Why Is Germany’s Homeownership Rate So Low?

Germany’s homeownership rate fell to 43.5% in 2025. That is the lowest level in more than 20 years.

Nearly three-quarters of Germans aged 25 to 45 now rent instead of own.

Germany now ranks second-lowest in the EU for homeownership. Only Switzerland ranks lower.

Rising Construction Costs Are Pricing Out German Buyers

The Pestel Institute for Housing Market Research tracked Germany’s homeownership decline. It points to a widening gap between construction costs and inflation.

Since 2000, construction costs have risen 160%. General consumer prices rose only 64% over the same period.

Higher interest rates have made the construction-cost gap harder to close. Building or buying a home is now out of reach for many households.

The Pestel Institute’s leadership blames high costs and high rates for the decline. It also says existing housing policy makes the decline worse.

Ending Baukindergeld Cost Germany More Than It Saved

The Pestel Institute blames Germany’s decision to end the child-building subsidy (Baukindergeld) five years ago.

The Pestel Institute says ending Baukindergeld saved little money. It argues the cut cost the state more in the long run.

Fewer first-time buyers entered the market after Baukindergeld ended. Construction costs were climbing at the same time.

Renters Face Tighter Competition As the Pestel Institute Pushes For Reform

If you rent long-term, you are not alone. Nearly three-quarters of Germans aged 25 to 45 rent too.

Renting in Germany ->

Fewer people are buying homes, so demand for rentals stays high. Expect strong competition for rental units in the coming years.

The Pestel Institute wants reforms to construction costs and buyer incentives. Its goal is to let 200,000 households become homeowners each year.

Steps To Take If You’re Considering Buying in Germany

Follow these steps if you’re weighing a home purchase in Germany right now:

• Budget for construction costs that have outpaced inflation. Factor this into any renovation or new-build plans.
• Check today’s financing conditions with a Baufinanzierungsberater (mortgage financing advisor). Interest rates are higher than in the 2010s.
• Look into KfW low-interest loan programs for buyers and energy-efficient building. These can offset some upfront costs.
• If buying isn’t realistic now, plan for a competitive rental market. More would-be buyers means more renters competing for the same flats.

NOTE: The Pestel Institute’s findings come from a research study, not a new law. No new government program has been announced yet.

Sources

• Newsworm — Homeownership in Germany Falls to Lowest Level in 20 Years
• Pestel-Institut — “Wohneigentum in Deutschland” (2025 study PDF)
• Pestel-Institut — Wohnungsmarkt (institute’s housing-market page)
• Eurostat — 68% of people living in EU households own their home
• Destatis — Wohnen in Deutschland (housing statistics hub)