For many middle-class people, owning a home is now unaffordable.
(Photo: obs)
The cost of home loans has tripled since the beginning of the year. Loans with a ten-year fixed interest rate were still being offered for one percent in January; today the interest rate is three percent. With a loan of 400,000 euros, this increases the monthly burden by 667 euros.
With prices continuing to rise, the rise in interest rates is making the purchase of residential property unaffordable for more and more sections of the population. The proportion of young buyers has already fallen significantly in recent years.
If you still want to buy despite high prices and interest rates, you need a lot of equity. Young families in particular don’t have that, unless they have parents who help finance the purchase. This means that social background becomes the decisive criterion for purchasing one’s own property.
“Work, work, build a house” is becoming a distant dream that fewer and fewer people can realize. Those who go away empty-handed look over the garden fence of their friends, who have similar qualifications and don’t earn more than they do, but thanks to their background they sit in their own garden and possibly discuss the performance principle there.
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The consequences go beyond the frustration of young families. After Switzerland, Germany is the country in Europe with the lowest home ownership rate. Only about half of the households live in their own four walls, all others rent.
Most people don’t have large stock accounts
In contrast, in Spain three-quarters of households own their homes, compared to two-thirds in England. At the same time, Germany is one of the European countries with the highest wealth inequality.
Expensive financing
667
Euro
The monthly charge for a loan of EUR 400,000 has increased by this value because of the higher interest rates.
>>Read here: Immowelt forecast: “The real estate boom is coming to an end”
Both are related. The most important asset of people in the middle class is their own property. In the top one percent, however, it is financial investments and company investments.
If the number of homeowners is significantly lower than in other countries and thus also the wealth of the middle class, this contributes to greater wealth inequality.
Jens Beckert is Director at the Max Planck Institute for the Study of Societies.
(Photo: David Ausserhofer)
But it is precisely this inequality that has been a particularly hot topic in discussions about social justice in recent years. Almost two-thirds of private wealth belongs to the top ten percent of the population.
>>Read here: Seven risks you should know before buying a house
The wealth promise of democratic societies is home ownership. While most people will never have significant stock portfolios or company investments, the broad middle class should be able to build wealth by buying their own home.
Germany keeps this promise much less than other countries. There is an urgent need to better support young people here. Possibilities would be to reduce the additional purchase costs when buying a home for the first time, or an asset amount that everyone receives when they come of age.
More: Relief when buying a house: what prospective buyers could expect from a reform.