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Germany – Bargain Paradise for Freehold Ownership

Buying property is an investment from which you stand to benefit for a long time to come – but which at the same time requires much more financial wherewithal than many other commodities. The thing about homeownership in Germany, though, is that it remains surprisingly affordable when you look at other countries in Europe: If you wish to become a homeowner in this country, you need to spend little more, on average, than the equivalent of two gross annual salaries for a new 70-square-metre flat, according to calculations done by the chartered accountancy firm of Deloitte. Existing flats tend to be even more affordable.

Higher Costs in Western Europe

The German price level is quite obviously hard to beat: The only other country where you need even less in terms of annual salaries is Denmark. In Italy, by contrast, buying a property will cost you nearly eight years’ salary, compared to factors of nine in France, and of around ten in the United Kingdom. These are the findings of a recent Deloitte survey of Europe’s residential real estate markets. Even in average square-metre prices, Germany tends to undercut all other countries in Western Europe. Prices here are barely above the level reported from transforming countries in Eastern Europe, such as Poland or Hungary – notwithstanding the substantially higher income levels in Germany.

Homeownership not the Standard Form of Residence in Germany

But while buying property is quite affordable in Germany, the country’s homeownership rate lags far behind that of other EU member states. In fact, Germany is the only one among the countries studied where the number of rental households is higher than the number of owner-occupied homes. This is startling insofar as there are many good reasons for owning property outright. Immunity to rental growth, inflation hedging, and low costs of living in old age are just three sound arguments in favour of homeownership. To be sure, the homeownership rate has perked up slightly in recent years, and stood at 46 percent in 2011 according to the latest figures. But this is still a far cry from levels seen in Italy or Hungary, to say nothing of Spain where more than 80 percent of the people owner-occupy their homes.