UK housing market could learn lesson from Germany

As the UK housing market reports a 2.5% fall in prices during the last month, many experts are claiming that Britain could learn a useful lesson from the safer German economy.

In Germany, home ownership is below 50% and tenants benefit from strict legal protection. While the housing market in the UK has experienced a massive boom, which may now be turning to a sharp decline, this has not happened in Germany.

Andreas Meyer-Schwickerath, executive director of the British Chamber of Commerce in Germany, said: “The real estate market (in Germany) is rather slow, and had been rather flat over the past 10 years, but at least we didn’t get the bubble. While British householders are contemplating rapid declines in the value of their biggest asset, German families are safe.”

Katrin Robeck of Moodyseconomy.com agrees. She said: “Germany has completely missed the property boom. It has missed out on a lot by having this fairly restrictive property market. But now, in times of financial uncertainty, it’s helping Germany.”

On the whole, German banks were unaffected by the sub-prime mortgage crisis. While IKB had to be bailed out by the government, none of the financial institutions in Germany experienced trouble to the same extent as Northern Rock.

“The story is one of resilience in Germany and vulnerability in the UK,” says Richard McGuire, senior fixed income strategist at RBC Capital Markets. “The credit crunch impacts the financial services sector (in the UK), and that is compounding the slowdown in the housing market.”

With economists in the UK and Germany saying that Britain should save more and spend less during times of financial crisis, could the UK housing market become more geared towards renting rather than getting a foot on the property ladder?

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