The overall economic environment in Germany should induce further investments in real estate and therefore lead to further growth of the property markets, even though significant salary increases are not expected and therefore the ratio of household income to general house prices will not improve. Nor should it worsen, however, given that general price inflation should remain stable and interest rates should stay relatively low. Also, the labour market is expected to remain robust, which should contribute to raising affordability of residential property for private households even without further state subsidies.
Explaining low homeownership
In order to explain low homeownership in Germany (at approximately 43 per cent, the lowest in the EU) and in view of the ongoing discussions on the integration of mortgage markets in Europe, the Association of German Pfandbrief Banks (vdp) commissioned a study on the relationship between the German rental housing market and homeownership. The study, conducted by the Institute of German Economy (IW Köln), concluded that the low homeownership rate cannot be interpreted as a weakness of the property market or as a result of an inefficient mortgage market, but that it is a direct consequence of the existence of a counterbalancing and highly performing as well as flexible rental housing market which finds its origins in social housing policy after the Second World War.
As a result, the German population benefits from the existence of two efficient and truly competing parts of the housing market, providing it with a real choice between home acquisition and home rental. This state of affairs in turn provides evidence that the costs of home acquisition and the costs of home rental are comparable in Germany – which is a testament to the German housing market's overall efficiency. A well-functioning rental housing market is furthermore deemed to facilitate labour-force mobility, encouraging in general a more flexible labour market.
