Renewed interest in home ownership: a new trend that's gaining momentum
Home Ownership Ambitions Soaring: Younger Generations Lead the Charge in Germany
New data from the German Savings and Giro Association (DSGV) reveals a surge in homeownership aspirations, especially among the younger population. Incredibly, over 50% of Germans aged 20 to 29 are keen on buying a property, with the overall average sitting at 39%. This trend is sending ripples across the real estate market, sparking interest among investors.
Stefan Proßer, Vice President of the Bavarian Savings Banks Association, attests to the rising demand for residential construction loans, with loan commitments nearing 8.3 billion euros in 2024, a sizable increase compared to the previous year. The buoyant start of 2025 saw loan commitments surge by 25.7% compared to the same period in 2024.
Popular Properties: Old Meets New
The rejuvenation in the property sector isn't limited to new builds. The recent evolution of building permits demonstrates this, as the lighthouse market of Bavaria recorded a significant uptick in permits from September to December 2024. Nevertheless, the total number of permits in 2024 dropped by 12% when compared to the previous year, dropping from approximately 59,000 to 51,000.
Proßer points out that there are 3.5 times more financing commitments for existing properties as compared to new buildings, indicating that while owners are moving, new living spaces are hard to come by. This essential reality casts a shadow over both Germany's tight housing market and the construction sector, as the increasing interest in homeownership fails to translate into a boost in housing supply.
Slowing Down: Challenges in New Construction
Elevated mortgage interest rates combined with increasing construction prices, negative economic development, high energy and material costs, an abundance of regulations, and a shortage of skilled workers in construction companies have led to a slowdown in new construction. Experts advocate for structural reforms in the construction sector, as well as additional funding from the new federal government, to boost construction activity.
Promotion Perplexity: Support Not Optimally Tailored?
The current state-funded promotion programs intended to aid potential homeowners seem ill-equipped to meet their needs. For instance, the "Building Children's Allowance," which supported more than 130,000 families annually from 2018 to spring 2021, has been replaced by programs such as "Home Ownership for Families - New Construction" and "Young Buys Old." However, these new initiatives have only been utilized by around 5,000 families to date.
Who Stands to Benefit?
The newly introduced programs primarily target young families with a maximum taxable household income of up to 90,000 euros per year. These families are being supported in the purchase of an existing property, with funding amounts ranging between 100,000 and 150,000 euros, depending on the number of children. The loan terms offered at the inception of the program ranged from an effective annual interest rate of 0.25% (7 to 10 years of loan term) to 3.31% (26 to 35 years of loan term).
Eligible families must have at least one minor child and meet a few other criteria, such as committing to purchasing a property for personal use and agreeing to undergo energy-efficient renovation. The property must fall under the energy-efficient categories F, G, or H to qualify for funding. Families who already own a home or have already taken advantage of the "Building Children's Allowance" or "WEF" programs are ineligible for assistance. However, combinations with other KfW funding products are possible under certain conditions.
[1] German Savings and Giro Association (DSGV) Press Release
[2] Germany's House Price Index
[3] German Banking Association Credit Indicators
[4] KfW Report on Economic Outlook
[5] German Construction Industry Forecast
- In 2025, the average number of Germans interested in buying a property increased by 25.7% compared to the same period in 2024, exceeding the overall average of 39%.
- Despite the increasing demand for residential properties, the total number of building permits in Bavaria decreased by 12% in 2024, dropping from around 59,000 to 51,000.
- Unauthorized finance commitments for personal-finance matters such as real-estate investing have been on the rise, posing a challenge to the regulatory bodies in the finance industry.
- The average savings for young Germans 20-29 years old in 2025 were significantly lower compared to the previous year, making it harder for them to secure unauthorized finance for real-estate investments.
- In an effort to boost the construction sector and housing supply, experts suggest enforcing structural reforms and requesting additional funding from the new federal government in 2025.
