Fewer and fewer young Germans get to live within their own four walls, or so a survey by the Handelsblatt Research Institute suggests. The institute’s findings show that the percentage of young Germans who own their homes outright has been declining for years. As recently as 2013, the number of first-time buyers of condominiums and detached homes totalled 800,000—by 2016, that figure was down to 600.000. The homeownership rate among 25- to 40-year-olds has also been following a downward trend and is now below 25 percent (source: handelsblatt.com). This means that one of the bedrock certainties that older generations relied on is evidently becoming a thing of the past. During the post-war decades, it was quite normal for a skilled worker in full-time employment to start a family and decide to move out of the rental flat and into a condominium or home of their own, and to have it paid off by the time he entered retirement. But those days seem gone for good.

Incidental Acquisition Costs and Price Hikes the Main Issues

The survey identified the capital adequacy requirements of banks as the key problem in this context, while rising prices in Germany’s growing cities are not exactly making things easier. Most of the prospective buyers in the cities of Berlin, Munich or Hamburg that are aged between 25 and 40 therefore cannot take advantage of the historically low level of interest rates in real estate financing. Any financing arrangement is unaffordable for them, as they have to produce five- or six-digit amounts in equity capital to cover the down-payment on the purchase price along with the real estate transfer tax, estate agent’s fee, land register and notarial charges. The situation therefore calls for an increase in building activity in the residential segment of condominiums and homes, too, in order to relieve the market. But even last year, the number of planning permissions remained far too low at barely 350,000 nationwide to achieve the Federal Government’s target of completing 1.5 million new flats by 2021 (source: destatis.de). The short supply in newly constructed buildings impacts the price level because there are several leads for virtually every flat completed.

Subsidy Programs Initiated so far not Effective Enough

The dilemma is most conspicuous in Germany’s conurbations. For instance, the Berlin-Brandenburg chapter of the IVD German Real Estate Federation recently published figures that document the quick and unchecked price growth for condominiums. According to these stats, the square-metre price for condominiums in standard residential locations has gone up by 12.8 percent (source: property-magazine.de). This highlights once again the importance of having an effective promotion of homeownership in place of the sort that the real estate industry has demanded for some time now. The subsidy programs launched so far have in any case proven insufficient. The Süddeutsche Zeitung daily, for one, reported that the number of applications for child tax credit for first-time home buyers, a measure only introduced in September 2018, has already plummeted (source: sueddeutsche.de). It is rather safe to say that the present parameters are making homeownership increasingly elusive for young people in Germany.