Most Germans don’t buy their homes, they rent • Hacker News Board

Re: Most Germans don’t buy their homes, they rent

#121

Post by snowwrestler » Mon, Oct 24, 2016, 1:59 PM UTC

premium-concern wrote: post #6

buro9 wrote: post #3

Earlier quoted context omitted.

Yup. Germany has one of the lowest adoption rates of credit products such as the humble credit card out of nearly all Western nations. Debt is not liked. Edit: From the same site, the linked article at the bottom has the answer: http://qz.com/262595/why-germans-pay-cash-for-almost-everyth... A better link: http://www.businessinsider.com/you-have-to-understand-german...

Yep. "Don't buy things if you can't pay for then." sounds reasonable, but some other countries seem to disagree. Not surprised that those countries suffer from government shutdowns over how much the debt ceiling is raised.

I can pay for my house--over time. Which is fine because I'm also living in my house over time.

Re: Most Germans don’t buy their homes, they rent

#122

Post by maxerickson » Mon, Oct 24, 2016, 2:01 PM UTC

tcbawo wrote: post #72

cm2187 wrote: post #5

So in Germany, the interest on a mortgage is non tax deductible. The article doesn't mention it but I understand that property owners are also liable for capital gain tax if they hold the property less than 10 years. I think that makes sense. There is no reason to favor individuals investing into an unproductive investment (property) over productive investments (stocks and bonds, which enable companies to raise money…

I had heard that the mortgage deduction was designed to incentivize the population to settle down. A population that is settled is more invested in the community, less likely to cause trouble, and more likely to pay taxes. Although, in today's workforce, lack of mobility can be a liability.

Most of the benefit goes to the wealthy (at least, the portion of the population with the highest incomes; I'm not interested in arguing about whether households earning $200,000+ in high expense areas are wealthy or not).

http://www.taxpolicycenter.org/model-estimates/individual-in...

For someone earning $500,000 a year, a $5,000 tax break is a $5,000 tax break, it isn't going to do much of anything to their behavior.

Considering that mortgages usually require a down payment, you could also make the argument that the benefit overwhelmingly accrues to the financially stable. People that can't get the down payment together aren't going to be stabilized by a benefit they can't access.

Re: Most Germans don’t buy their homes, they rent

#123

Post by prefect42 » Mon, Oct 24, 2016, 2:06 PM UTC

Noseshine wrote: post #26

thesimon wrote: post #11

Earlier quoted context omitted.

>such as the humble credit card out of nearly all Western nations Of course using your overdraft is totally fine, but using the evil credit cards even when paying in full is just like declaring bankruptcy. Doesn't help payment services in Germany that Visa/MasterCard is always considered an evil credit card and debit brands aren't too common.

From the PoV of someone who once co-owned a small business in Germany that accepted card payments: The reason they are "evil" is that they charge the dealer the by far largest fees. Cache: no fee. EC card: small fee. Credit card: large fee. And of course I can't ask the customer to pay for it, I must have one price for all. It was something like 1% vs. 3% (approximately(!), just to give an idea of magnitude). It's no…

I think, in the US, the credit card "tax" is even higher for new businesses. As much as 6% I've been told. (Nice if someone could verify). You can use PayPal instead, they take a smaller cut, still 2%.

Re: Most Germans don’t buy their homes, they rent

#124

Post by freeflight » Mon, Oct 24, 2016, 2:06 PM UTC

thesimon wrote: post #45

standel wrote: post #42

It's an interesting article. I'm from Belgium, one of the highest house owners countries. Even though it's true it's a life-long debt and it might be risky (in case of crisis), housing is still considered as a Long Term Investment so that you can pass that investment to your children (after heavy tax deduction :)). I find interesting the article does not mention who actually owns all these houses and who benefits in…

Munich is the most expensive city for property by far, so it's probably not the most representative example.

Munich might be the most expensive city on average but other German cities, even way smaller ones, also have comparable high rent prices in some of their more centrally located districts.

Re: Most Germans don’t buy their homes, they rent

#125

Post by SyneRyder » Mon, Oct 24, 2016, 2:10 PM UTC

ethanbond wrote: post #75

webkike wrote: post #23

Earlier quoted context omitted.

Using credit cards does not preclude being able to afford the thing you are paying for. I regularly use my credit card for every day purchases despite having ample money in my checking account. The regular payments allow me to develop a good credit history without much worry.

Also worth pointing out that some credit cards carry huge perks if used as your daily spending method. For example, the Chase Sapphire Preferred card extends some warranties by a year, also covers purchases for 120 days against damage/theft, also will pay back the price difference on an item if the price goes down within 90 days of purchase. Similar cards carry similar benefits, I'm sure. All you have to do to reap t…

Yup, I always pay off my credit card in full each month, and I earn Frequent Flyer points (especially on AmEx). I've earned enough for multiple Round The World tickets. Those are worth far more than any small annual fees I paid on the cards.

And in the event that your card is stolen, a credit card is always better than a debit card, because then money isn't stolen from your own personal bank accounts.

Re: Most Germans don’t buy their homes, they rent

#126

Post by riprowan » Mon, Oct 24, 2016, 2:11 PM UTC

cm2187 wrote: post #5

So in Germany, the interest on a mortgage is non tax deductible. The article doesn't mention it but I understand that property owners are also liable for capital gain tax if they hold the property less than 10 years. I think that makes sense. There is no reason to favor individuals investing into an unproductive investment (property) over productive investments (stocks and bonds, which enable companies to raise money…

> There is no reason to favor individuals investing into an unproductive investment (property) over productive investments (stocks and bonds).

I beg to differ. I think that real estate, like farming, has critical societal benefits that are worthwhile to develop and maintain.

Namely, it is very difficult to raise a family of four in a mutual fund. Investing in a home may is absolutely "productive."

See, there are significant societal benefits to home ownership that you are not considering. For example:

1. A paid off home is a social safety net against homelessness for an entire family and many of their social circles. Even if all of them are unemployed, all of them have a roof over their heads.

2. A paid-off home frees up cash flow. It allows the owner to divert his earnings into other activities or investments or reduce the amount he has to earn monthly.

3. Real estate can be borrowed against. Try that with stocks. If you are an entrepreneur, your home is likely the asset you will use to acquire bank financing for your business.

4. With unskilled / low-skilled jobs vanishing left and right, homebuilding is one of the few markets which still relies entirely on a giant low-skilled workforce. It's one of the few sectors that can keep a lot of people productively employed. I think there are valid arguments against stimulating homebuilding to reduce unemployment among low-skill workers, but there is nevertheless a societal logic here.

5. In a time when wealth is centralizing as never before, investments in real estate distributes wealth locally. I think there are valid arguments against public policy to distribute wealth, but there is a societal logic here.

6. Finally: taxing a home is very counterproductive to the well-being of the middle class and the poor. I'm sure in Germany the interest on a mortgage isn't tax deductible as you say, but I'd also guess that steps are taken to refund the property taxes for the lower classes. Otherwise you simply tax the poor out of their homes - a form of confiscation.

I think there's a lot of sense in NOT taxing one's first home, at least not if it's below a certain reasonably high value. All things considered, home ownership is empowering. A second home or income-generating rental property is a different story, but one's domicile should be unconfiscatable by the state.

Re: Most Germans don’t buy their homes, they rent

#127

Post by freeflight » Mon, Oct 24, 2016, 2:17 PM UTC

ygra wrote: post #88

adrianratnapala wrote: post #30

Earlier quoted context omitted.

The home ownership percentage is still 43%, so not that low. Landlords seem to be the usual mix of older, upper-middle proffessionals that you see in other countries. It's just a bit more concentrated. Also there are many houses which have two or three appartments. The owner will live in one appartment, and either have a different generation of their family in the other ones, or else rent it for money.

In my home city (Rostock) a large portion of flats are owned by a single, large-ish company. A stark difference to now (Tübingen) where most flats are owned by individuals. Personally it's much easier to handle contractual stuff (which renting always entails) with a company instead of a person. At least landlords here tend to have trouble distinguishing contractual interactions (reducing rent resulting from unfixed i…

>With the landlord living just two streets away they're sometimes inclined to take things personal and show up on your doorstep.

Or worse: They will try to fix/repair things themselves, instead of hiring an actual professional for the job. My landlord, a brain surgeon, won't hire anybody for anything. Instead, he will come over himself and try to fix things he clearly has no clue about. Last time he cut himself trying to fix the parquet floor, ended up bleeding all over the place. I had to repaint some of the walls and the floor is still in a shoddy state.

Re: Most Germans don’t buy their homes, they rent

#128

Post by [deleted] » Mon, Oct 24, 2016, 2:22 PM UTC

standel wrote: post #42

It's an interesting article. I'm from Belgium, one of the highest house owners countries. Even though it's true it's a life-long debt and it might be risky (in case of crisis), housing is still considered as a Long Term Investment so that you can pass that investment to your children (after heavy tax deduction :)). I find interesting the article does not mention who actually owns all these houses and who benefits in…

[deleted]

Re: Most Germans don’t buy their homes, they rent

#129

Post by trgn » Mon, Oct 24, 2016, 2:22 PM UTC

standel wrote: post #42

It's an interesting article. I'm from Belgium, one of the highest house owners countries. Even though it's true it's a life-long debt and it might be risky (in case of crisis), housing is still considered as a Long Term Investment so that you can pass that investment to your children (after heavy tax deduction :)). I find interesting the article does not mention who actually owns all these houses and who benefits in…

It is a cultural thing in Belgium for sure. It also has a few other things going for home buyers. The population density plays in its favor, there is less risk that changing jobs requires you to move. The high taxes and fees when purchasing (between 12-25%) are a break on speculation, so there are no bubbles to speak of. And even though land is expensive, there is sufficient supply in quality housing stock due to the backlog of six decades of sustained housing construction. It's affordable to buy at many price points.

Re: Most Germans don’t buy their homes, they rent

#130

Post by cm2187 » Mon, Oct 24, 2016, 2:23 PM UTC

riprowan wrote: post #126

cm2187 wrote: post #5

So in Germany, the interest on a mortgage is non tax deductible. The article doesn't mention it but I understand that property owners are also liable for capital gain tax if they hold the property less than 10 years. I think that makes sense. There is no reason to favor individuals investing into an unproductive investment (property) over productive investments (stocks and bonds, which enable companies to raise money…

> There is no reason to favor individuals investing into an unproductive investment (property) over productive investments (stocks and bonds). I beg to differ. I think that real estate, like farming, has critical societal benefits that are worthwhile to develop and maintain. Namely, it is very difficult to raise a family of four in a mutual fund. Investing in a home may is absolutely "productive." See, there are sign…

> Namely, it is very difficult to raise a family of four in a mutual fund.

It is difficult to ski without skis. But most people don't buy skis, they rent them. Renting skis do not mean that no skis will be manufactured. There is a need for house, houses will be constructed, irrespective of whether people will over-bid on them or not.

> A paid off home is a social safety net against homelessness

Stocks and savings are equally a safety net against loss of primary income.

> Real estate can be borrowed against

Borrowing against your home to finance your business is no different than selling some stocks to invest into your business. In both cases you are using previous savings.

> I think there's a lot of sense in NOT taxing one's first home

Why? Again you are assuming that the alternative to owning a home is renting one and having no savings. The cost of housing (renting) would be much lower in a country without massive over-bidding on property. There is no reason to give a tax benefit to this particular type of investment (property) over any other types of investment.