Why don't Germans buy property?

Authored by the expert who managed and guided the team behind the Germany Property Pack

Everything you need to know before buying real estate is included in our Germany Property Pack

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INVESTROPA

A team specialized in real estate investing in European countries

We are a team of financial experts, legal professionals, developers, and local real estate specialists dedicated to helping people like you avoid mistakes when investing in real estate in a foreign place, particularly in Germany. If you'd like to learn more about us, you can check our presentation page.

How this content was created 🔎📝

At INVESTROPA, we explore the German real estate market every day. Our team doesn't just analyze data from a distance—we're actively engaging with local realtors, investors, and property managers in cities like Berlin, Munich, and Hamburg. This hands-on approach allows us to gain a deep understanding of the market from the inside out.

These observations are originally based on what we've learned through these conversations and our observations. But it was not enough. To back them up, we also needed to rely on trusted resources

We prioritize accuracy and authority. Trends lacking solid data or expert validation were excluded.

Trustworthiness is central to our work. Every source and citation is clearly listed, ensuring transparency. A writing AI-powered tool was used solely to refine readability and engagement.

To make the information accessible, our team designed custom infographics that clarify key points. We hope you will like them! All illustrations and media were created in-house and added manually.

What are the main reasons Germans prefer renting over buying property?

Germans prefer renting over buying primarily due to strong tenant protections that make renting as secure as owning.

The German rental system offers indefinite lease contracts that average 11 years in duration, providing long-term stability without the financial commitment of ownership. Tenants enjoy comprehensive legal protections against arbitrary rent increases and evictions, creating a sense of permanence typically associated with homeownership.

Cultural factors play a significant role, as German society views renting as a completely normal and respectable housing choice rather than a temporary step before ownership. There is minimal social pressure to own property, unlike in Anglo-Saxon countries where homeownership is often seen as a key life milestone. This cultural acceptance stems from Germany's post-World War II investment in social housing, which established a foundation of quality rental properties.

Financial flexibility is another major factor, as renters can adjust their housing size and location as life circumstances change without incurring the substantial transaction costs associated with buying and selling property in Germany.

The preference for renting also reflects Germans' risk-averse approach to major financial commitments and their desire to maintain geographical and career mobility.

How does the German rental market work and how does it compare to other countries?

The German rental market operates on a fundamentally different model than most other countries, offering unprecedented security and stability for tenants.

German rental contracts are typically indefinite, meaning tenants can stay as long as they wish without fear of arbitrary termination. The average tenancy lasts 11 years, compared to just 1-2 years in countries like the UK or US. Landlords can only terminate leases for specific legal reasons such as personal use of the property or significant tenant violations.

Rent control mechanisms cap annual rent increases at typically 15-20% over three years in most areas, with stricter controls in major cities like Berlin and Munich. This provides predictable housing costs for tenants, unlike markets where rents can spike dramatically year-over-year.

Tenant rights in Germany are exceptionally strong, including the right to make minor modifications to the property, sublet with landlord consent, and transfer lease contracts to family members. These protections create a sense of ownership without the financial burden of actual ownership.

Compared to other European countries, Germany has both higher rental supply and stronger tenant protections, making the rental market a genuine long-term housing solution rather than a temporary arrangement.

What impact do property prices have on the decision to buy in Germany?

High property prices in Germany, particularly in major cities, significantly discourage homebuying by making the financial advantage of ownership negligible for decades.

City	Average Property Price per m²	Years to Break Even vs Renting
Munich	€8,500-€12,000	35-40 years
Berlin	€4,500-€7,000	25-30 years
Hamburg	€5,000-€8,000	30-35 years
Frankfurt	€6,000-€9,000	30-35 years
Cologne	€4,000-€6,500	25-30 years

Property prices in German cities have risen dramatically over the past decade, often outpacing both rental rates and income growth. In Munich, for example, property prices increased by over 80% between 2010 and 2020, while rents increased by only 40% during the same period.

The rent-to-price ratio in Germany means it often takes 25-40 years for buying to become financially advantageous compared to renting and investing the difference. This is significantly longer than the 15-20 year break-even point common in other European countries.

Transaction costs add substantially to the financial burden of buying, with transfer taxes ranging from 3.5% to 6.5% depending on the state, plus notary fees of 1-2% and real estate agent fees of 3-7%. These upfront costs mean buyers need significant capital beyond the purchase price.

How do Germans view long-term property ownership compared to other countries?

Germans view property ownership as a long-term financial commitment rather than a necessary life achievement, contrasting sharply with attitudes in other developed countries.

Unlike in the UK, US, or Australia where homeownership is often considered essential for financial security and social status, Germans see property ownership as just one of many investment options. Many Germans prefer to invest their capital in other assets like stocks, bonds, or business ventures rather than tying up wealth in real estate.

The concept of "housing as consumption" rather than "housing as investment" is more prevalent in Germany. Germans often prioritize spending on experiences, travel, education, and other lifestyle choices rather than committing to a 25-30 year mortgage that limits financial flexibility.

German attitudes toward property ownership are also influenced by historical factors, including the destruction of property during World War II and the subsequent socialist housing policies in East Germany. These experiences created a cultural understanding that property ownership doesn't guarantee security.

As of September 2025, surveys show that only 60% of Germans consider homeownership important for personal fulfillment, compared to over 80% in countries like Ireland, Spain, or the United States.

Are there any cultural factors influencing Germans' hesitancy to purchase property?

Several deep-rooted cultural factors in Germany make renting socially acceptable and reduce the pressure to own property.

German culture highly values financial prudence and risk aversion, making the substantial debt required for property purchase culturally uncomfortable for many. The idea of taking on a 25-30 year mortgage conflicts with traditional German values of financial conservatism and debt avoidance.

Flexibility and mobility are prized in German society, particularly among younger generations who prioritize career opportunities and lifestyle choices over settling in one location. Property ownership is seen as limiting these options due to high transaction costs when selling.

There is no social stigma attached to long-term renting in Germany, unlike in many other countries where renting is viewed as failure to achieve adult milestones. Successful professionals, families, and retirees commonly rent without any social judgment.

Germans also tend to compartmentalize housing and investment decisions, preferring to rent suitable housing while investing savings in diversified portfolios rather than concentrating wealth in a single property asset.

It's something we develop in our Germany property pack.

What role do government policies play in the decision to rent rather than buy in Germany?

German government policies actively favor renting through strong tenant protections and limited incentives for homeownership.

The German legal system provides extensive tenant rights including protection against arbitrary eviction, regulated rent increases, and the right to make property modifications. These policies create rental conditions that rival ownership in terms of security and control.

Unlike many countries that offer significant tax incentives for homeowners, Germany provides minimal benefits for property ownership. Homeowners cannot deduct mortgage interest on their primary residence from taxes, unlike in the US where this is a major incentive for buying.

Rent control policies in major German cities limit annual rent increases and provide predictable housing costs for tenants. The "Mietpreisbremse" (rent brake) law caps rents for new tenancies at 10% above local average rents in many markets.

Capital gains taxes apply to property sales within 10 years of purchase (except for primary residences occupied for at least two years), discouraging speculative buying and frequent property trading.

Government housing policy focuses on maintaining adequate rental supply rather than promoting homeownership, contrasting with countries that actively subsidize first-time buyers or provide mortgage guarantees.

How does the availability of affordable rental properties influence the decision to buy?

The abundant supply of quality rental properties in Germany reduces the urgency to buy and maintains competitive rental pricing.

Germany has approximately 24 million rental units, representing about 49% of all housing stock, creating a liquid and competitive rental market. This high supply means tenants have choices and landlords must maintain competitive pricing and property standards.

Social housing (Sozialwohnungen) comprises about 5% of all housing and provides affordable options for lower-income households, reducing the pressure to buy out of necessity. These units often offer below-market rents with long-term security.

The quality of rental housing in Germany is generally high, with many rental properties offering modern amenities, energy efficiency, and professional management. This eliminates the "rental quality penalty" that drives purchasing decisions in other markets.

Long-term rental availability means Germans can access family-sized apartments and houses without needing to buy, unlike markets where quality rental properties are scarce or limited to small units.

As of September 2025, vacancy rates in most German cities remain between 2-4%, indicating healthy supply without extreme scarcity that would drive rental prices to unaffordable levels.

What are the tax implications of owning property in Germany?

Property ownership in Germany carries significant tax obligations that make renting financially attractive for many households.

Tax Type	Rate/Amount	Application
Property Transfer Tax	3.5% - 6.5%	Paid once at purchase
Property Tax (Grundsteuer)	0.26% - 1.0% annually	Annual tax on property value
Capital Gains Tax	25% (within 10 years)	On sale profits if sold before 10 years
Notary Fees	1.0% - 2.0%	Required for property transfers
Mortgage Interest Deduction	0% (not available)	No tax benefit for primary residence

Germany imposes substantial upfront taxes on property purchases, with transfer taxes varying by state from 3.5% in Bavaria and Saxony to 6.5% in several other states. Combined with notary fees and agent commissions, total transaction costs can reach 8-12% of the purchase price.

Unlike many countries, Germany does not allow mortgage interest deductions for primary residences, eliminating a major tax incentive for homeownership. This policy particularly affects higher-income households who would benefit most from such deductions.

Capital gains taxes apply to property sales within 10 years of purchase at a rate of 25%, unless the property was the owner's primary residence for at least two years before sale. This discourages property speculation but also penalizes owners who need to relocate for career or family reasons.

Annual property taxes (Grundsteuer) are relatively low compared to other countries, typically ranging from 0.26% to 1.0% of assessed property value depending on location and property type.

How does the mortgage system in Germany differ from other countries, and what are the challenges?

The German mortgage system is notably conservative and restrictive compared to other developed countries, creating significant barriers to homeownership.

German banks typically require down payments of 20-40% of the property value, with many preferring 30-50% for optimal terms. This is substantially higher than countries like the US or UK where 5-20% down payments are common, requiring German buyers to accumulate significantly more capital before purchasing.

Mortgage terms in Germany are typically fixed for only 5-10 years, after which borrowers must renegotiate rates at current market levels. This creates interest rate risk that doesn't exist in countries offering 25-30 year fixed rates, making long-term payment planning difficult.

Lending criteria in Germany are strict, with banks requiring extensive documentation of income stability and limiting debt-to-income ratios to conservative levels. Self-employed individuals and those with irregular income face particular challenges obtaining financing.

Early repayment penalties (Vorfälligkeitsentschädigung) can be substantial if borrowers want to pay off loans early or refinance before the fixed period ends, reducing flexibility compared to mortgage systems in other countries.

It's something we develop in our Germany property pack.

We did some research and made this infographic to help you quickly compare rental yields of the major cities in Germany versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.

How do interest rates in Germany affect the decision to purchase property?

Interest rates in Germany significantly impact purchasing decisions due to the mortgage system's structure and the economic calculation of renting versus buying.

As of September 2025, German mortgage rates range from 3.5% to 4.5% for 10-year fixed terms, making monthly payments substantially higher than during the low-rate period of 2015-2022 when rates were below 2%. This rate increase has pushed many potential buyers back to renting.

The short fixed-rate periods (5-10 years) in German mortgages mean borrowers face significant refinancing risk when rates rise. Unlike countries with 25-30 year fixed mortgages, German homeowners must regularly renegotiate their loans at prevailing market rates.

Higher interest rates particularly impact the rent-versus-buy calculation in Germany, where it already takes 25-40 years for ownership to become financially advantageous. Each 1% increase in mortgage rates can extend this break-even period by 3-5 years.

Rising rates also affect down payment requirements, as banks become more conservative and may require larger deposits to approve loans, further raising the barrier to entry for potential buyers.

The European Central Bank's monetary policy directly affects German mortgage rates, and expectations of continued rate volatility make many Germans hesitant to commit to variable-rate mortgages after fixed periods end.

What are the risks associated with buying property in Germany that deter potential buyers?

Several significant risks associated with German property ownership discourage potential buyers and reinforce the preference for renting.

1. **Interest Rate Risk**: With mortgage terms fixed for only 5-10 years, buyers face the risk of significantly higher payments when refinancing, potentially making properties unaffordable. 2. **Illiquidity Risk**: German property transactions are slow and expensive, with high transfer taxes and lengthy legal processes making it difficult to sell quickly if circumstances change. 3. **Market Volatility Risk**: German property prices can be volatile, particularly in smaller cities where economic changes can significantly impact values, and buyers may face losses if forced to sell during downturns. 4. **Regulatory Risk**: Changing government policies regarding taxation, rent controls, or building regulations can affect property values and rental income potential unpredictably. 5. **Maintenance and Renovation Risk**: German building standards and energy efficiency requirements are strict and constantly evolving, creating potentially substantial unexpected costs for property owners.

The high transaction costs (8-12% of property value) mean that any property sale within the first few years typically results in financial loss, creating additional risk for buyers who may need to relocate for career or personal reasons.

Legal complexity in German property law requires expensive professional assistance and creates risks of costly mistakes for inexperienced buyers, unlike the more standardized processes in some other countries.

It's something we develop in our Germany property pack.

Are there any social expectations or pressures regarding property ownership in Germany?

Social expectations regarding property ownership in Germany are markedly different from most other developed countries, with minimal pressure to buy and full acceptance of long-term renting.

German society does not equate property ownership with personal success or financial responsibility, unlike cultures where homeownership is seen as a key adult achievement. Successful professionals, including doctors, lawyers, and executives, commonly rent throughout their careers without social judgment.

Family and peer pressure to buy property is largely absent in Germany, with parents and friends typically supporting housing decisions based on financial logic rather than social expectations. Multi-generational renting is common and socially accepted.

Dating and marriage decisions are rarely influenced by property ownership status, as renting is viewed as equally stable and respectable as owning. Many German couples choose to rent even after marriage and having children, without facing social stigma.

Professional and social networks in Germany often include long-term renters in leadership positions, reinforcing the social acceptability of choosing rental housing regardless of income level or career success.

The German concept of "housing as utility" rather than "housing as status symbol" means that housing choices are primarily evaluated on practical factors like location, cost, and lifestyle fit rather than social prestige.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

Sources

1. IamExpat - Why Germans Prefer Renting
2. ManageCasa - Germans and Renting
3. The Munich Eye - Germany Homeownership Landscape
4. Bundesbank - Housing Finance Research
5. Tranio - Why Germans Prefer to Rent
6. IPPR - Lessons from Germany Tenant Power
7. American German Institute - Housing Finance Comparison
8. Quartz - Germany Homeownership Rates