Germany plans tax breaks, extra child allowances for homeowners
Real estate industry experts in Germany are in a state of disagreement over plans suggested by Federal Construction Minister Hendricks (SPD), which would see the state cofinance families’ home purchases, and proposals from the CDU/CSU to introduce an extra child tax allowance for homeowners.
According to reports in Frankfurter Algemeine Zeitung, as well as in Immobilien Zeitung, Michael Voigtlander, from the Cologne-based Institut der deutschen Wirtschaft (IW), speculated that the proposals may largely be the product of electioneering, but stressed that the ideas were at least heading in the right direction.
He expressed his relief that, after so much attention has been given to the rental housing market, politicians now seem to be turning their attention to homebuyers and owners.
Voigtlander complained that the amount of personal savings needed to buy a home in Germany are too high. The average German home currently costs EUR 250,000, which means that a family needs to save EUR 75,000 for their 20% downpayment and the 10% they will need to cover ancillary purchase costs, a figure which is, in many cases, simply unrealistic.
Nevertheless, he believes that any form of state subsidy or a programme to provide government-funded equity loans would be too expensive. Voigtlander thinks it would make far more sense to direct efforts towards reducing ancillary purchase costs, such as land and property transfer taxes.
One possible approach would be to spread the payment of land transfer taxes over a ten-year period.
Reiner Braun from empirica remains ambivalent to the proposal as he believes it does nothing to combat the underlying shortage or affordability of building land and instead merely treats cosmetic symptoms. As a result, he thinks that such an approach would only really make sense if it were targeted exclusively at those high-price regions where families have to compete with property investors, and not everywhere.
The ZIA German Property Federation greeted the minister’s plans. The federation believes that younger homebuyers would benefit via the inclusion of property in their retirement planning. At the same time, it would make no sense if any support for homebuyers were then cancelled out by increases in property taxes or changes to mortgage lending regulations.
In a separate report, the FAZ quoted Michael Psotta as saying that such ‘gifts’ could soon add up to billions in liabilities for tax payers.
He also cautioned that, if the measures are introduced universally, i.e. without upper income thresholds, there is a serious risk that they would end up largely subsidising wealthier households who would have had no problem buying property anyway.