Tax advantages for property owners: who really benefits?

Tax advantages for property owners: who really benefits?

Buying property for young people is becoming increasingly difficult in Germany as rich landlords and large real estate companies benefit from tax advantages that do not benefit everyone equally. The non-governmental organization “Network Tax Justice” points out loopholes in German tax law that allow profits from rising real estate prices to be tax-free if privately held apartments are resold after ten years or later. Through such tax tricks, real estate billionaires can save up to 20 percent in taxes and social security contributions, while Germany loses around ten billion euros every year.

The Ministry of Finance, however, emphasizes that the German tax system is competitive and fair and that there are no tax gaps. These tax advantages for real estate sales after ten years are not loopholes, but pursue legitimate goals and also benefit young people who purchase a property and later sell it for a profit. However, Verena Örenbas, Federal Managing Director of the Home Ownership Association, sees the reality differently and explains that young people are having increasing difficulties entering the real estate market due to high real estate prices, a lack of equity and rising costs of living.

She emphasizes that unlike real estate billionaires, young people do not have the resources to build extensive portfolios and achieve strategic financial benefits from their real estate holdings. The financial advantages for large real estate companies and investors are significantly greater compared to owner-occupiers. In order to promote the purchase of home ownership and limit the exploitation of tax regulations by large investors, Örenbas advocates promoting the purchase of real estate for owner-occupiers. She also suggests reducing additional purchase costs and offering cheaper loans, grants and tax incentives to make it easier for young people to access the real estate market.