House prices in Germany

I personally think that in the UK the thinking is different to the thinking over here. In the UK the house is looked at as an asset that is there to viewed as just that whilst in Germany, it is viewed as a place to live and eventually die.

I believe that with the advance of a flexible labour market and fluctuations in employment, more people here will view their property as a financial assest as opposed to a fixed home that they will never move from come hell or high water.

During the past 16 years of coming to Germany and having an interest in the property market both at home and abroad, I have seen the advance of estate agents and the attitude to property in Germany. It seemed that all those years ago, selling a house was a real stigma as those that sold often only sold due to financial difficulties rather than moving jobs or moving on. The property market is getting a little more slick over here (property estate agencies with proper displays and portfolios as opposed to a single picture in the the local bank) and are getting the idea that it is ok to buy and sell.

The people that are buying property now are doing so with an eye to profit (I read somewhere that over 33% of properties sold in Berlin last year were sold to foreigners due to its being relatively cheap and a good chance of them making a profit)

I still do not understand why a lot of Germans do not like to buy a property that has had a previous owner and prefers to build. A property in need of renovation is, at the moment, good value for money in most areas of Germany.

It seems to me there is a lot of crossed wires here; Hutcho and Johnny Enlgish both have a point.

1. Hutcho is right because if you are using a house to live in and not an investment - how can you be richer if your house is gone up in value and the next house on the ladder (the one that you would like to buy) has also gone up a similar amount. The only time you can benefit from an asset price rise is if you abitrage and in the case of housing that is by moving out of your area to a slower rising area; moving abroad; or a different house class (I like that - like asset class - financial speak!!!). The Radio 4 programme I mentioned discussed these points.

2. JohnnyEnglish, agreed Equity in a house is at the end of the day worth money and can be used but the provisio to do what? - buy another more expensive house or to start a business. One is realising the gain the other is not - See above.

3. House vs Renting. To add to my earlier post - if you can save whilst renting the calculations most alway be a comparision Asset A (House) vs. Asset B (Shares, Gold, Government Bonds etc). But if you can't save and the mortgage costs are similiar to Renting then buying in the long term willl likely be the better option. The crux is can you save whilst renting accordingly to my models. In general, investing with debt is always going to be worse than investing without debt but the slight twist with housing is that you live in the asset so save rent making it a potential competitor to Pensions,Shares,Funds,Property Funds, Gold etc.

I have a house which is worth more than €300,000 and was thinking of selling it and investing in a market in which real estate appreciates more than here. I am quite handy, so ideally I would get a fixer-upper (so as to also not use up all my capital) and try to work my way up. Buy, sell. Buy, sell. Etc..

Though eastern Europe seems like a booming market, and is what everyone talks about, I really would rather do this in the UK where real estate appreciates and where I can live comfortably for the time (months) that it takes to get a place, work on it, put on the market, etc..

Does anyone have any advice or had any experience doing something like this? TV shows in Britain make it seem as if everyone and their brother is doing this, however I would be interested in hearing from people with real experience.

This implies that you are 100% mobile as to where you live and therefore also work?

The good thing about living in a house and "trading up" is that any gains will normally be tax free (unless you take the piss and move every 6 months).

However you are correct that every man and his dog is trying to do this. My brother as it happens is a property developer in the UK, and we chat on a regular basis.

The tricky thing is buying at the right price, the competition is huuuuuuge for anything that is a project. Also 200k sterling is not a big budget in the south east of the UK, unless you are just gonna use as a deposit and gear up with a mortgage.

But I would be worried about joining the game in the UK now.

For an alternative idea take a look at this website:

http://www.euroburolimited.co.uk/

David Potter that runs the website is a nice chap, and gets a few interesting bits and pieces in Austria, Slovenia, Slovakia etc.

Me? I have my eyes fixed on Austria 'cos it is so near, so pretty and it has great skiing.

The UK is a weird place since as Johnny English said every one and his dog and gold fish wants to be a property developer.

There are so many programmes on TV - extolling the ability to make money via property that it a joke.

I spoke to a few developers and I was told it can be a little corrupt the market as those that are already and have the contacts with Estate Agents etc and have lots of money will give back handers to keep the best and cheapest property of the market. Not sure how wide spread such practices but worth remembering.

Backhanders do indeed still go on in the UK market. Also if you rock up to the average estate agent and say "Hi, I am looking for a project" you will literally hear the audible groan as you will be punter number 500 that week.

With so many punters chasing the same properties the real issue is the 1 in 10 morons that have no proper idea what the refurb is really gonna cost, or simply don't care, so they pay over the odds. So stuff goes for ever crazier prices, and there is no meat left in the deal for a proper developer.

p.s. I used to own an estate agents in the UK in the early 90's with my brother.

Ruin your credibility in one easy step

You're right initially, but that's because initially your interest charges make up the bulk of your mortgage payments. Eventually, that decreases over time with the final result being that you're not paying at all, iow, saving 800 eur a month. The other argument in favour of buying a house is that its value is fairly secure. With shares, the value can disappear overnight whereas with a house even if it's value disappears - which is extemely unlikely - you still have a house rather than a piece of paper. Obviously, you get less return for less risk. But houses are probably the best way of making sure you don't lose money. But they're not the best way of making money, not here at least.

Yes, but the alternative investment of the deposit would have increased in value over that time as well.

That is only true if you do not need a mortgage to pay for the house. To stick with Hutcho’s example, 100 000 deposit and 200 000 borrowed from the bank to pay for a 300 000 house, if the value of the property drops by 50% your house is worth 150 000 and you owe the bank 200 000. That means you have invested 100 000 and end up with –50 000. Try loosing 150% investing in shares!
This is an extreme example but not unrealistic. If you had bought a flat in Kassel or Chemnitz in 1994 that is where you would be now.

Yes, your alternative investment could very well have increased and, if so probably more, on the other hand, also have decreased by a lot less. Other forms of investment tend to be a lot riskier meaning you can make more, but also lose less. There's no right answer. It depends really on your risk profile.

You may have lost 150% on the house, but you still have the house. As long as you still live in it, it's better than losing 100% on your shares because you can't do much with worthless pieces of paper.

For the record, I wouldn't speculate on housing in Germany. Market isn't there for it due to the high transaction costs. But if you're going to live in it, then that's a different kettle of fish altogether.

What does riskier mean and what other investments are we talking about?

What if you factor in the repression risk/default risk which you don't have with Shares then would you still say that other investments are riskier. What volatility are we comparing Returns, Default Risk - chance of 100% lose i.e. Interest Rate risk vs Volatility in Income or Capital Gains. What time span are you talking about as well - since time will play a factor in risk profiles of asset classes.

I'd say one has to be more specific i.e. what is your gearing - what are you unemployment chances, where are you buying in a investment cycle - so therefore I would never said an undiversified assets is always less riskier than other investment opportunities (i.e. Funds, Tracker funds, Currency, Property Funds, Government bonds, Gold, Wine, Saving Accounts!).

Devil is always in the detail when it comes to Investments. Like, as an undiversified Share portfolio can lose 100% like ahouse - look at those people who had all their money in Company Pensions and lot it!!!

I agree when you say there is no right answer but I wouldn't say Property are by default less riskier than other investments. That smacks to me of a property bias...

Stanford the Wineman.

Firstly, I echo what LeChamois said. Eventually your mortgage would be paid off, but had you saved the extra you'd been paying into your mortgage over the same amount you'd would have paid in rent, you would have a huge amount of savings. The interest from this would would be paying your rent (and probably more) so you'd be in the same position as owning a house.

Secondly, if you lose 150% on the house, its not enough that you still live in it. You have lost your 100,000€ and another 50,000€ that wasn't even yours.

Losing 100% on shares when investing in the range I was talking about (trying for 7% per annum) would be near on impossible. If you had diversified shares and this happened, you and the rest of the capitalist world would have more to worry about than just losing your savings. But even if you're still worried, do the sums at 4%. You can get that at any bank here, and that is 100% secure. It'll still work out better than buying.

Remember also with my sums, I selected a mortgage at 5%. Its not going to go much down from there, but it could easily go up. 10% interest rates on mortgages historically are not unusual. That means you'd be paying 2800€ a month instead of 1400€. There's much more chance of this happening that losing a substantial amount in conservative funds.

I also agree with Stanford though, if you're unable to save otherwise (because of will power, not because of not having enough), you're probably best to buy with a mortgage that will make you save, cause if you're renting and not saving you'll be worse off in the long run.

Hi, i'm a brit thinking of moving to Germany soon (I've visited several times before and loved it - Berlin & Stuttgart). There is no way I could ever afford property in the UK on my salary anyway (25k - i'm in construction). I'm very temped to buy a flat in Berlin, the prices are so reasonable! I was thinking I could always rent it out for a bit while i'm still over in the UK. Can anyone recommend good estate agents, and should I get a mortgage from a European bank to avoid exchange rate fluctuations? any help appreciated...

I don't think you need a real estate agent. Just let it be known that you want to buy in Berlin and sellers will flock in. If you are intending to buy to let in Berlin though you should keep in mind that due to the economic situation there is a serious risk of tennants not paying rent regularly.

What you are saying is means that an investment that leaves you with €0 it not as good than one that leaves you stuck with a huge debt to pay back. That is absurd.

Thanks. I would'nt really be interested in renting it out and becoming a landlord long-term, it would only be to cover the period while I am still in the UK. I'm not expecting huge capital gains either - I just want somewhere to call my own, and swore I would never be a harry-come-lately to the UK property market (I could'nt afford to anyway, and the incentive to remain here dwindles by the day).

Germany is in many ways an underrated country in my opinion, and on the face of it buying property in Berlin is a better propersition than buying some wildly over-priced property in the UK and spendin the rest of my days worrying about a crippling mortgage (while stuck in a traffic jam, watching the rain coming down )

UK Traffic. I have in irrational hatred of traffic. Back in the UK I would avoid trips, journey and visits to avoid traffic. A simple 5 mile journey to the airport might mean leaving 1 hour earlier to "be on the safe side". Just driving from say Esher to Heathrow means negotiating Kingston, Twickenham, Isleworth and other horrors. There is no answer but to escape the island.

I actually think the UK is a great place to make money. But if you are not making any serious money, and taking just an average wage and getting by, then better off to get the hell out of there I reckon! Vote with your feet.

p.s. My opinion is just South-East - I am sure other parts are better.

Agree with everything you say. I too suffer an undiluted hatrid of traffic jams - I can start to feel myself twitch uncontrollably, and have spent far, far too much of my life in them. Too many people in too small an island - it affects everything; traffic, house prices, social cohesion...but we have a government who (to quote David Blunkett) see's "no upper limit on the amount of people who can live here" Hmmmm I beg to differ...

But yes, with the right idea and business sense, one can still make a lot of money in England. But if your scrapping by on a fixed salary, you can have it easier and better elsewhere.

Whatever your view is, someone will always disagree with it. I think the UK is an expensive, overcrowded, crime-ridden dangerous country that punishes the law-abiding, and syphathises with the criminal. A country that common sense forgot...

Shame...

Some house listings display the cost of a home in price per square foot or meter. Real estate agencies in the US often do this, especially in NYC where space is at a premium. A good way is to take the price of the property and divide it by the amount of living space. Even Munich looks like a bargain next to New York and Boston where some homes can cost as much as $30,000 a square meter, even more.

Alexis,
I don't know why you included that interesting little tidbit which looks to be from another thread, but it somehow fits. Like Found Poetry! Love it.

I enjoy looking at Property all over the world. Houses or apartments in Germany do not seem to me to be good buys. Far too pricey for what you get or should I say what you do not get. Most Germans seem content to live in tiny tiny houses or apartments , four people in a space meant for one.
AND German contemporary architects and builders. They all think that every " living room "will include a wall unit for TV, etc a sofa , a chair , a coffee table. The plans seem to provide space for these things and nothing else.
Add to this the windows here , a variety of window shapes and sizes in one room in some configuration that is impossible to drape other than to " hang a scarf over it..."

Different sized windows? Just those crazy krauts being all wild and whacky again.

Solution: Don't have curtains. They suck anyway.

Londine, you obviously haven't been to south-east England. Nearly all the average family houses here are smaller than your average family apartment in Munich. I'd say the average size is 65-80 m2 in England, compared to 80-120m2 in Munich.

I was thinking the same... (says he sat in 150+ m2)

I'm with you on that one. Our house is nothing but windows and we don't have curtains. Makes it hard (but not impossible) to run around naked downstairs (on the first floor). Our neighbors must love us.

I have lived in an apartment in London and a house in Cambridge and a house in Penzance. All were far larger than the usual German place but I didn't feel that these places were unusually large.

You need some form of protection from the sun at your windows.

Can you elaborate on that comment?
Why do I need some sort of sun protection? The floor on the main level are stone so even when the sun does hit them, they don't get all that warm. In summer, the house stays cooler inside than it is outside just because of how the house is built. We have dach windows (windows in the roof) but in summer, there are a couple of big trees that block the midday sun so it stays cool. In winter, these trees have no leaves so it lets the sun in and heats up the house.

So, no curtains at our place on the main floor which means I can wave to the neighbors from the kitchen when they walk by.

Tinted double glazing and external roller shutters. Works for me. Not had curtains for years.

Sun ruins most furniture .

And your precious artwork. Londine, the 3 places you lived might have been bigger than the average German place, but I can assure you that's not the norm.

Cambridge and Penzance are hardly the centre of the universe.

Hi there

My second post...apologies for the rant.

I have to admit shamefully that the property bug has yet to erase itself from my brainwashed subconsciousness!

We made a good profit from the UK housing market (in Staffordshire) and have yet to invest. Living in Strasbourg the prices are a bit like good parts of the Midlands with detached property in the right areas costing between 430k to 1M euros. The problem here is that the market has rocketed by around 40% in the last 4 years and now the people dont want to take lower offers...so its a bit of a deadlock...but now i see places that were on the mkt for 400k being reduced by 50k at least. In a way it seems the french got a bit caught up in the old 'property for pension and make a bit on the side' mentality! The french economy is in a mess really but i wont dwell on that!

We're looking to move eastwards to join my girlfriends french friends in leipzig. In comparison the market in Leipzig seems too good to be true and coming from a family of investors it normally is However i am sure there are very good chances to make nice investments both with regular buy to let and other out of the box choices. I think we'll definitely be looking at property/investments in the 100-350k euro bracket with the view to a 10-15 year investment.

We did look at Switzerland where you can get very rich/low tax/high wages...but the cities (geneva and less so Lausanne) just seemed dead and lacked the ambiance you get in Leipzig and Strasbourg...so i guess we might be taking more of a lifestyle decision aswell as maybe a wise investment decision...we certainly couldnt afford to invest for the future in Switzerland or Strasbourg anyways!!

Interesting comments here too about the market.

Cheerio

Richard

Germans tend to live in smaller dwellings for a good reason, this is one of the most densely populated countries in the world. Western Europe in general is densely populated. Life for most people in the Northeast US isn't much different. I lived in NYC for three years and it was cramped, not too mention noisy and insanely expensive, I knew a lady from Zurich who though NYC was a "ripoff".

Alexis just becasue Germany is densely populated doesnt mean that people should live on top of one another . If this country would ever cut down a tree or two , there would be plenty of room.
I lived in NYC too. It wasnt as bad as here . Apartments were far larger.

You must be loaded then - with an ordinary budget in Britain you can certainly not get anything bigger than an average German flat.

When I lived in London we paid £900 pcm rent (plus bills & Council tax) for a small one bedroom flat of about 40 sqm - and that was 6 years ago. For that price I could get something a lot bigger in Germany, even in expensive places like Munich.

48th in the World, 3rd in Europe behind Holland and the United Kingdom.

I'm 100% happy with the fact that they don't allow people just to take over farmland and forests so that they can have 20sqm more to live in and have a garden that they'll mostly never use anyway. I'm just back from Brisbane, Australia and its disgusting back there. My parents live 45 minutes drive from the city, and that 45 minutes consists of driving through constant suburbs the whole way, not to mention about 30 traffic lights. Sprawling cities, of which there are many in US/Canada/Australia, are ugly and inconvenient and stressful and I would never like to live in one again.

I live here with my girlfriend in an 80sqm apartment and that is plenty. Because everyone lives here in a reasonable space, it also means that I can get on my bike, ride 15 minutes from the centre of town and have farmlands and lakes. We also have great public transport because of it, something that is simply not feasible if we did things your way.

Absolutely Hutcho. We need more high rise blocks. No point in spreading outwards - just make the rooms smaller and build 'em higher I say.

I don't get why you would think that in Germany people are living cramped and on top of each other. What Bollox. Have you ever lived there yourself? I have, in many places and have family there and I can say 1 thing - everyone I know moved directly out of home in to a flat of their own, say about 45sqm on average for 1 person at the age of 20 (or in my case 19) in London, where I grew up for most of my life and am now living again, not a single one of my colleagues including superiors lives alone, everyone is sharing/renting a room because of the expense here, it is from my experience far more cramped than anywhere I have yet seen in Germany.

Build downwards. We should start having huge subterranean living complexes. That way we don't ruin the landscape or countryside and you'll have more room to enjoy when going up to the surface...

thats a nippy bike to get to farmlands and lakes in 15 minutes from Marienplatz (Olympiasee and Nymphenburg I guess) but I get the point

it has star trek style warp speed engines.

I like your thinking fellah. The underground apartments would have excellent thermal properties which would stop the Hermans moaning about the cost of heating. It would also keep the rooms 99% dark which is as we know how the Hermans naturally like to live, and it would also have no windows guaranteeing a near draught-free existence. They do have a natural love of kellers.

I am starting to wonder if Germans are in fact derived from a large burrowing rodent of some sort?

Ok, maybe not centre of the city, but I live in Neuhausen, which by anyones standards would be classed inner city and I can ride from here to Feldmochingersee in 15 minutes and its all pretty rural out there..

Take the price of the house and divide by the amount of living space, I saw a home in Düsseldorf Germany that costed $1350 per square meter($135 per square foot). My home in Miami costs a whopping $10,000 per square meter, nearly ten times a similar property in Düsseldorf. Even health insurance is reasonable, I got a quote for 60EUR a month, while I pay over $400US a month in Miami, which also has the highest level of medical litigation in the Southeast USA.

You mean even health insurance in the States is reasonable, right? I paid only $60 a month through my company and here I pay 450€ a month. It is much, much higher here.

I don't live in the city of Munich, but in the non-city part of Unterschleissheim and I pay around 3600E per square meter. It would be much more expensive to own the same house in Munich (or even in Starnberg) .So, it is all relative...

Oi. Leave the trees alone

I'd rather live in a dense (but still green and relaxed) city like Munich and retain a 10 minute bike ride to the huge forest than live in urban sprawl like much of the UK where everyone builds a wall around their own little bit of 'garden' and spreads the mess of the town over a larger area. I used to live in Duesseldorf - god forsaken nightmare that whole part of the country is too.

TreeHuggger

Munich is the most overpriced city in Germany, still like I said real estate in a decent part of Miami costs 10,000US a square meter, New York and San Francisco is even more insane with real estate in better areas STARTING at $10,000 a square meter(I am talking about regular working class neighborhoods), if you don't believe me take a trip here, and you will be shocked at how expensive it is, especially considering that the average wage in Miami Dade is only 28,000US a year. There are some inexpensive companies to get health cover, you are paying way too much.

You have no idea about me and if I am paying 'way too much'. I am not paying 'way too much' for top quality private health insurance.

And, I don't need to visit Miami or LA or any other place in the U.S. - been there, done that, got the t-shirt.

Well you have no idea about me... so there!!! I am finding that the cost of living in the city I plan to live in is less expensive than my hometown of Miami. I would agree with you that Munich and Bavaria in general is expensive. On your profile you mentioned Vermont, no wonder!! I am going from Miami to probably what would be the German equivalent of Portland. Another thing, more people I met in Ruhr speak ENGLISH than in Miami. Damn Cubans and Puerto Ricans!!!