Low levels of home ownership aren’t something that springs to mind when describing a buoyant housing market, but Germany’s nation of renters is turning mainstream thinking on its head.
Despite having the highest GDP in Europe, Germany has one of the lowest home ownership rates with just over half of its residents owning their home. This compares with 64.4 percent of adults in the UK and 78.8 percent of adults in Spain.
Part of the reason for the lack of home ownership is that Germany acts a lot more favorably towards renters than other countries do.
Tenants can terminate their apartment contracts for convenience whereas landlords can only give notice for good cause – this could include the landlord deciding to live in the apartment themselves or a material breach of contract by the tenant. Notice periods often extend to nine months and there are strict rules governing when the owner can demand an increase in rent.
Despite the challenges facing landlords, there has been increasing demand from both national and international investors for residential properties in Germany, where steady rental yields are an attractive option in the current low-interest rate environment.
Konstantin Kortmann, Head of Residential Investment Germany at JLL, suggests investors are attracted to Germany’s urbanization, stable economic environment and well-established residential market.
As well as having the largest residential buy-to-let investment market in Europe, Germany has one of the biggest and strongest economies in the world. The unemployment rate, for example, stood at just 4.2 percent in August 2016 – the lowest since February 1981.