The formation of residential property is getting more and more difficult for private households. That’s the opinion of multiple real estate experts that discussed and held lectures at the housing policy forum by the German Association for Housing (DV) at the end of November.1 The most significant barrier that the experts identified in order to own property is the equity capital. With an assumed equity capital quote of 20 percent only about 5 percent of tenant households are capable of raising sufficient funds, as Bernd Hertweck, chairman of the Wüstenrot Bausparkasse, precalculated.2
The equity capital requirement increases purchasing prices on one side, while ancillary acquisition costs are on the rise too due to the constantly increasing land transfer tax that is currently already at 10 percent of the purchase price, states Hertweck. His calculation example is based on the greater area of Stuttgart – in some regions ancillary acquisition costs are even higher. In combination with broker commissions the amount of ancillary acquisition costs is at 15 percent of the actual purchase price in Berlin.3
Younger people acquire rarer residential property
The motivation of purchasing residential property is sinking significantly. Tobias Just, real-estate economist of the Irebs real estate academy in Regensburg, showed that search requests at Google on the subject of purchasing residential property have been decreasing over the past two years.4 The homeownership quote of the 25-35 year old and the number of first time purchasers is also heavily declining, according to the Wüstenrot chief Hertweck. In contrast, young people dream of having their own homes and affording it is currently as favorable as it has never been before.
The affordability of residential property is coherent to the low interest rates, while at the same time, the low interest policy is a problem for the formation of residential property, states Carl-Ludwig Thiele, board member of the German Central Bank. Low interest rates make it difficult for private households to gain enough equity capital in order to purchase residential property.
Funding programmes demanded for home ownership
Most experts had the opinion at the housing policy forum that politics should fund home ownership. Jost de Jager, manager of the Gewos, stated that “ordinary people don’t have any possibility to create wealth.” It’s even more problematic when you take a look at the statistics about wealth distribution, that was implemented at Wüstenrots manager Hertweck’s presentation: Originating a net household income of around 1.700 to 2.300 Euro, tenants on the eve of retirement created net wealth of about 30.000 Euro - while property owners have 166.000 Euro, which is five times more.