Why is homeownership low in Germany? (2024)

Why is homeownership low in Germany?

There's another pretty simple reason Germans are less likely to own houses. The government doesn't encourage it. Unlike high-homeownership countries like Spain, Ireland and the US, Germany doesn't let homeowners deduct mortgage-interest payments from their taxes.

Germany has high transfer taxes on buying real estate, no mortgage interest tax deductions for owner-occupiers, and a social housing sector with broad eligibility requirements. All these features potentially tilt incentives towards renting.

To provide the impoverished population with at least temporary housing, Germany's government built more affordable homes. Today, rental prices for property in Germany are lower in relation to purchase prices. This can be verified by the example of Germany's three largest cities: Berlin, Munich, and Hamburg.

Germany's property market differs from some of its European neighbors, as many residents choose to rent a home rather than buy one. The good news is that there are no restrictions on expats buying a property in Germany – you'll just need a high enough income and be able to qualify for a German mortgage.

A change in welfare laws, which made it impossible to receive unemployment benefits if one had not worked for a time, was accountable for that increase. Poverty rates are high among people who did not graduate from school and did not learn a trade.

German Builders Report More Cancellations, Fewer New Orders

Like in many other countries across Europe, housing construction in Germany is being hit as higher interest rates and inflation cause financial and material costs to soar. The lack of building threatens to intensify shortages in years to come.

Buying a home is a sound financial investment, especially if you have unused capital sitting in a bank account, where it is unlikely to increase in value. Germany, in particular, is a good place to buy, with low interest rates on mortgages (usually 1-2%) and a very stable property market.

Because the population is denser in Germany cities than say in the US. There is no space for huge homes with gardens, more common are multiple level apartment buildings. The other factor is cost. Property cost a lot more in Germany.

Switzerland takes the top spot, with 61% of the country opting to rent a property, closely followed by Germany at 54% and Denmark at 47%. Take a look at where other countries rank on the map below. So, why do people choose to rent, and what do they consider when looking for a rental property?

Just over 17.3 million people in Germany were affected by poverty or social exclusion in 2022. This equated to 20.9% of the population, the Federal Statistical Office (Destatis) reports on the basis of first results of the survey on income and living conditions (EU-SILC).

What is the average income of a German family?

The average monthly gross income of households in Germany amounted to 4,979 euros in 2021, according to results of the continuous household budget surveys. Earnings from employment (63%) were the main source of income. An average amount of 3,136 euros per month was received from dependent employment or self-employment.

The median wealth of a household in eastern Germany stood at €43,400 in 2021, compared to €127,900 in western Germany. However, median wealth in eastern Germany has risen relatively more strongly than in western Germany than was the case in the previous survey, according to the Monthly Report.

All types of real estate, including undeveloped land, are subject to these taxes. The good news is that property tax rates in Germany are generally low, typically ranging from 0.26% to 1%. The assessed value, also known as the “Einheitswert” in German, is usually lower than the market value of the property.

Housing is dramatically more affordable in Germany than in hot housing markets elsewhere in Europe or North America. It's more like Houston than Cascadia's high-priced cities. Beyond its modest price and rent levels, Germany also stands out for the stability of its housing costs: they're uncannily, freakishly stable.

Housing in Europe's largest economy, which used to rise only incrementally in price but rapidly became more expensive in recent years as a result of cheap borrowing costs, is going through its biggest crisis in decades.

The Federal Government acknowledges that homelessness in Germany is caused by multiple factors, "such as financial, domestic, and individual psychosocial reasons" and that it is not merely rooted in the lack of affordable accommodation According to Global Homelessness Statistics, "Around 50% of poor households spend ...

The poorest city in Germany is Gelsenkirchen (North Rhine-Westphalia). The people who live there earn approximately 18,106$ per year (16,203€) which is extremely low for german standards considering the fact that the average yearly earning in Germany is 45.250€ (50,565$).

There's another pretty simple reason Germans are less likely to own houses. The government doesn't encourage it. Unlike high-homeownership countries like Spain, Ireland and the US, Germany doesn't let homeowners deduct mortgage-interest payments from their taxes.

Instead, German house builders use a mixture of concrete and rebar, with sand and limestone block-work for the walls, and plenty of insulation too. The result is a strong and well-insulated home that will stand the test of time.

The biggest con of living in Germany is the high amount of tax that is deducted from a worker's pay. Depending on an expat's salary, income tax can be as high as 40 percent of their income. The upside of these high taxes is the fact that it allows many subsidies, free education and free healthcare.

Are mortgages common in Germany?

The rate of home owners with a mortgage or loan in Germany fluctuated between 2010 and 2021. It can be seen that 28 percent of German households had a mortgage in 2021. This was an decrease from the previous year, when 31 percent of households had a mortgage loan.

As stated in a study by Immowelt, families in Munich and Hamburg must earn €10,000 per month before taxes to afford to buy a home. To give you an example, a 90-square meter property in Munich costs about €823,590. That is, at the current standard interest rate, the monthly mortgage payment would be €4,255.

Residential property prices in Germany have fallen by their steepest decline since data collection began in 2000, with larger cities seeing harsher drops.

Why don't German apartments have kitchens? The reason why German apartments don't have kitchens boils down to two things: strict tenant rights laws and the overall high number of renters compared to homeowners in the country. Live in Germany explains that more people rent in Germany over owning a home.

What is the average cost of rent in Germany? Average rent costs in Germany range from €300 to €800 per calendar month for a room in shared accommodation and from €500 to €1,346 for a one-bedroom flat.