The Evolution of Immigrants’ Homeownership in Germany

Abstract

Recently, the homeownership rate of immigrants in Germany has increased by more than 20 percentage points. To shed light on this sharp rise, this paper investigates the driving forces of the trend in the homeownership rate of immigrant households in Germany between 1996 to 2005 and 2001 to 2011 using a probit-based non-linear decomposition method. Empirical findings suggest that 50 % of the change in immigrants’ homeownership rate within the first time period can be explained by characteristics such as age and educational attainment. In the second time period, the explanatory power of characteristics is almost zero, indicating that it is rather the favorable economic and institutional environment as well as changes in immigrants’ tenure choice process that contributed to the substantial increase in immigrants’ homeownership rate in Germany. We additionally find that housing quality of immigrant homeowners has slightly improved as well, but that there is still a substantial nativity gap in housing quality among tenants as well as among owners.