In cooperation with the German Property Federation (Zentraler Immobilien Ausschuss) and five real estate companies a mail survey among renters and recent owners was conducted in order to learn more about the attitudes of households toward self-occupied property. One important finding is that only a minority of 9 percent of renters would like to buy their apartment. The most often named reasons for the disinterest are fear of financial distress and uncertainty in regard to the social stability of the neighborhood or the surroundings. Yet the results for the owners show that the financial burden of the purchase is limited since mortgage payments do not much exceed former rent payments, in particular for low-income households. To become more interested in buying property respondents would welcome measures like a redemption option, allowances for additional purchasing costs or equal treatment of property and pension plans in taxation. For younger households old-age provision has become the most important motive for buying a home. That owners also use other forms of old-age provision like pension plans shows that self-occupied property is not a substitute but a complement to other retirement arrangements.

Introduction

Over the last years international investors have acquired huge stocks of residential property in Germany. Private equity funds like Cerberus, Oaktree or Fortress assume that rents and prices in the German real estate market will surge in the near future since market prices have remained flat during the last 10 years while all other major OECD countries, except Japan, experienced a housing price boom (OECD, 2005). Their main focus is on hitherto public properties because they presume that the housing stock is under-managed and the financing structure inefficient (Just and Reuther, 2005). In addition, they pursue a strategy of selling the property to the current tenant. Since Germany's home ownership rate (43 percent) ranks low in international rankings, they assume a backlog demand for self-occupied property.

The first experiences of the privatized enterprises with the sale of flats to tenants have been modest. Deutsche Annington, Germany's largest landlord with a stock of currently 220,000 flats, has only sold 2.5 percent of its units in 2006, although 5 to 6 percent were originally planned (Deutsche Annington, 2007). Others, like the formerly state-owned GSW in Berlin which owns 65,000 apartments, sell less than 1 percent of their flats per year to the current tenants. Nevertheless, in the future a higher demand for owner-occupied property is expected since private old-age provision has gained importance. Recent reforms of the pay-as-you-go retirement system have reduced the replacement rate of statutory pensions by 10 percentage points to 40 percent and made them liable for taxation.

Against this background it is particularly interesting to know more about the attitudes of tenants in order to estimate the potential for future sales. With respect to old-age provision the experiences and motives of new home owners are also of importance since it is unclear whether ownership substitutes or complements other forms of savings. Rational portfolio optimizers would divide their savings between different asset categories. However, since the purchase of property can bind the bulk of private households' capital funds it is uncertain if home owners continue to diversify their pension portfolio.

In cooperation with the German Property Federation (Zentraler Immobilien Ausschuss) and five real estate companies (Alt & Kelber, Deutsche Wohnen, GSW, Patrizia and Treureal) a survey was conducted by mail to shed light on these questions. This survey is unique since only tenants and recent purchasers of multifamily apartments have been contacted. The answers, therefore, allow an insightful assessment of a residential property market of high interest for the public.

In the following, the key results of the survey will be presented after an introduction of the methodology and some descriptive statistics of the tenants.

Methodology

The questionnaire was sent to 6,351 households, 3,250 renters and 3,101 owners. The overall response rate was 17.5 percent. Given the detailed questions on rents, mortgage costs and purchase prices this result is appropriate, particularly since the scope for employing conventional techniques to reduce the non-response rate was limited (Goyder, 1987). The real estate companies refused to hand out address data for fear of discontent among their customers. Therefore, in addition to the questionnaire only a reminder two weeks later was sent to the households by the real estate companies. It was not possible to address non-responding households individually.

Altogether 405 owners and 704 renters completed the questionnaire. The renters are concentrated in the Rhine-Main Region (Frankfurt) and in Berlin while the surveyed owners are predominantly located in the west and south of Germany. The age structure of the owners and renters is similar. Over 50 percent of both groups are older than 60 years. This seems to be typical for the included condominiums which were built mainly in the sixties and seventies. As a consequence families are underrepresented. Only 27 percent of the owner households and 15 percent of renter households consist of more than 2 persons. Striking differences can be found in regard to disposable income. Whereas 5.8 percent of the renters have a net household income of more than 3,250 Euro per month, the corresponding share of owners is 10.5 percent. Even more striking is the gap in the share of low-income households. 5.9 percent of the owners dispose of less than 1,250 Euro per month compared to 35.1 percent of the renters. A detailed description of the income distribution of both groups can be found in table 1.