Germans climb onto property ladder to combat financial crisis
* Home ownership seen overtaking renting within five years
* Low interest rates, rising rents encourage ownership
* Higher property prices and fear of inflation help too
By Tom Bill and Peter Dinkloh
LONDON/FRANKFURT, March 1 (Reuters) - After 20 years advising other people on property deals, Berlin-based lawyer Elke Springer did her own last year. Having rented all her life, she bought a house.
A growing number of Germans are doing the same in the wake of the financial crisis.
Low mortgage rates, rising rents and fear of inflation mean that on current trends more Germans will own their homes than rent within five years, reversing a pattern seen since the country's mass rebuilding programme after the Second World War.
"The crisis years had quite an effect on me and I thought very carefully about what to do with my money," said 54-year old Springer, who moved into a house in a wealthy Berlin south-west suburb in January. "It was important the money was safe from inflation. In a bank you get less than inflation."
The value of property typically rises in step with the cost of living, something Europe is battling to keep in check as it recovers from the financial crisis. Inflation is a worry for older Germans in particular, brought up with stories of how swathes of the population twice lost their savings during bouts of hyperinflation in the first half of the twentieth century.
Homes owned by their occupier accounted for 46 percent of all German dwellings in 2011, according to official data, up from 43 percent in 2010, though that is still the second-lowest proportion in Europe after 39 percent in Switzerland.
Tenant-friendly laws and a larger number of well-appointed homes for rent mean renting doesn't have the same stigma as in other countries. Home ownership is 58 percent in France and 69 percent in Britain, according to research group Euroconstruct.
However, a surge in German mortgages last year suggests the gap may narrow. Schwäbisch Hall, one of Germany's biggest building societies, issued almost 33 billion euros ($43 billion) of mortgages last year, up from 25.2 billion in 2009 and the highest amount it has ever lent, the company said in January.
Ultra-low interest rates are encouraging Germans to become homeowners, said Matthias Pink, head of research for property consultant Savills in Germany.
"Five years ago buying property was not really a topic of conversation," Pink said. "Today you can get mortgages at three or four percent, which is significantly lower than five or ten years ago when they were above six percent."
A typical 75 square metre flat in Frankfurt cost 640 euros ($840) per month to rent and 710 euros to buy 10 years ago based on a 30 percent deposit, Pink said. Today, thanks to lower rates, it would cost 795 euros to rent and 540 euros to buy, despite the purchase price rising to 215,000 euros from 180,000.
Upmarket estate agent Knight Frank opened a residential business in Frankfurt in 2012 to exploit what European managing director Chris Bell calls "an inflection point in the market".
"Germany is out of kilter with most of developed Europe and it's purely based on cultural logic, not financial logic," he said.
TAKING THE PLUNGE
The popularity of renting has kept German residential prices below those in Britain, but the gap is narrowing.
The price of a typical new-build home in Frankfurt rose 13 percent to 3,500 euros ($4,600) per square metre in the year to June 2012, while it rose 3 percent to 5,900 pounds ($9,000) in Greater London in the year to December, according to property consultant Jones Lang LaSalle.
Martin Loll, a Frankfurt-based lawyer at Clifford Chance, and his girlfriend planned to amass a larger deposit before buying but changed their minds during their first visit to a prospective new home last September.
"When I stepped onto the balcony and saw the Frankfurt skyline I was overwhelmed," Loll said. "I was losing and winning several thousand euros each day with my savings during the crisis and I couldn't stand it any longer."
They paid 490,000 euros for a fourth floor flat in southern Frankfurt at a mortgage rate of 2.61 percent after putting down a 100,000 euros deposit.
"The insecure situation in Europe helps convince even people like me who originally did not want to take on debt and wanted to remain flexible," said another German buyer who had previously invested in German bonds.
Rising levels of home ownership will concern investors in the popular German rental sector, though any switch seems unlikely to have an impact in the short term.
Transactions involving parcels of 10 or more German residential properties rose 70 percent to a five-year high of about 11.1 billion euros in 2012, as investors were drawn to a bet on the strength of the German economy, according to data from Jones Lang LaSalle.
In January residential property company LEG Immobilien listed on the German Stock Exchange and there is talk of more to follow including Deutsche Annington in a market where yields are about 4.5 percent for the best housing and 6 percent in secondary locations.
While rents have been low in the past, that has put many credit-starved developers off building. Together with a growing population in major cities, that means demand has exceeded supply, pushing rents up and providing another reason to buy.
Rent rises of 19 percent in Berlin and 14 percent in Frankfurt over the last three years have put the issue centre-stage in the campaign for September's general election.
The Social Democrat opposition candidate Peer Steinbrück has promised to cap rent increases at 15 percent over four years from 20 percent and build more social housing.
Demand has pushed property prices up more than 10 percent per year in the major cities and though not everyone can afford a deposit, many Germans are talking about how they can benefit from such rises, Bell said.
"You heard similar conversations on the streets in Spain in '96 and '97 and Poland in '03 and '04," he said, referring to other ownership booms. "There is a generation now asking 'why am I throwing money at a landlord?'"
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