continue to feel good about their decision.

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