Germany's homebuyers lose out to landlords under tax rules, IW study finds

A study by the Institute of the German Economy (IW) shows that owners who live in their own homes in Germany are at a significant tax disadvantage compared with landlords. For a €300,000 apartment in a metropolis, a self‑occupier would lose about €87,000 over 15 years, earning a return of roughly 6 %, while a landlord can achieve nearly 9 % by deducting depreciation, loan interest and maintenance costs. Outside major cities the tax gap narrows to €40‑50 k.

The IW compared Germany with six other European countries and found that German landlords enjoy the highest average returns, whereas self‑occupiers have the lowest. Germany also has the lowest home‑ownership rate in the EU – just 44 % in 2022 versus an EU average of around 70 %. IW housing expert Michael Voigtländer suggested that “a tax allowance on land‑transfer tax for self‑occupiers could promote home ownership”.

The findings highlight how current German tax policy may deter private home buying and could spur debate on reforms to support homeowners as a means of wealth building and retirement security.