Real estate market: Home ownership is too expensive for many young people
In Germany, the number of first-time real estate buyers is falling. Financing is especially difficult for boys, a study shows. The authors criticize high additional costs.
In recent years, fewer people in Germany have moved from a rented apartment into their own property than in the past. In the years 1998 to 2002, the number of so-called first-time buyers still averaged around 700,000 households per year. In the years 2013 to 2017, there were only about 450,000 households, and in 2016 and 2017, the value even dropped to less than 400,000 per year. This is the result of an investigation by the Institute of German Business (IW) on behalf of Bausparkasse Schwäbisch Hall.
Above all, young people in Germany would find "virtually no access to the home ownership market," according to the study. The share of households with their own dwelling or own house has been stable in Germany for some years at about 45 percent, but among the boys, the rate has fallen recently.
According to the study, in the group of 25- to 34-year-olds in 2017 still 12 percent lived in their own property, in the group of 35- to 44-year-olds it was 38 percent - in each case five percentage points less than in 2010. At the same time Share in group of 65- to 74-year-olds by two percentage points to 58 percent.
Home for good earners
A major reason for the difficulties of the boys is the increased capital requirements at the time of purchase. Michael Voigtländer, author of the study, said: "The ancillary labor costs, such as land tax, land registration fees, brokerage and notary fees, and capital requirements are based on purchase prices, which have risen in many places in recent years. Therefore, "households today must have saved significantly more capital". This was a problem primarily for young people who were unable to afford much because of low interest rates. On the other hand, those who have overcome the equity hurdle profit from the low interest rates for real estate loans.
In fact, real estate buyers have to raise huge sums of money for them, especially in expensive cities - sometimes the additional costs reach six-figure sums. Depending on the state, the brokerage fees fluctuate between 5.95 and 7.14 percent of the purchase price, and among others in Berlin, Hamburg and Hesse, they are paid by the buyer alone. That's tens of thousands of euros in many cases. The land transfer tax is 3.5 to 6.5 percent. Many federal states have raised this tax in recent years and thus profited from the real estate boom.
The figures in the study suggest that, above all, high-earners can afford or afford their own property. The household income of those who moved from a rented apartment to their own property has increased significantly in recent years. While it was at an average of 3,000 euros net in 2010, it was just under 4,000 euros in 2017.
Many tenants in Germany
In a Europe-wide comparison, the home ownership rate is even lower in Switzerland. In the Federal Republic of Germany it is particularly high in Baden-Württemberg with 54.4 percent, followed by Lower Saxony with 54 percent. In eastern Germany, it remains below the all-German average in all federal states. The lowest is in Berlin with 18 percent.
"The home ownership rate is an important indicator of wealth creation," says Voigtländer. In countries with a greater spread of real estate ownership, individual wealth creation is more pronounced. However, comparatively many people in Germany traditionally rent - a reason for this being also seen in the special features of the German housing market.