Key Points
- Germany has one of the lowest rates of home ownership in Europe. Less than half of the country are homeowners.
- Experts say this is largely driven by regulatory systems that produce incentives to rent long term.
- In contrast, Australia's rental and regulatory systems are based on the notion that renting is transitional.
Germany has one of the lowest rates of home ownership in Europe, with only 49.1 per cent of Germans owning their own home.
Experts say this is largely driven by housing policies that produce incentives to rent, such as indefinite tenancy agreements.
In stark contrast to Australia, where the average initial fixed tenancy agreement is for 12 months, German renters are offered initial fixed-term agreements ranging between two to 30 years, with the option for indefinite leases also readily available.
Driven by housing policies that produce incentives to rent, Germany has one of the lowest home ownership rates in Europe. Source: SBS News
Why is there a stigma around renting?
According to Michael Fotheringham from the Australian Housing and Urban Research Institute, if we want long-term agreements to be an option in Australia, we have to start with changing the perception of renting.
"Australia has always viewed renting as transitional," he said.
"We are still stuck in this 1950s view of the world, where renting is a short-term rite of passage after you leave your family home and you share a house in your twenties for a little while before you buy your own. It's still not being viewed as a long-term solution," he said.
"Unfortunately, our rental and regulatory systems are still based on that notion, which is why we don't have the option to opt for long-term leases. And we really should have that ability by now considering how many people in Australia are projected to be lifetime renters." Fotheringham said.
Financial incentives for real estate agents
With over 70 per cent of rentals managed by real estate agents in Australia, Fotheringham says the financial incentive for agents is also largely to blame for Australians not having access to initial long-term lease agreements.
"Our rental systems haven't looked for long-term security," he said.
"Real estate agents have a financial incentive when re-letting and maintaining a property. In countries like Germany, landlords letting and managing their own properties is the norm."
Short lease terms and the lower security that comes with them, partly reflect the market structure in Australia and the 'Mum and Dad investor' owners who own rental properties.
Owners in Australia are more likely to need the property for some other purpose, such as living in it themselves at some stage, unlike corporate owners, which are more common in Europe.
Australia's short tenancy agreements are largely driven by financial incentives received by real estate agents, according to experts. Source: AAP / JAMES ROSS/AAPIMAGE
Tax incentives lead to shorter leases
According to PropTrack senior economist Paul Ryan, Australia's investment property tax incentives are also a significant cause of short-term lease offerings, with generous minimum thresholds and capital gains tax discounts for owners resulting in 70 per cent of investors owning at least one rental property.
“Providing longer leases, and more security of tenure for tenants would go a long way towards making renting a long-term prospect for Australians," he said.
"As is changing the cultural perception that renting is just a stepping stone to home ownership. But this would require a combination of incentives for current landlords to offer longer leases, and continued encouragement of build-to-rent corporate landlords to enter the market,” Ryan said.
