Some Endorse Homeownership whereas Others Hamper It


January 2019

While the Germany’s governing Grand Coalition is still discussing ways to sponsor homeownership for private households, some of the German Laender have already moved ahead. The State of Saxony, for one, just passed a guideline for the promotion of homeownership in rural areas. It specifies that Saxony will grant state-sponsored loans to private home buyers and home builders (source: At currently 0.75 percent interest, these loans over 10,000 to 80,000 euros are even cheaper than bank loans made affordable by the low-interest cycle. Moreover, a fixed-interest period of 25 years will keep the monthly interest expenses permanently low. Although the program subsidises only owner-occupied homes in rural areas of the state, the criteria are defined in such generous terms that major cities are actually the only ineligible locations (source:

Mecklenburg-West Pomerania Raising its Real Estate Transfer Tax

The state of Saxony is thus contributing to homeowner subsidisation in a way that does make a difference. Saxony is, by the way, the only state apart from Bavaria that never raised its real estate transfer tax since it was made a state-level tax. In 2006, the Laender were granted the right to set their own real estate transfer tax rates, and some have made repeated use of the option. Saxony and Bavaria are now the only ones that still charge the original rate of 3.5 percent. By contrast, Mecklenburg-West Pomerania recently announced its intention to raise its real estate transfer tax by 01 January 2020 at the latest. Having previously increased its tax rate from 2.5 percent to five percent in 2012, the state now plans to push it up to six percent. This will put Mecklenburg-West Pomerania on a level with Berlin and Hesse, while four Laender charge even higher rates: Schleswig-Holstein, North Rhine-Westphalia, Saarland and Thuringia.

Germany’s Laender Share in the Responsibility

The two developments in Saxony and Mecklenburg-West Pomerania, respectively, illustrate that the responsibility for promoting homeownership rests not solely with the Federal Government. Admittedly, the public debate focuses primarily on the Federal Government’s plans—such as child tax credit for first-time home buyers, the sureties by the KfW development bank, possibly the contracting-party-pays principle—but it should be remembered that the German Laender have a number of sponsorship options as well. Especially the real estate transfer tax, while regularly discussed on the federal level, is ultimately a state-level tax, as mentioned above. North Rhine-Westphalia, for instance, announced last fall that it intends to lower its real estate transfer tax rate by 2022, though without giving any details (source: In other words, state governments could lower the tax rate if they wanted to. But they dread the loss of revenue after years of—sometimes brisk—growth, mainly as a result of real estate transfer tax hikes. For the same reason, they usually point to the Federal Government whenever the subject arises.

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