Why are Germans renting and not buying apartments? What happens to renting and buying real estate in Europe’s largest economy.
By the end of 2017 – the beginning of 2018, seven out of ten citizens of the European Union lived in their own real estate.
In Germany, more than half of the population rents housing. According to Trading Economics, the tendency to rent residential property in Germany will continue.
Let’s see why the Germans prefer to rent housing rather than buy?
1. To rent a house in Germany is profitable.
The German government encourages rental real estate. Favorable tenants’ housing policy of the country developed in the second half of the twentieth century.
Germany began to provide a much better balance between public and private real estate investment than many other countries after the Second World War, Quartz writes. Of the 16 million apartments that existed in the pre-war era, nearly 6.5 million became uninhabitable. In order to provide the impoverished population with at least temporary housing, the FRG government supported house building programs that would be affordable for the population by equipping and renting.
Now the price of renting real estate in Germany in relation to the purchase price is low. This can be seen in the example of the three largest German cities: Berlin, Hamburg and Munich. As the price-to-rent index shows, apartments purchased in these cities will be recouped by rent only for 28–30 years in Berlin, 24–29 years in Hamburg, and 37–39 in Munich. The interest on the mortgage will further increase this time.
Now, due to the growing flow of immigrants, rental prices in the country are rising. In 2019, the average rental price of apartments in the German capital was 1,100 euros. Therefore, in Berlin in 2020 it is planned to adopt a law on the freezing of rents for 5 years in order to stop the price increase.
2. The mortgage system affects the choice of rent.
Germany does not encourage the purchase of housing. In this country, homeowners cannot deduct mortgage interest from taxes.
Compared to other European countries in Germany, average mortgage interest rates are 1.79% in the first quarter of 2019, according to Statista.com. For reference: the lowest rates in Denmark (0.78%), the highest – in Poland (6%).
Buying is less attractive to Germans compared to renting because it can only be obtained by someone who has at least 40-50% of the cost of housing for a down payment and money for an agent’s commission, taxes and notary fees. Usually the amount of a mortgage loan covers up to 70% of the market value of real estate.
Transaction costs, as a rule, vary from 9 to 15% and depend on the city. For example, in Munich they average 9.1%, and in Berlin 15.2%. However, low transaction costs do not make housing in Munich more affordable than in Berlin, because Munich has the highest real estate prices in the country.
3. Young people later begin to work.
Fewer young people in Germany are eager to buy housing. From 2010 to 2017, the proportion of homeowners in Germany aged 25–34 years decreased by 30% to 12% of the total number of homeowners.
The country has free education, so the Germans may not be in a hurry to graduate from the university as quickly as possible to go to work. It is popular to take a break between leaving school and going to university. Young people are not attached to their place of residence and do not earn money; therefore, they usually cannot buy an apartment on their own.
By 2017, the percentage of the population without vocational education decreased by 10% over the previous nine years. The number of bachelors and masters from 2014 to 2017 increased by more than 70%. This is evidenced by studies of the national statistical office of Germany Statistisches Bundesamt.
Thus, the stratum of insolvent people in society is increasing.
And this is an alarm.
Source https://tranio.ru/articles/pochemu-nemcy-arenduyut-kvartiry-a-ne-pokupayut/
