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Germany: surging rental market but declining homeownership 2023/12/1 source: Print

The European Central Bank's tenfold surge in interest rates over the past year has put the brakes on Germany's property market while stoking the flames of the rental market, making homes increasingly out of reach for Germans.

After 10 hikes in 15 months, the ECB maintained its three key rates unchanged in October this year.

However, this well-intentioned move has not reached Germany's property market.

According to Germany's financing platform, average housing prices have continued to slide, with year-on-year apartment prices dropping by 6.83 percent and house prices by 7.66 percent, reflecting a persistently sluggish housing market.

However, the rental market tells a different story.

German citizens are turning to renting homes due to the burden of mortgage stress, while homeowners are opting to sell their properties, fearing declining prices.

Additionally, the German government's energy transition plan has raised the bar for building new houses and reconstruction.

These factors, intertwined, have worsened the imbalance between supply and demand. It is anticipated that around 700,000 Germans may find themselves unable to secure homes by 2023.

To ease this situation, governments at all levels have implemented various measures.

"The homeownership rate is 43 percent in Germany, while it has reached 46 percent in Baden-Wurttemberg. The property association in Baden-Wurttemberg is striving to build homes and make them accessible to people at fair and affordable prices," said Dr. Beuerle, a member of the property association in Baden-Wurttemberg.

With government financing, the local property association in Stuttgart, a southern German economic powerhouse, has acquired and renovated a batch of old homes, renting them out to people with low incomes.

While this model tackles issues related to renovating dilapidated buildings and housing low-income groups, it requires a relatively long time to take effect.


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