In Germany, it pays to be a landlord. Literally.

Imagine two neighbours in the same apartment building in Munich. Both bought identical apartments for €300,000 in the same year, under the same conditions, with the same financing. One lives in their apartment. The other rents it out. After fifteen years, the landlord has achieved a return on equity of just under nine per cent. The owner-occupier has achieved around six per cent. The difference in present-value terms, according to a new study by the Cologne Institute for Economic Research (IW), amounts to more than €87,000 — in favour of the landlord.

Same building. Same price. Same starting point. Different tax treatment.

That disparity is not the result of chance. According to the IW, it reflects the way Germany's tax system treats residential investment and owner-occupation differently. Landlords can depreciate the building for tax purposes, deduct mortgage interest and offset maintenance expenditure against taxable income. Owner-occupiers generally cannot. Acquisition costs, including land transfer tax (Grunderwerbsteuer), become part of the landlord's tax calculation through the property's cost base, while for owner-occupiers they remain simply part of the upfront cost of buying a home.