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In no other country in the EU are there as few homeowners as in Germany. This is due to the high construction costs in this country – but there are also historical reasons.
More than 83 million people live in Germany in an area totaling 357,580 square kilometers. Of these, less than half are owners. According to the European statistics agency Eurostat, in 2022, 47 percent of German households lived in their own four walls, the other almost 53 percent rented.
This means that Germany is at the absolute bottom of the pack in Europe – apart from the special case of Switzerland. Romania, Slovakia, Croatia, Hungary and Montenegro have the highest ownership rates. In these countries, more than 90 percent of the population lives in their own house or apartment. But why is it like that?
Industrialists metropolitan areas and tenements
There are primarily historical reasons why Germany has such a low ownership rate in comparison. These go back to the 19th century after the Franco-German War and the founding of the empire in 1871. At that time, Germany developed from a late feudal agricultural country into an industrial nation.
This means that people flocked from the countryside to the cities to find work. They needed housing as quickly as possible, and cheaply at that. Between 1880 and 1900, large industrial centers emerged. The term “tenement barracks” comes from exactly this time. This described the extremely spartan and military standard of living that prevailed there. The term also stood for the housing misery in the Empire.
But even after the Second World War, pressure on the housing market increased dramatically. Infrastructure, houses and numerous apartments were destroyed, as were displaced people from the eastern regions, refugees, evacuees and soldiers returning from the war. Almost 21 million people were looking for a new home immediately after the end of the war, and around 5.5 million apartments were missing.
Podcast “Gold & Ash: House Purchase Project”
The first season of the podcast “Gold & Asche” from the ARD finance editorial team starts on February 21st. In seven episodes, the most important things when buying a house are examined step by step – with background information and expert knowledge.
Episode 1: Is it worth buying a house? (21st of February)
Episode 2: The Right Time to Buy a Home (February 21)
Episode 3: How much house can I afford? (February 28)
Episode 4: What do I have to pay attention to when getting a loan? (6th March)
Episode 5: How the state provides financial support for buying a house (March 13)
Episode 6: Everything about energy renovation (March 20)
Episode 7: Was everything better before? (27th of March)
Federal Government wanted to create living space quickly
The new federal government then tried, on the one hand, to quickly create new living space with a bundle of measures. On the other hand, rents should not rise explosively due to the extremely high demand. The housing industry was therefore declared a top priority.
“Housing construction is the most essential requirement to lead the German people towards a political and economic and an ethical and cultural recovery,” said the then Chancellor Konrad Adenauer in February 1950 about the housing situation.
At least a quarter of the housing stock was lost during the war, says Konstantin Kholodilin from the German Institute for Economic Research (DIW) in an interview tagesschau.de. This was a national task that absolutely had to be solved.
Measures for housing development in the 1950s
In 1950, the so-called First Housing Construction Act was finally passed. As a result of the resulting measures, more than five million new homes were built in the years after the war.
The housing shortage was also great in the GDR. At the same time as the First Housing Construction Act in the West, the so-called “Construction Act” was passed there in order to stimulate housing construction. In the mid-1950s, prefabricated construction was promoted.
“This is a historic development that we had,” says real estate professor Günter Vornholz tagesschau.de. After the Second World War, the housing stock in Germany was badly damaged. “In the 1950s and 1960s, rental apartments were built quickly. And as a result, there was a high proportion of tenants,” explains Vornholz. Since then, the rate has only changed relatively slightly.
“Diverse” rental market in Germany
Michael Voigtländer from the German Economic Institute (IW) sees a reason why less than half of all German households live in their own four walls, and also in social housing. Too little emphasis was placed on promoting self-used property.
There are also special features in the German housing market that are not just based on history. The rental offer is very diverse, says Voigtländer. “It doesn’t exist in other countries that I can actually rent a single-family home or a high-quality apartment of various sizes.”
In addition, there is the “beautiful situation” that the country not only has one center, but also many large cities that are economically intact and offer many good opportunities to live in the surrounding area. The population is distributed relatively well in Germany.
High costs for purchase and construction
Vornholz also adds that there are good conditions on the tenant market. The protection of tenants is relatively high in Germany. In addition, the conditions for acquiring property yourself are not exactly easy. Because of the solid construction and various building regulations, the pure construction costs for a property are comparatively high.
This also applies to the additional purchase costs, such as the property transfer tax, which in Germany is now as high as 6.5 percent of the purchase price in some federal states. For comparison: In America the real estate transfer tax is just 0.3 percent. In addition, there are comparatively high costs for notaries and brokers in Germany.
Voigtländer also sees the high additional costs of acquisition in Germany as a “very big obstacle” when buying a house. “You have to have saved around ten to twelve percent of the purchase price just for this,” says the expert. Many would not even be able to find access to the home ownership market because only 15 percent of all tenants would have saved more than 60,000 euros.
More balanced Real estate market in Germany
The ownership rate ultimately also depends on the region within Germany. Ownership rates are particularly low in major German cities: in Berlin, around less than 14 percent. The situation is similar in the metropolises of Frankfurt, Hamburg, Cologne and Munich. In rural areas, however, significantly more people live in their own four walls, just over half. The highest ownership rates are in Baden-Württemberg and Lower Saxony.
From economist Kholodilin’s point of view, the fact that there are comparatively few owners in Germany is not necessarily a bad thing. People abroad envy the country for its still good real estate market and its balance.
Neither 100 percent tenants nor 100 percent owners are beneficial for society and the economy, according to Kholodilin. In some countries, the only way to live in metropolitan areas is to buy property. If you can’t afford that, you’ll end up having to cut back on other expenses or commute far to work. In addition, the housing industry is more volatile with a high ownership rate. “Prices are rising and fluctuating more, which does not necessarily promote stability,” says the expert.