Will This Solution Fix the German Housing Crisis?

Germany’s housing crisis demands a holistic approach. While boosting homeownership is important, lowering entry barriers and promoting responsible renting are equally vital components.

Key Takeaways

  • Germany’s low homeownership rate, especially among young people, signals a growing housing challenge.
  • Homeownership offers retirement savings but introduces financial complexities, including maintenance and insurance costs.
  • Renting isn’t always a financial loss; it allows flexibility and potential tax benefits for investment.
  • Homeownership builds net worth through equity, but disciplined saving and investing offer alternatives for renters.
  • High upfront costs, including taxes and fees, are the primary barriers to homeownership in Germany.
  • A holistic approach, balancing renting and owning, is essential to address Germany’s housing crisis effectively.


Germany is currently grappling with its most significant housing shortage in the past 30 years. With a deficit of 700,000 flats today, this number is expected to balloon to a staggering 1.5 million in just two years.

In response, the German Conservative Party (CDU/CSU) has unveiled a series of measures aimed at tackling this housing crisis. One of the core aspects of their strategy is to increase homeownership in Germany, which currently stands at a meager 45 to 50 percent, making it the second-lowest homeownership rate in Europe, only surpassing Switzerland.

The Quest for Homeownership in Germany

The declining homeownership rate in Germany, especially among young people, has set alarm bells ringing in the political arena. While the homeownership rate was historically stable until 2010, it has since taken a discouraging downward turn.

A revealing statistic shows that in 2001, as many as 700,000 people dared to take the step onto the property ladder. However, this former dream has shrunk drastically, with only a fraction – less than 400,000 – reaching this milestone by 2020. This shift underscores the daunting financial challenges many young Germans face when considering home ownership.

The younger demographic in particular faces a homeownership rate of only 12%, highlighting the enormous hurdles they face in realising their desire for homeownership in the current market.

Pros and Cons of Homeownership

The conservative party’s push to promote home ownership in Germany is based on the belief that it brings several notable advantages. First, home ownership is seen as a sound method of retirement planning that effectively addresses the shortcomings of the country’s public pension system.

While home ownership can certainly serve as a retirement strategy, it is not without financial difficulties. Purchasing a property may free you from the burden of renting, but it also brings with it a new set of financial obligations. These include property maintenanceinsurance cover, and possible renovation and modernization costs.

So the advantages of home ownership have to be weighed against the practical and financial realities, especially the long-term obligations involved.

Renting: A Viable Alternative

Renting isn’t always the financial pitfall it’s often portrayed to be. Let’s examine the case of two identical individuals, Bernie and Ralph, both in identical financial situations. Bernie decides to buy a home, while Ralph takes an alternative path, continuing to rent and channeling his surplus funds into income-generating properties.

Ralph’s strategy boasts several noteworthy advantages. Firstly, it presents the potential for tax benefits that Bernie, as a homeowner, won’t be able to leverage. Moreover, Ralph retains the flexibility to invest his capital in various avenues, thus diversifying his portfolio and potentially maximizing returns.

While owning a home can offer financial security and a sense of accomplishment, it’s crucial to debunk the myth that renting is a financial dead-end. Depending on one’s financial discipline and investment strategy, renting can be a practical and rewarding choice.

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Building Net Worth Through Homeownership

The case for homeownership gains momentum when we consider how it can boost an individual’s net worth over the years. As a homeowner diligently pays down their mortgage, they steadily amass equity in their property. This is in stark contrast to renters, who are not structurally compelled to save in quite the same way.

However, it’s important to recognize that renters have their own avenues for wealth accumulation. They can channel their resources into disciplined saving and strategic investments, creating a solid financial foundation that can rival homeownership in terms of net worth growth.

Therefore, while homeownership is a time-tested strategy for building wealth, it’s by no means the only path to financial success. The key lies in making informed financial decisions that align with one’s individual circumstances and goals.

Barriers to Homeownership in Germany

The most formidable barrier to homeownership in Germany lies in the staggering upfront costs associated with purchasing a property. These costs encompass a notary fee of 2%, land registry fees, ground purchase taxes that span from 3.5 to 6.5 percent, and the possibility of additional real estate agent fees. A possible 10 percent down payment further compounds these financial hurdles, making property ownership a distant dream for many.

Recognizing the pressing need to increase homeownership, the Conservative Party is contemplating a range of measures aimed at reducing these barriers. By lowering these substantial upfront costs, they aspire to make homeownership a more attainable goal for a broader segment of the population. If successfully implemented, these initiatives could potentially open the doors to homeownership for many who have long yearned for a place to call their own.


In conclusion, the housing crisis in Germany is a complex challenge that demands a multifaceted solution. While boosting homeownership rates is a vital component, it’s equally crucial to explore other strategies. Lowering the formidable entry barriers, fostering affordable housing projects, and encouraging responsible renting all play pivotal roles in tackling this issue holistically.

Striking a balance between renting and owning could well be the linchpin in addressing this crisis comprehensively. By embracing a combination of these approaches, Germany may pave the way for a brighter housing future, where more individuals can access suitable homes, whether as renters or homeowners.

1 thought on “Will This Solution Fix the German Housing Crisis?”

  1. Pingback: Wird diese Lösung die deutsche Wohnungskrise lösen? | GermanReal.Estate

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