Register here to get your personal account and profit from all the advantages of the individual search functions.
X
accentro-hitzigallee
30072020

Nearly a Quarter-Million Applications for Child Tax Credit

For more than a decade after the end of the nationwide homeownership subsidy in 2006, no central public subsidies worthy of the name were available in Germany – until the child tax credit for first-time home buyers was introduced in September 2018. The idea behind the instrument is to pay families with children an equity grant of 12,000 euros per child toward the acquisition or construction of an owner-occupied dwelling. Demand for the child tax credit is enormous – 233,000 families with children having filed applications for homeownership financing to date, as the Federal Ministry of Building and Urban Development stated recently.1

Particularly reassuring to see is that the applications for the child tax credit were filed mainly by families with comparatively low income. Almost two out of three applicants have a taxable household income of less than 40,000 euros, according to the Ministry of Building and Development. This means that the instrument reaches even those families that would have serious difficulties financing the acquisition or construction of a flat or a home without the government grant.
 

Child Tax Credit to Expire by the End of this Year

The success of the child tax credit for first-time home buyers illustrates how strong the demand for homeownership is among the German population – even among people with rather low or middle income. That Germany is considered a nation of tenants, and that at 46.5 percent it has one of the lowest homeownership rates anywhere in Europe is clearly not so because Germans feel no desire to own their homes outright. At the same time, the low homeownership rate shows how much potential the German housing market still has.

But once the child tax credit program expires by year-end 2020, no further applications will be accepted. The way it looks now, whether or not the program will be extended won’t be decided until next year. Potential condominium buyers are also left in the dark as far as the subject of the real estate transfer tax and surety bonds by the KfW development bank are concerned.
 

Demand Strongest for Existing Properties

Legislation for a tax allowance or a reduction of the real estate transfer tax is still unlikely to find a political majority, and even the creation of a surety bond by the KfW development bank, which is actually part of the coalition agreement between the Christian Democrat bloc and the Social Democrats, is a long time coming. This is odd insofar as both instruments would be quite effective in lowering one of the main hurdles blocking the way to homeownership by reducing the amount in equity capital required as down-payment on a home. The success of the child tax credit for first-time home buyers has just demonstrated that grants will indeed be embraced by people and help a broader segment of society to afford homes of their own.

It has, by the way, turned out that applicants for the child tax credit have preferred existing buildings over newly-constructed ones: 60 percent of the properties bought were pre-used homes or condominiums. This could be connected to the fact existing properties tend to be more affordable than new buildings – and since more applicants belong in the low-to middle-income cohort, it stands to reason that they gravitate toward existing flats. So, this represents yet another aspect that ought to be taken into account in future housing policy measures.

1 www.haufe.de/immobilien/wirtschaft-politik/baukindergeld-kommt-und-wird-auf-drei-jahre-begrenzt_84342_456308.html