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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

#221

Post by jpetso »

sickbeard wrote: post #157
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

In Canada, there's a capital gains tax exemption for your (owned) primary residence. If I wanted to live in a given place, it would be stupid to buy the place, rent it out, and rent another place myself with the rent money minus the income tax I paid from it. When selling the place, I owe capital gains taxes on it. Taken together, that ends up being a worse deal for me than merely buying what I need and using it for myself, tax-free.

Of course, what renting gives you is the flexibility to live in a smaller place and avoid overpaying for extra space that you might want to use at a later time. Still, the savings from renting a smaller place have to be greater than the tax expenses that I get charged for renting out.

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

#222

Post by nommm-nommm »

Normal_gaussian wrote: post #176
aianus wrote: post #146

Earlier quoted context omitted.

It gives you the liberty to move for a better job. That's enormous when you're early in your career and switching jobs results in huge pay increases. Even within the same city, it's really nice to move near your new job and not have a commute.

I don't see that this is a real problem for ownership. You can sell the house and buy another. Sure its more complex than simply giving notice and leaving but it isn't hard.

Selling a house costs tens of thousands of dollars. It takes a long time and can be frustrating and emotionally draining.

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

#223

Post by weinzierl »

premium-concern wrote: post #139
rmc wrote: post #64

Earlier quoted context omitted.

> Serious question: Why is it not very popular in other countries? Because some countries have much, much worse tenants rights. I moved from Ireland to Germany and in Ireland: * There is basically no protection for rent increases, some people are being told their rent is increasing by 50% * Can't change your apartment. Not allowed to paint the walls, nearly all come with furniture, better make sure you don't damage a…

In Germany: - Rent increase limits - Larger changes need landlord's approval (changing walls and stuff). A lot of smaller stuff can be done on your own and doesn't require asking the landlords. (Many landlords are happy if you want to paint the walls etc., though.) - Only smaller apartments (often intended for students) come usually with furniture - The deposit has to be put on a special, locked bank account. The mon…

Two more:

- Temporary leases for residential properties are only allowed in very special circumstances

- For the landlord termination is almost impossible

Tenancy law is very one-sided in Germany which leads to a high vacancy rate for residential properties (around 5% [1]). That doesn't mean that there is no housing shortage at the same time.

[1] https://de.statista.com/statistik/daten/studie/258767/umfrag...

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

#224

Post by Trombone12 »

to3m wrote: post #188
cm2187 wrote: post #97

Earlier quoted context omitted.

You could have savings and investment you could use to cover a lower rent the rainy days. House prices are only high because everyone is over-bidding to buy them. And that's driving rents up. Now this is different to the question of whether you should individually follow the crowd in a country where everyone over-bids on property. If you don't, you still pay a high rent to repay the massive mortgage of the guy who bo…

Why is there room for rents to go up? Why aren't they in general already around the maximum the market will bear?

Because not everyone is poor yet, and rent is among the last things you can save on.

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

#225

Post by ar0 »

SyneRyder wrote: post #119
Noseshine wrote: post #26

Earlier quoted context omitted.

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…

That's really intriguing. The fees you're describing are the same in Australia (2.9% on AmEx) and don't seem particularly evil at all. A few stores do charge a credit card surcharge here, but the majority of retailers don't anymore. As a near-annual visitor to Germany, it drives me nuts that I can't use my Australian credit card everywhere (especially at Saturn). I would LOVE to have an EC card, but it seems there's…

DKB Bank (dkb.de) offers German bank accounts for people living outside of Germany (and they're even free). You'll get a Visa card and an EC card with it.

However, I am not sure if this also applies to Australia or only to other European countries. But if you're really interested it might be worth checking it out. (Also, I think their website is only available in German, so you would need to understand / find someone who understands some German to sign up.)

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

#226

Post by MagnumOpus »

easytiger wrote: post #116
vslira wrote: post #7

According to the article, mainly: 1 - Government doesn't subsidize homeowners; 2 - Renting rules are reasonable for renters, increasing supply which makes renting affordable. There, saved you a click.

The government doesn't subsidies home owners in the UK and it is considered very very expensive, apparently, by many.

The government does subsidise home owners through nearly a dozen different schemes[1], landlords through a dozen more[2], and the mortgage banks through another score[3], which is the reason why prices are very expensive indeed.

[1] freedom from capital gains tax, RTB, HTB equity loan, HTB mortgage guarantee, HTB ISA, Forces HTB, NewBuy, AFHOS, Shared Ownership Scheme, Key Worker Scheme, Home Ownership Scheme for Cripples, and that is just off the top of my head

[2] rent floors through LHA, tax deductability, ability to flip residence between first and second homes for zero cap gains tax, freedom from inheritance tax beyond the usual limit...

[3] state bailouts for all major banks, gurantees, QE, QE2, QE3, liquidity schemes, credit purchase schemes etc etc

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

#227

Post by mason240 »

codemac wrote: post #163
Spooky23 wrote: post #152

Earlier quoted context omitted.

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 communit…

Only the home improvements is unique to home ownership, the rest happen whether or not you're renting or owning.

When I was renting, I had a 30-day investment in the neighborhood/city.

Now that I own my house, I have a 150k investment in the neighborhood/city.

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

#228

Post by wolfgke »

cylinder wrote: post #83
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...

And yet the public debt of Germany is just as high as these credit addicted nations, what does that say?

> And yet the public debt of Germany is just as high as these credit addicted nations, what does that say?

That in the past Germany was not so sensible about its budget.

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

#229

Post by Raphmedia »

LeanderK wrote: post #29

I am a German CS-Student and currently renting in a shared flat with 4 other students. We call it WG (living-community) and its really popular not only with students, but i know a lot of young professionals and even middle aged ones that share an apartment (it gained popularity in the 60s, so i think its more of an culture thing that older do not share a flat). If you are in a partnership, you can move out and share…

> Serious question: Why is it not very popular in other countries?

Nudity is frowned upon but everyone will be half-naked or naked at home. Hard to share a living space.

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

#230

Post by nommm-nommm »

josefresco wrote: post #31

How does Germany handle retirement? In the US, your home is seen as an investment, one that can partially fun retirement or depending on the market, pre-retirement income.

>In the US, your home is seen as an investment

Historically a very poor one.

http://www.usatoday.com/story/money/personalfinance/2014/05/...

>"Capital gains have not even been positive. From 1890 to 1990, real inflation-corrected home prices were virtually unchanged."

>From 1890 -- just three decades after the Civil War -- through 2012, home prices adjusted for inflation literally went nowhere. Not a single dime of real growth. For comparison, the S&P 500 increased more than 2,000-fold during that period, adjusted for inflation. And from 1890 to through 1980, real home prices actually declined by about 10%.

Not to say that a house is a bad thing. A house can be great! It provides shelter, stability, and can provide a vast amount of joy and pride. Its a very poor investment vehicle. Its a very bad idea to have 100% of your wealth tied up in your primary residence.

Diversification is a key to financial stability everywhere.

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