Berlin, Frankfurt/Main, November 28, 2016 – Buying a residential property in Germany is significantly cheaper than renting, regardless of location. This is according to the new “ACCENTRO-IW Housing Costs Report 2016.” Looking at Germany as a whole, buying a home is, on average, about 41 percent cheaper than renting. In Hamburg and Berlin, the figure is more than 45 percent; in Munich, 34 percent; and in Stuttgart, 35 percent. The study was conducted by the Cologne Institute for Economic Research on behalf of ACCENTRO Real Estate AG. To this end, rents and housing costs were analyzed for 402 districts.
Regulations Hinder Homeownership
However, despite the relative advantages of homeownership over renting and the favorable financing terms, demand has not shown any significant response. “The opportunities for homeownership are particularly attractive. Therefore, a significant increase in demand would have been expected,” says Jacopo Mingazzini, CEO of ACCENTRO AG. “The reasons lie in the high barriers to buying a home. Banks sometimes require 10 to 20 percent down payment, real estate transfer tax has been significantly raised in the federal states, and legal regulations such as the Residential Mortgage Credit Directive further complicate homeownership. Homeownership is very important for retirement planning. Unfortunately, however, these factors are holding potential buyers back,” says Mingazzini.
Housing Price Trends Offer Room for Further Price Growth
Although housing prices in Germany have risen sharply, there is currently no risk of the market overheating. “Based on the housing cost approach, it appears that prices could rise even further. This also applies to major cities,” explains Prof. Michael Voigtländer of the German Economic Institute (IW). “The calculations show that homeowners, facing the same financial burden as renters during the purchase phase, can own a debt-free property by the time they reach retirement age,” adds Mingazzini. Only in the event of extreme interest rate movements would buyers have to shoulder slightly higher costs. The goal is therefore to determine the maximum interest rate that would still allow the financing plan to be viable in ten years. “The interest rate that must not be exceeded in ten years in order to maintain the financing model is the so-called ‘financing-neutral interest rate,’” says Voigtländer. “The results of this calculation are surprising. In many districts, the interest rate can rise significantly above today’s rate without resulting in any additional burden for the buyer,” adds Voigtländer. In 325 districts, the financing-neutral interest rate is over four percent; in 280 districts, it is even over five percent. Even in major cities, the financing-neutral interest rate is three percent or higher in many cases. Only in Munich is the interest rate very low.
Low interest rates more than offset the rise in purchase prices
“When these factors are combined, the current sharp drop in interest rates not only offsets the higher prices but actually overcompensates for them, thereby making homeownership even more attractive,” says Mingazzini. “The potential for a setback—which, according to widely held opinion, is a threat when interest rates rise—does not exist to that extent,” says Mingazzini. The calculation of the financing-neutral interest rate underscores the significant opportunity that the current financing environment offers for home ownership. “In most areas, households can purchase a home and pay off their mortgage in full without being burdened any more than renters,” explains Mingazzini. Only in the event of an extreme rise in interest rates over the next ten years would households, taking repayment into account, have to pay more than renters.
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 tenant-oriented sale of apartments to owner-occupiers and private investors, 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 Cologne Institute for Economic Research
The Cologne Institute for Economic Research is a private economic research institute committed to a free-market economic and social order. The Cologne Institute for Economic Research is a registered association. Our members include approximately 110 business and employer associations in Germany, as well as individual companies. Our project partners primarily include foundations, associations, and public institutions.
Contact for Press and Public Relations
Jan Hutterer
Kirchhoff Consult AG
Borselstraße 20
22765 Hamburg
Email: accentro@kirchhoff.de
+49 (0)40 – 609 186 65
Investor Relations Contact:
Thomas Eisenlohr
ACCENTRO Real Estate AG
Kantstraße 44/45
10625 Berlin
Email: eisenlohr@accentro.de
Phone: +49 (0)30 88 71 81 272