Given the low level of interest rates, more than half of all gainfully employed persons in Germany (55 percent) do not feel like signing up for another pension scheme. Instead, one in four people (27 percent) is thinking about buying property, either for owner-occupation in old age or as a buy-to-let investment. If you project this ratio onto the overall market, it would imply a doubling of the homeownership rate. This is the upshot of a report on private retirement planning and management in Germany compiled by the Axa insurance company (“Axa Deutschland-Report 2016 Ruhestandsplanung und -management”). More than 3,000 Germans, either in employment or in retirement, were polled for the representative survey.
According to its authors, real estate is more popular today than any other investment vehicle. For the working population, the option of choice appears to be buy-to-let investments, preferable to any other investment format like fixed-income savings or annuities. The one thing yet more interesting for respondents is the acquisition of a home for owner-occupation.
Real Estate as a Key Component of Financially Secure Retirement
Industry experts predict that the current low-interest rate cycle will fuel a steady increase in the demand for real estate because, unlike classic investment models, it promises a stable and attractive rate of return. As the Axa survey plausibly illustrates, the demand for real estate among pensioners and employees with pension gaps has already gone up. Another major advantage when buying buy-to-let property is that capital gains will be entirely tax-exempt if the property is held for a minimum ownership of ten years, whereas all other investment formats are subject to the flat-rate withholding tax. But the appeal of real estate may vary from one city to the next: While high residential property prices are putting pressure on returns in Munich, the average square-metre price of 3,406 euros in Berlin makes a 3.5-percent return on investment quite realistic. If you wish to buy a particularly affordable asset, you should consider existing buildings without heritage protection. These are often available for sale at comparatively low prices, and may yield gross returns as high as five percent.