Home ownership remains significantly more affordable than renting. This is the conclusion drawn by the sixth edition of the annual “Accentro Housing Cost Report”. In almost all regions and districts across Germany, it is still more cost effective to buy an apartment or house than it is to rent a comparable property. On average, there is a 56% cost benefit associated with homeownership. According to the report, owner-occupiers pay less than renters for housing in 399 of 401 German districts, including metropolitan areas. In Berlin, owner-occupancy is currently 40% more affordable than renting, the smallest difference among Germany’s “Big Seven” cities. The front-runner is Cologne, where the benefit stands at more than 65%. The combination of rising rents and favourable mortgage conditions continues to reinforce this trend.
The report identifies several factors that have contributed to the substantial housing cost advantage enjoyed by homeowners over tenants. The collapse in mortgage interest rates has pushed the already low costs of homeownership even lower. Savings achieved as a result of low interest rates have not been wiped out by rising purchase prices. Tenants do not enjoy this interest rate advantage.
The appeal of homeownership has strengthened and demand for owner-occupied property has increased as a result of the coronavirus pandemic. Against this backdrop, the report’s authors call on politicians to do more to support access to the benefits of homeownership. Furthermore, mortgage lenders’ equity requirements are the greatest hurdle for many would-be buyers. Instruments such as state-guaranteed subordinated loans and relief from real estate transfer tax could be introduced to boost Germany’s low homeownership rate. The study also points out that potential buyers would benefit from measures to reduce incidental acquisition costs, which are, in many cases, the main reason lenders have tightened their equity requirements.