Real estate purchase

Reasons Why Germans Find it so Hard to Build Wealth


November 2019

Since 2011, Germany’s homeownership rate has flatlined somewhere between 45 and 46 percent, which means that nowhere else in Europe, apart from Switzerland, do so many households rent their homes. Despite the fact that interest on mortgage loans is at an all-time low, wealth-building through homeownership is not getting off the ground in Germany. While this can be blamed—at least to some extent—on demographics, the household income situation also plays a bigger role than in other countries, as a recent survey by the IW German Economic Institute found. It also determined that parental wealth is evidently a factor of growing influence on the accessibility of homeownership (source:

The analysis particularly highlights the fact that homeownership among younger lower-income households has declined over the past few years. While Germany’s collective homeownership rate merely declined from 45.9 to 45.5 percent between 2011 to 2017, it dropped from 15.2 to 12.4 percent among the age group of 25 to 34 year-olds and from 40.8 to 38.3 percent among people aged 35 to 44. In the first income quintile, the rate decreased from 25.2 to 22.0 percent and in the second quintile from 41.3 to 40.0 percent.  

Parental Wealth an Important Factor

The survey authors tie the fact that the homeownership rate is dropping among younger households to the progressive academisation of German society. With more and more young people enrolling in degree programs, Germans tend to start saving capital later in life, thereby delaying the acquisition of property until a later stage in their lives. Another factor is the rising number of single-person households, especially among the younger segments of the population. What makes it easier for cohabitating couples to save up capital is, for one thing, the higher income and, secondly, the lower overhead costs.

The IW survey also concluded that whether or not you buy a home often depends on your parental wealth situation. The findings suggest “that the children of parents who are homeowners at the same point in time are more likely to become homeowners in their own right and sooner than others,” in the words of the survey. Having waned in the zero years, the influence of the parental income situation has regained its significance in recent years.  

Advice to Policymakers

According to the survey, people whose parents are homeowners had a 40 percent higher chance to become homeowners themselves than people without a homeownership background on the parent side. Being able to rely on financial report from the parents is an increasingly important wealth-building driver because of the high capital adequacy requirements when buying an apartment.

Whether you will buy a home and thereby take a major step toward wealth accumulation and private retirement planning appears to depend increasingly on whether you enjoy certain privileges. Wealth is inherited more often than not, or else remains “reserved for the already high income-earning groups,” or so the survey suggests. Policymakers are therefore “well advised to focus more closely on the accessibility of homeownership.” The survey’s authors use the occasion to draw attention to the fact that incidental acquisition costs when buying a home are much lower in other countries like the Netherlands or the United Kingdom, reducing the capital adequacy requirements and putting the acquisition of property within reach even of less affluent people.

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