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23 05 2019

Homeowners Keep Getting Wealthier

The net assets of private German households have been making hefty gains, as a recent survey by the Bundesbank noted. While this is generally considered welcome news, a parallel trend has been a cause for concern – because the wealth growth within the German population is unevenly distributed and extremely so. The main reason cited for it is the low homeownership rate in Germany. A particularly wide gap was found in the distribution of household wealth between homeowners and tenants.1

While the average net assets of property owners rose by 37,200 euros to 277,000 euros between 2014 and 2017, the median assets of tenants barely cleared 10,400 euros. Thus, the wealth gap between homeowners and tenants is growing considerably, and it is mainly due to the fact that tenants do not benefit from the appreciation of real estate. The Bundesbank statistics demonstrate that homeownership plays a key role in wealth accumulation and that the low homeownership rate in Germany is creating a widening gap of wealth inequality.
 

Stagnating Homeownership Rate

Promoting the acquisition of homes and helping more tenants to buy homes of their own would therefore contribute to a more balanced distribution of wealth. Yet the homeownership rate in Germany has for many years flatlined on a level that counts among the lowest anywhere in Europe. While 70 to 80 percent of all households in Italy and Spain live within their own four walls, less than half of the German households can say the same. According to the Bundesbank, only 44 percent of the households in Germany own their homes outright. For what it’s worth, the latest sample survey of income and expenditure by the Federal Statistical Office puts the rate at 47.5 percent.2

Compared to other European countries, the low homeownership rate in Germany creates serious inequalities. The European Central Bank periodically conducts surveys on the mean wealth in the eurozone member states. Both the survey from 20133 and the latest survey, from late 2016,4 showed that the median wealth in Germany, a supposedly affluent country, counts among the lowest among the eurozone member states.
 

Measures to Promote Homeownership are a Long Time Coming

The federal coalition government had originally resolved to promote the acquisition of homes by private first-time buyers and thereby to push up the homeownership rate. But apart from the child tax credit for first-time home buyers, whose fitness for purpose has been called into doubt by economists,5 the governing Christian Democrats and Social Democrats have yet to initiate any measure toward that end. There has been no mention so far of a surety to be granted by the KfW development bank, as announced in the coalition agreement, nor has there been any sign that the reform of the real estate transfer tax is under way.
 

1 www.spiegel.de/wirtschaft/soziales/deutsche-immobilienbesitzer-werden-immer-reicher-a-1262923.html
2 www.faz.net/aktuell/finanzen/meine-finanzen/sparen-und-geld-anlegen/immobilien-hausbesitzer-bleiben-in-deutschland-in-der-minderheit-16143807.html
3 www.welt.de/wirtschaft/article115143342/Deutsche-belegen-beim-Vermoegen-den-letzten-Platz.html
4 www.sueddeutsche.de/wirtschaft/studie-der-ezb-die-meisten-deutschen-besitzen-weniger-als-andere-europaeer-1.3308252
5 www.zeit.de/politik/deutschland/2018-04/iw-studie-baukindergeld-gutachten-kritik