Accentro 2021 Housing Costs Report: On average across Germany, homeownership is 56% cheaper than renting.
• No signs of overvaluation in the real estate market • Homeownership has gained additional appreciation due to the pandemic
Berlin, June 9, 2021 – On a nationwide average,buying a residential property in Germany was 56 percent cheaper than renting one in 2020. This means the cost advantage of owning a condominium over renting a comparable apartment has grown by about 7.5 percent compared to 2019—that is the finding of this year’s ACCENTRO Housing Cost Report, which was compiled in collaboration with the German Economic Institute (IW). According to the study, homeowners live more affordably than renters in 399 of 401 German districts, including in major cities. They pay an average of 4.32 euros per square meter, compared to new-lease rents of 9.89 euros for comparable apartments.
For the Housing Cost Report, now in its sixth edition, the German Economic Institute (IW) compares housing costs between homeowners and renters; rents and housing costs for all 401 districts and cities not classified as districts were analyzed nationwide. The calculation is based on net rent (excluding utilities) as well as the costs for owner-occupiers, which consist of the purchase price, incidental purchase costs, mortgage interest, and lost interest on equity, as well as maintenance and depreciation. In its latest report, the IW has identified several reasons why homeowners have lower housing costs than renters. Due to the sharp drop in mortgage interest rates, the running costs for homeowners—which were already very low—have fallen even further. Although purchase prices have continued to rise, they have not done so to such an extent that they could outweigh the savings resulting from lower interest rates. Tenants do not enjoy this interest rate advantage.
“Our ACCENTRO Housing Costs Report 2021 shows that homeownership is becoming increasingly attractive as an investment. The gap between rental costs and owner-occupier costs has been widening for years. Given the persistently high real estate prices and low interest rates, homeownership remains the best form of private retirement planning,” explains Lars Schriewer, CEO of ACCENTRO Real Estate AG.
No Overvaluation in the Real Estate Market
Given the significant and growing advantage homeowners have over renters in terms of housing costs, the IW concludes that the housing market in Germany is not overvalued.
According to the ACCENTRO Housing Cost Report, interest rate trends are a stabilizing factor in the housing market. There is still no indication that interest rates will rise. Previous studies also suggest that pandemics typically result in falling real interest rates. Whether this scenario will repeat itself is at least questionable, given that interest rates are currently slightly above zero. However, interest rates have not yet reached their upper limit in the market; therefore, the authors of the study anticipate that prices will continue to rise, given the persistently high demand for home ownership.
The Impact of COVID-19 on the Residential Real Estate Market
“The COVID-19 pandemic did not have a dampening effect on residential real estate prices in Germany. The pessimistic scenarios predicting price declines of 20 percent did not materialize. On the contrary: Homeownership has gained additional value as a result of the pandemic,” comments Prof. Dr. Michael Voigtländer, head of the Financial and Real Estate Markets division at the IW, adding: “While migration into cities has paused, international migration will gain momentum as restrictions are eased in the wake of vaccination campaigns. In the medium term, major cities remain attractive markets where price increases are still expected.”
Most recently, only about 1.18 million people moved to Germany, while about 980,000 left the country. In 2019, 1.6 million people still immigrated to Germany. Even lower net immigration figures are expected in 2021. Population growth has declined significantly, particularly in cities such as Hamburg, Frankfurt am Main, and Munich. However, the high appeal of German metropolitan areas, along with the resurging demand for skilled workers, is likely to lead to an increase in population growth once again soon.
“The largely positive population growth and the continuing excess demand will lead to further increases in purchase and rental prices in the near future,” Schriewer predicts.
Owner-occupiers Have an Advantage Even in Major Cities
Significant cost advantages for owner-occupiers are not limited to rural areas or regions with low or moderate purchase prices. Even in the relatively high-priced major cities of the Top 7, the cost advantage for owner-occupiers over renters ranges from 41.1 percent (Berlin), 50.3 percent (Hamburg), 53.6 percent (Munich), 58.1 percent (Stuttgart), 60.6 percent (Frankfurt am Main), 64.3 percent (Düsseldorf), and 65.1 percent (Cologne). This cost advantage has even grown by up to 7 percent compared to 2019.
Supporting Homeownership as a Social Policy Tool
Homeownership has gained additional appreciation during the COVID-19 pandemic. Never before have people spent so much time in their homes. This has caused demand for homeownership to rise. However, despite this demand and the low costs of owner-occupancy, Germany remains a nation of renters.
“We reiterate our call for policymakers to support access to homeownership. There are numerous examples from European countries such as the United Kingdom and Belgium that provide tax relief on home purchases, for example through property transfer tax exemptions. Since the required down payment is often the biggest hurdle to homeownership, government-guaranteed subordinated loans and a reform of the real estate transfer tax could improve access to homeownership for households with low or moderate incomes,” says Voigtländer.
“Above all, buyers should be relieved of the burden by reducing ancillary purchase costs. These costs are often the reason for the growing equity requirements. This is where the government has the greatest scope for action, for example through tax exemptions or a waiver of the real estate transfer tax,” adds Schriewer.
The ACCENTRO Housing Costs Report is available for download here: Housing Costs Report
About ACCENTRO Real Estate AG
ACCENTRO Real Estate AG is a residential real estate investor and the market leader in housing privatization in Germany. As of December 31, 2020, its real estate portfolio comprised approximately 5,200 units. In addition to Berlin, its regional focus includes major East German cities and metropolitan areas, as well as the Rhine-Ruhr metropolitan region and Bavaria. ACCENTRO’s business activities encompass four core areas. These include the sale of apartments to owner-occupiers and private investors at market-rate rents, the sale of real estate portfolios to institutional investors, the development and management of its own real estate portfolio, and the marketing of apartments for property owners, investors, and project developers. The shares of ACCENTRO Real Estate AG are listed on the Prime Standard of the Frankfurt Stock Exchange (WKN: A0KFKB, ISIN: DE000A0KFKB3). investors.accentro.de
About the German Economic Institute (IW)
The German Economic Institute is a private economic research institute that advocates for a free-market economic and social order. Members of the registered association include approximately 110 business and employer associations in Germany, as well as individual companies. Its project partners primarily include foundations, associations, and public institutions.
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