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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

#331

Post by mrottenkolber »

fwn wrote: post #102
mrottenkolber wrote: post #56

Germany is a two-class society divided into landlords and renters. A landlord will usually not own only one but ~3-20 houses that total to ~15-100 flats. The landlords often are renters themselves. When compared with big housing companies, private landlords require bigger profit margins, leading to low quality maintenance of existing houses and ex-orbital rents. Especially in crowded cities, rent regulation is non ex…

Spending 70% of your income on rent is far from inevitable in Germany.

I wrote “as much as.” So this varies from town to village, and how much income you have. So of course for some rich people it will be 10%, but I would guess for most its ~50% (living quality / income trade-off), while you really want it to be below 15% for a decent flat.

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

#332

Post by analog31 »

ythl wrote: post #312
eloisant wrote: post #217

Earlier quoted context omitted.

Well rent doesn't create any wealth either, you're just paying monthly a landlord so he doesn't have to work. If you want to create value, you should make sure that housing prices (both renting and buying) stay low. This way not only wealth can go to other investments, but more people can take the risk to start a business if they don't have the risk to be unable to pay their rent or mortgage.

Being a landlord sucks, you don't know what you are talking about. Tenants are terrible for wear and tear on your house. Since they don't own the house they don't treat it with care. Lots of maintenance and tenant problems that need solving.

I have friends in some of the rental neighborhoods in my locale. How do tenants destroy the outside of houses, make roofs leak, or fail to turn on the heat?

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

#333

Post by mrottenkolber »

LeChuck wrote: post #326
fwn wrote: post #102

Earlier quoted context omitted.

Spending 70% of your income on rent is far from inevitable in Germany.

Not only far from inevitable but impossible in a lot of cases. When I was looking for an apartment in Germany most (all? I can't remember) landlords wanted to verify that my income was at least three times the rent.

Well, that can’t work out in all cases, obviously. Remember that a significant chunk of the people don’t make 3x of a low rent in many towns.

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

#334

Post by sedachv »

kasey_junk wrote: post #275
pixl97 wrote: post #167

Earlier quoted context omitted.

>Stocks and savings are equally a safety net against loss of primary income. Until you have a 2007 collapse again (predicted by some to happen again soon), where you both lose your job and a massive amount in stocks. Savings have been at extremely low rates for a long period of time in the US.

At about the same time the housing market got decimated as well. It also comes back in more variant ways. One extreme downside of thinking of your home as an investment vehicle is how poorly it is diversified. It is almost exactly directly correlated to the local job market...and to macro trends like the MBS issues we saw in 2008.

> One extreme downside of thinking of your home as an investment vehicle is how poorly it is diversified. It is almost exactly directly correlated to the local job market...and to macro trends like the MBS issues we saw in 2008.

This is what I cannot understand about people who advocate buying homes in the United States for small-time investors - how can you not see this? How does it make any sense to divert almost all of your cash flow into a single, massively leveraged, illiquid investment? Miss a few payments on your mortgage and you are totally wiped out (and without a place to live!). At least stocks can bounce back and maybe you can get 30% back on bad bonds. And no one is stopping you from holding cash or TIPS.

If you are wealthy and a house is a small part of your portfolio the impact of the possible downsides is qualitatively different, but as a small-time investor tying up most of my wealth into home ownership on the hope that "house prices always go up" (which really means treating the future generation as suckers that will pay inflated prices for your home) and that the risk of mortgage default does not exist does not make sense to me.

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

#335

Post by quicklyfrozen »

nommm-nommm wrote: post #184
kodablah wrote: post #174

Earlier quoted context omitted.

Your points miss both the financial incentive to make things better for your own asset and long term incentive since oftentimes renting makes one more nomadic. Point by point: - You might not garden w/ no equitable return on house value (or at least not build a large gardening setup), and landlords feel the same way in reverse (no benefit to them to do anything beyond the minimum once it's inhabited) - Maintain != im…

When I rented I gardened. I haven't the slightest clue why you believe someone wouldn't garden when they rent. In fact the place I rented I picked because I could garden.

As a landlord, I'd be pretty unhappy with tenants gardening on my land -- that's just an extra expense as I'd have to maintain it or convert it back when they leave. Maybe if they signed a long lease...

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

#336

Post by arebop »

Spooky23 wrote: post #251
heisenbit wrote: post #196

Earlier quoted context omitted.

"Residential properties usually have short term leases." Not true in Germany. Most leases are indefinite. As the contractual rent often increases by less than the market there is some incentive to stay put. Also keep in mind that moving in Germany is an expensive proposition as the kitchen is usually not part of the deal.

Germany has a different legal system and tradition. The probability of the US enacting indefinite leases is zero.

1/3 of San Francisco apartments are effectively under indefinite lease.

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

#337

Post by AjithAntony »

alistairSH wrote: post #206
cm2187 wrote: post #112

Earlier quoted context omitted.

But this maintenance would happen anyway whether you own or rent.

At a much slower rate. If the paint in my personal home starts peeling, my incentive to fix it is higher - I don't want to walk down the hall and see peeling paint. If the paint in a corporate-owned tenement starts leaking, what incentive does the corporation have to repair it? They will do the bare minimum to prevent me suing them for breach of contract. A tenant is unlikely to sue over peeling paint. And they activ…

> If the paint in my personal home starts peeling, my incentive to fix it is higher - I don't want to walk down the hall and see peeling paint.

> If the paint in a corporate-owned tenement starts leaking

LOL. It's the opposite effect. If I own the place, and The paint is peeling, and I have to fix it... then maybe I'll just live with it until it gets worse, or I plan to sell. If it was a rental, then I complain to the landlord to fix.

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

#338

Post by hash-set »

sedachv wrote: post #334
kasey_junk wrote: post #275

Earlier quoted context omitted.

At about the same time the housing market got decimated as well. It also comes back in more variant ways. One extreme downside of thinking of your home as an investment vehicle is how poorly it is diversified. It is almost exactly directly correlated to the local job market...and to macro trends like the MBS issues we saw in 2008.

> One extreme downside of thinking of your home as an investment vehicle is how poorly it is diversified. It is almost exactly directly correlated to the local job market...and to macro trends like the MBS issues we saw in 2008. This is what I cannot understand about people who advocate buying homes in the United States for small-time investors - how can you not see this? How does it make any sense to divert almost a…

I don't think most Americans buy houses as investments. There are other reasons: You usually find yourself in a better neighborhood with fewer hassles if you buy vs. rent.

Stocks and bonds aren't any better anymore--the bottom could drop out again anytime and leave you with half or less of what you previously had.

We're in a crap storm of epic proportions in this country, but we avoid the reality of it.

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

#339

Post by manarth »

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?

As an example, in the UK, social security provided a formula that determined the "permissible rent".

If I claimed housing benefit, they would look at the formula, and tell me "Your housing benefit is a maximum of £x: if your rent is more than that, you have to pay it out of your own pocket".

The formula dictated the maximum rent for state-subsidised housing: almost no tenant claiming social security could afford to pay above the subsidised amount from their own pocket.

However, the formula accounted for rental prices in the region over the previous few years, and effectively acted as a price escalator. All DSS landlords priced their rent at the maximum permitted, and the subsidy therefore regularly increased with their prices. As a result, buy-to-let became very popular, with a number of training courses/presentations pitching this price-escalation practice, which also helped sustain the price escalation.

As rental prices increased for state-subsidised landlords, unsubsidised private tenants also had their rents increased, both sectors mirroring each other.

The government have since introduced caps to various benefits, which may put a stop to the routine escalation, but it's a good demonstration of some of the legislative flaws. For most people, a place to live is high if not top on their priorities, and most debt advice councilors recommend paying rent/mortgage as the top priority, above every other bill, so even given excruciating increases, most people will still pay it.

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

#340

Post by moosekaka »

erikb wrote: post #267
valine wrote: post #43

Earlier quoted context omitted.

I've always been the opposite. I can't stand coming home to an apartment filled with people. After dealing with chaos all day, I want to know there's a quiet, tidy place where I can relax. I dislike coming back and having to interact with people.

Yeah, for me sharing the apartment is more of a downside either. I also only know people who enjoy it because they were friends with the other sharers before they shared an apartment.

I have done both (shared an apartment and sole renter). I definitely prefer been the sole occupant. Personal space and privacy, not having to wait for the bathroom, sleep schedules, cleanliness of common areas (especially the kitchen, which by far has been the largest source of conflict wrt to cleanliness).

Of course it is 'wasteful' and expensive to take up a whole housing unit to yourself, but some (most?) people (especially strangers) in the US do not make considerate room mates. Actually probably long term only family members learn to live together in harmony (probably because they have to).

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