1. Home
  2. Studies
  3. Homebuyers, Liquidity Constraints and Private Market Solutions: European Best Practices
Michael Voigtländer at Intereconomics External Publication 12. February 2019 Homebuyers, Liquidity Constraints and Private Market Solutions: European Best Practices

Even though the cost for owner-occupied homes fell sharply in the last years, homeownership rates in the EU remain sluggish. Sound economic policy would promote homeownership especially as rents are on the rise. Policies that facilitate schemes such as equity release options, housing saving plans and crowdlending seem promising.

Download Link
European Best Practices
Michael Voigtländer at Intereconomics External Publication 12. February 2019

Homebuyers, Liquidity Constraints and Private Market Solutions: European Best Practices

Download Link

Share this article:

or copy the following link:

The link was added to your clipboard!

German Economic Institute (IW) German Economic Institute (IW)

Even though the cost for owner-occupied homes fell sharply in the last years, homeownership rates in the EU remain sluggish. Sound economic policy would promote homeownership especially as rents are on the rise. Policies that facilitate schemes such as equity release options, housing saving plans and crowdlending seem promising.

Low and temporary subsidies could jump-start private market solutions in those areas. Enabling many individuals to buy a home is sound, since individually-owned homes are a major driver of individual wealth accumulation. Moreover, higher homeownership rates can encourage growth.

The past few years have been characterised by a dramatic decrease in mortgage rates across Europe. In the Eurozone, average interest rates for fi xed-rate mortgages of more than ten years dropped from over five percent in 2008, to less than two percent in the fi rst half of 2018. The reasons for this development are well-known. First, there is the European Central Bank’s expansionary monetary policy. In order to mitigate the effects of the fi nancial crisis and the sovereign debt crisis, the ECB has pursued a very loose monetary policy, including unorthodox measures such as quantitative easing and the purchase of sovereign bonds. Second, demographic changes are dampening the development of interest rates. In all OECD countries, the population is ageing. What is more, retirement ages have not been fully aligned with increased life expectancy, thus lengthening the period of pension payments. Consequently, households need to save more in order to supplement their pension. Third, investments are stagnating. There are many reasons for this but it is presumed that the shrinking workforce is a main driver since fewer workers tend to result in less need for capital. Furthermore, digitisation demands better-educated workers but fewer capital investments, especially since industry 4.0 focuses on network and machine communication rather than on huge capital investments. Decreasing public investment over time is another contributing factor. Thus, the real interest rate is decreasing as a result of less or stagnating investments and increased savings.While ECB policy is expected to change in the coming years, the demographic factor will endure and gain importance, thereby limiting future increases in mortgage rates.

Download Link
European Best Practices
Michael Voigtländer at Intereconomics External Publication 12. February 2019

Homebuyers, Liquidity Constraints and Private Market Solutions: European Best Practices

Download Link

German Economic Institute (IW) German Economic Institute (IW)

Share this article:

or copy the following link:

The link was added to your clipboard!

More on the topic

Read the article
Pekka Sagner / Michael Voigtländer in International Journal of Housing Policy External Publication 6. May 2022

Supply side effects of the Berlin rent freeze

On 23 February 2020, the Berlin Senate introduced the Berlin rent freeze (‘Mietendeckel’). The law was repealed on 25 March 2021. The Berlin rent freeze was an unprecedented market intervention in the German housing market.

IW

Read the article
Michael Voigtländer / Jonas Zdrzalek IW-Trends No. 1 14. April 2022

An Analysis of the Current Risk Levels in Residential Real Estate Financing in Germany

The German Federal Financial Supervisory Authority (BaFin) is keeping a watchful eye on the granting of housing mortgages and from 2023 on will require lending banks to increase their equity capital to cover potential risks.

IW

More about this topic

Content element with id 8880 Content element with id 9713