Berlin, Cologne, April 17, 2018 – Homeownership remains significantly more affordable than renting. This year’s “ACCENTRO-IW Housing Cost Report” concludes that, when viewed across Germany as a whole, the costs for homeowners are about one-third lower than those for renters. The conditions for purchasing a home remain very favorable. The study is based on nationwide rent and housing costs for all 401 counties and independent cities in Germany. The study was conducted by the Cologne Institute for Economic Research (IW) on behalf of ACCENTRO Real Estate AG under the scientific direction of Prof. Dr. Michael Voigtländer.
Jacopo Mingazzini, CEO of ACCENTRO Real Estate AG: “Despite the significant advantages over renting, the homeownership rate in Germany remains at a low level. This is due in no small part to the high barriers to purchasing real estate. Young people, in particular, are held back by high down-payment requirements when purchasing a home. At the same time, building home equity is becoming increasingly important for retirement planning. We therefore believe policymakers have a duty to simplify access to homeownership.”
Homeownership costs are significantly lower than rental costs across the board
Since 2008, the costs of owner-occupied housing have fallen steadily. Only in the past two years have these costs risen slightly again. Nevertheless, on a national average, purchasing an existing home is 32.7 percent cheaper than renting a comparable unit on the secondary market. In many districts, the financial burden—even when mortgage payments are factored in—is lower than that of renting. This opens up further potential for homeowners to boost their retirement savings. Despite the continued rise in purchase prices in Germany’s metropolitan regions, the cost advantage for homeowners over renters in the seven largest cities—at 33.2 percent—is slightly above the national average. Homeownership is particularly attractive in Frankfurt and Hamburg. The range of cost advantages across major cities varies from 26.4 percent in Stuttgart to 38.6 percent in Hamburg.
Early Homeownership Is Particularly Attractive
Despite the significant cost advantages for homeowners compared to renters, demand patterns show no notable reaction. The homeownership rate remains at a low level. Private households can benefit most when they purchase a home early on and can thus spread out the mortgage payments over a longer period. Young households could significantly improve their retirement planning if they pay off their mortgage before retirement. “We currently face a major challenge here, as young households rarely have the financial means to raise the necessary down payment,” said Jacopo Mingazzini.
Conditions for Homeownership Remain Attractive
The appeal of buying a home stems in particular from historically low mortgage interest rates. “Since interest rates are expected to remain low, we anticipate that this advantage will persist,” explains Prof. Dr. Michael Voigtländer of the German Economic Institute (IW). “Although the most favorable time to purchase a home has likely passed, homeownership remains significantly more affordable than renting. Even moderate interest rate increases would not significantly diminish the strong cost advantage of homeownership.” The study shows that even with an interest rate rise to 3.5 percent and a total financing period of 35 years, the costs for interest, principal repayment, and maintenance remain below rental costs in most regions—in some cases by 30 to 40 percent.
New Incentives for Wealth Accumulation Are Needed
“While the ‘Baukindergeld’ (child home-buying allowance) planned by the federal government could help reduce the capital requirement, it is far too expensive. Other measures, such as guarantees or a reform of the real estate transfer tax, would be much better suited to facilitating access to homeownership for broad segments of the population,” states Prof. Dr. Michael Voigtländer. “The persistently low interest rates still offer an opportunity to stimulate wealth accumulation in Germany. It is now up to policymakers to establish the right framework conditions for this,” adds Jacopo Mingazzini.
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 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 consist of foundations, associations, and public institutions.
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