Low Homeownership Rate Causes Great Differences in Wealth


July 2019

The steep price growth over the past years has drastically increased the wealth of many property owners. Between 2011 and 2018 alone, the assets held by German owners of residential property owners grew by 2.8 trillion euros, as the economists Till Baldenius, Sebastian Kohl and Moritz Schularick recently determined in the context of a survey (source: While this should actually be a piece of good news, it also hides a problem – because only a small number of households has benefited from the large jump in wealth.

Germany’s richest ten percent accounted for roughly 1.5 trillion euros and thus more than half of the total, whereas the less affluent half practically failed to benefit from the capital growth (source: The reason underlying this imbalance is the low homeownership rate more than anything else.  

In Other Countries, the Middle-Class Benefits as Well

Only 45 percent of all German households live within their own four walls (source: This ratio, one of the lowest when compared to other European countries, has stagnated for years, despite many assurances by policymakers that they intend to stimulate capital growth. And so they should, because homeownership is a key component of private wealth accumulation – as the survey on the distribution of wealth just demonstrated once again.

The survey’s authors drew attention to the fact that in countries with a higher homeownership rate, such as the United States, the middle-class benefits much more from the capital growth than is the case in Germany where the rise in property prices was a windfall only for a minority. It has generally caused the financial imbalance in these countries to level out – unlike in Germany.

No Political Interest to Promote Homeownership

But you don’t need to look all the way across the Atlantic to understand the wealth-boosting value of residential real estate. A comparison among Germany’s various regions tells the same story. According to the survey, more than half of the growth in assets of German home-owners between 2011 and 2018 was registered in the states of Bavaria and Baden-Württemberg, although these two Länder only account for around one quarter of the total population. The uneven distribution of wealth within Germany is explained by the fact that Bavaria and Baden-Württemberg count among the states with the highest homeownership rates.

The authors believe that the imbalance will deepen for a long time yet because the price-driving mismatch between supply and demand on the housing market is here to stay. The survey estimates that the shortfall in flats across Germany will amount to nearly one million by 2030. This makes a further price growth seem likely, and there is currently nothing to suggest an imminent change in the low German homeownership rate. While the Federal Government did introduce the contentious child tax credit for first-time home buyers, it has made no further efforts to put homeownership within reach of a broader spectrum of the German populace through political measures, such as a waiver from the real estate transfer tax.

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