German real estate boom
The inherited parental home is becoming more and more expensive
2/19/2022, 8:31 am
The dream of owning a home is becoming increasingly unrealistic for many Germans. The advancing real estate boom has paradoxical consequences: while purchase prices are skyrocketing, inheritance is also becoming more and more expensive. This is mainly due to inheritance tax.
In view of the rapidly increasing real estate prices, inheriting the parental home is becoming a heavy financial burden for many citizens due to the high tax burden – and for a growing number it is unaffordable. This is reported by the Bavarian Ministry of Finance, owner associations and individual homeowners. A growing number of families are being hit by the development, who are not high earners and who are struggling with the fact that the value of their houses and land has skyrocketed in recent years.
Bavaria’s Minister of Finance, Albert Füracker, is demanding that the federal government both increase tax allowances and regionalize inheritance tax. Since 2009, real estate prices in metropolitan areas such as Munich have doubled or tripled in some cases. “The relief effect of the allowances is hardly there anymore,” says CSU politician Füracker. “There is a risk that in the long term more and more investors will buy and rent real estate, especially in popular regions.”
Established residents are pushed out
The development does not only affect heirs of luxury properties: “Many of our settlers built their houses after the war, often on very large plots of land,” reports Beatrice Wächter, the managing director of the homeowners’ association in Bavaria. “In the meantime, after the death of their parents, some of the children can no longer keep the houses because the inheritance tax is so high.”
Precise data are lacking, but the phenomenon is believed to be accelerating the trend toward displacement of established residents. “In the case of inheritance tax, the tax office also assumes the achievable rent, not the rent actually collected,” says Sibylle Barent, head of the tax and financial policy department at the Haus & Grund owners’ association in Berlin. In the current market environment, small private landlords without reserves are “forced to face the question of whether they should sell to institutional investors rather than pass the property on to their children.”