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Most Germans don’t buy their homes, they rent

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

#151

Post by standel »

aianus wrote: post #145
standel wrote: post #143

Earlier quoted context omitted.

so as a society, it would be better to have a handful of house owners collecting the rent of everyone else? Is that a good allocation to you?

Yes. Owning your own home is like cooking your own food. It might be cheaper but only if you don't value your own time or have anything better to do. There's a reason why even rich, successful businesses rent office space instead of buying. They just can't manage a property as efficiently as the companies that focus on that.

Facebook, Google, Apple, Microsoft, IBM, HP and many others would certainly not agree with you. They cook their own food, own lot of real estate and I am pretty sure they don't think it's time they lost.

These big companies do not manage one single house (office). They manage a real estate portfolio. Most of big companies have a mix of rented and acquired office space. Ultimately, owning real estate or not is an investment decision.

Some big companies, like HP recently, went from owning most of its real estate to sell large chunk of it ... Reason is to get some cash flow and to rationalise some expenses. But not because someone else could manage better their real estate.

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

#152

Post by Spooky23 »

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…

That's a ridiculous position.

My ownership of my home provides a lot of active investment activity that wouldn't happen otherwise:

Examples:

- the local nursery benefits from the plants and growing materials that we buy

- investments in home improvements generate contractor man-hours and local material purchases

- as an active participant in stakeholder in the community, I contribute to the governance of the community

- single family homes are valued at a premium to multi family, so I contribute more to local school and municipal services.

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

#153

Post by Spooky23 »

vilhelm_s wrote: post #92
tcbawo wrote: post #72

Earlier quoted context omitted.

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.

According to Priceonomics, > the deduction began as an unplanned technicality. When the federal government first levied income taxes in 1913, Congress allowed Americans to deduct from their taxes the cost of all interest payments. This is standard policy for corporations: the government only wants to tax profits—not money spent on loans for tractors or a new office. In 1913, the government allowed deductions on all i…

That's not really accurate, you could deduct interest and leases for a very long time. Pretty sure that went away as Vietnam war spending ramped up.

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

#154

Post by usrusr »

pchm wrote: post #144
usrusr wrote: post #120

Earlier quoted context omitted.

New cars tend to be leased, but more often than not (at least in the price ranges "family sedan" and up) this is formally a company car, even if it is not used for business purposes at all. This is primarily driven by a full set of smoke and mirrors on the taxation level, that probably grew because it's what keeps the domestic market going for German car giants. In the case of "formally a company car", leasing is not…

Can you elaborate a little more on the "company car" thing? It sounds interesting. Does it mean that you basically get a car from your employer as part of the job benefits, but in reality you cover the cost (which is deducted from your salary)? How does it work?

Pretty much like that, it gets deduced from salary and not only insurance and maintenance but also fuel expenses often (sometimes? always?) go through that black box that shields the user from full awareness of car ownership cost. The taxation aspect is complicated enough that everybody has an opinion wether it makes a difference or not, but nobody is entirely sure. Many users will claim that there is no benefit, but secretly hope there is. It might have a bigger impact on the employer side where I suspect that these costs are something entirely different than salaries in terms of bookkeeping, to the point where in some companies you might be able to negotiate a bigger total if you take a party of it as a car (big maybes, this is me trying to get a consistent mental model of why these arrangements are so crazy popular, if you ask me this is either a shameful subsidy for those who need it least our an entirely pointless overcompication of something that could be so simple).

Oh, and a fun anecdote further illustrating the craziness of it all: there's an organization now that sued for eligibility of all kinds of vehicles, so if my employer had such a programme I could get my next fancy bicycle through them! (But as an inner city renter, my bike ownership is limited by storage anyways, and pretty much maxed out already)

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

#155

Post by huherto »

randiantech wrote: post #90
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…

So are you recommending to invest savings on stocks and bonds rather than a house? I mean, I wont argue / refute you reasoning, I just simply dont have the knowledge to do a proper analysis. Ill just say that my 78 years old parents, that not even finished high school, always told me to first buy a house, then think about the rest. Being an owner feels like the best decision Ive ever made. If something happens to me,…

> So are you recommending to invest savings on stocks and bonds rather than a house?

I don't think he is saying that. As an individual it may be better to invest in the house. Depending on many individual factors. e.g. Capital gains, timeframe, etc.

What I think he is saying is that collectively it is better for society that more people invest in productive activities that generate new wealth.

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

#156

Post by sickbeard »

whack wrote: post #39

The Germans seem to be far ahead of the curve here. From a financial planning perspective, buying a home results in: 1) The vast majority of your assets becoming concentrated in a single plot of land, in a single neighborhood, in a single city 2) Your future mobility to pursue jobs in other cities, becoming significantly constrained If you want to invest your savings, then invest them in the stock/bond markets. If yo…

Excessive mobility has an adverse effect on families and children. It makes sense to rent if you are single, but it makes more sense to plant yourself somewhere when you are a family.

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

#157

Post by sickbeard »

WA wrote: post #46

On the other hand, many Germans believe: renting is paying someone else, buying is paying yourself (which is nonsense). Especially in more rural areas, buying/building a house is considered a big achievement in life. People are even willing to move from a smaller city to little towns just to be home-owners. Buying a house can be a net loss over the years, if you're not located in a major city. Especially in East Germ…

Frankly the only people who say this are investors. If you look at it from a purely investing perspective it makes sense to buy a house and then rent it out, rather than buy a house and live in it as an investment.

But most people are not investors, they want a home to raise their kids and be a place they belong. That's the disconnect

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

#158

Post by Kalium »

coldtea wrote: post #69
whack wrote: post #39

The Germans seem to be far ahead of the curve here. From a financial planning perspective, buying a home results in: 1) The vast majority of your assets becoming concentrated in a single plot of land, in a single neighborhood, in a single city 2) Your future mobility to pursue jobs in other cities, becoming significantly constrained If you want to invest your savings, then invest them in the stock/bond markets. If yo…

> Your future mobility to pursue jobs in other cities, becoming significantly constrained Perhaps the idea of people who haven't adopted this is that, unless they like doing so, humans should not have to live like nomads moving here and there to pursue this or that financial opportunity, but instead should be allowed to grow roots in some place, help shape it and improve it, connect with their neighbors, etc.

People are allowed to grow roots, shape and improve a place, and connect with their neighbors all they like. This is the state of places like the USA today.

People aren't allowed to demand that the economy provide them with all the means they might wish for to do these things in any arbitrarily selected location.

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

#159

Post by wavefunction »

cm2187 wrote: post #130
riprowan wrote: post #126

Earlier quoted context omitted.

> 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…

Most people don't go skiing every day or enough to justify the cost of purchase, but for those who do they most certainly purchase one or more pairs of skis.

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

#160

Post by criddell »

aianus wrote: post #145
standel wrote: post #143

Earlier quoted context omitted.

so as a society, it would be better to have a handful of house owners collecting the rent of everyone else? Is that a good allocation to you?

Yes. Owning your own home is like cooking your own food. It might be cheaper but only if you don't value your own time or have anything better to do. There's a reason why even rich, successful businesses rent office space instead of buying. They just can't manage a property as efficiently as the companies that focus on that.

> It might be cheaper but only if you don't value your own time or have anything better to do.

No way. My family of four eats around $250 of food every week. That works out to $3 per person per meal.

The other expenses would have to total more than $600 before we would break even eating fast food every day. The food we make at home is considerably better than fast food, so I think it would cost an extra $1000 to eat out than cook at home.

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