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About Smaug

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  • Location Frankfurt am Main
  • Nationality Spain
  • Hometown Madrid
  • Gender Not Telling
  1.   Quite right. Obviously, if there's no house inflation, but deflation, it doesn't work.
  2.   I agree with you 100% you but I'd like to expand on that thought.   In the typical situation you describe you are only richer "on paper". Your standard of living is the same and if you moved you wouldn't be able to cash in on any capital gains because you'd have to spend those gains on your new home anyway. However, house inflation makes home owners wealthier in relation with renters. In practical terms, homeowners keep their residential "status" (the quality of their housing stays the same) but renters become poorer because as purchase and rental prices goes up, their purchasing power (the quality of the housing they can afford)  decreases, assuming all else stays equal.   In a way, house inflation acts a wealth redistributor, moving wealth from the poor (which own less or no real estate) to the rich (which own more real estate).    There are also many examples in which house inflation actually makes home owners richer. I am going to use the UK as an example because it's a country with historically spectacular house inflation. In the UK, it is quite common for home owners to keep refinancing their property and increasing the size of their mortgage to generate loans that they treat as income. I''ll illustrate this with an example:   Mr and Mrs. Smith buy a house for 200K. Let's pretend their mortgage is 180K. After a few years their mortgage has decreased to 150K but their house has doubled in value to 400K, so now they are sitting on 250K  (400 - 150) worth of equity. Note that when they bought the house their equity was only 20K (200-180) They decide to borrow another 100K. The bank is happy to lend them the money as their house (which is its security) is worth 400K now. Now the Smiths mortgage is 250k and their equity is 150K They use 50K of their newly acquired cash for home improvements (e.g. a conservatory). Maybe their house is now worth 450K as it has a nice new conservatory attached to it. They use the other 50K to buy a new car, go on a cruise and buy new clothes. Notice how the Smiths have actually become "richer" and not just on paper simply because of house inflation: They have an improved house, a new car, new clothes and they went on a cruise. These things weren't bought with income--house inflation paid for them.   In the meantime renters have become poorer, because with the same salary, more and more properties are now out of their reach. If properties have doubled in price they can only afford "half" of what they could afford before.   Now lets fast forward to the Smiths' retirement. After 25 years the Smiths' house is now worth 1,250,000 million quid. They have a 250K mortgage and 1,000K equity. They haven't paid off their mortgage in all this time because they discovered that they could buy stuff they couldn't ordinarily have been able to afford with their income by borrowing against the house. Because the house kept going up and up and price, these debts were cancelled out by their unrealized capital gains and the bank has all too happy to keep playing this game.   Still, renters keep getting poorer and poorer.   When they retire, the Smiths decide to sell the house. They pay off their debt of 250K with the proceeds, buy a house in Greece for another 250K and are left with 500K cash. Notice I say "Greece", because the Smith's have now moved from a place with high house inflation (UK) to a a place with lower house inflation (Greece), they've now become richer, purely riding property inflation spread between the UK and Cyprus.  
  3.   I absolutely agree.   Other contributing factors in my opinion are the extremely low returns on cash savings, which make bricks more attractive as an investment, and many foreign investors pouring money into the German property market after the financial crisis, as Germany was seen as relatively impervious to the wreckage seen in other countries, and a haven for their money.  
  4.   It used to. When I bought my first flat in 2001 the Finanzamt transferred about 1,000 euros to me ea. year for (if memory serves) the following 10 years.
  5. Strange request from Landlord

    I am just guessing here, but that probably has to do then with you being the technical beneficiary of any interest that's accrued in the account. However, technically, it should be a joint account, so, in that sense the situation is non-standard.
  6. @fraufruit Yes, that's right. The numbers refer to Germany as a whole and the variation in property values within Germany is staggering. In some areas values go up and in others they go down. In many areas (and not just in the former East) you can buy nice condos for 30 K, whereas in Munich you don't get a broom closet for 10x that amount.   I bought my Frankfurt flat in 2001 and property values in Frankfurt for the next 5 years or so were stagnant, and even went down a bit some years. It's only in the last few years that it has appreciated in value.
  7. Thanks for clarifying @fraufruit Here's an interesting interactive graphic to play with and check historical property appreciation in different countries.   Historically, German has always had low property inflation. The recent upswings in Berlin, Stuttgart, Munich and other places are pretty much a freak event.   Here's an example comparing house prices in the UK, Germany, Spain and the US since 1980. You can play with the timeframe and the countries to your heart's content though. Imagine you'd bought a house in Spain in 1980 and sold it just before the crash in 2007. It would have been worth about 17 times more in 2007 as in 1980. Even now, after the crash, recession, etc. it'd still be worth about 12 times more than back in 1980.   Crazy stuff.    
  8. Strange request from Landlord

    Is the Mietkaution held in an joint account (both in your name and the landlords)? If yes, there's nothing strange about the request. The bank is asking for this information from ALL account beneficiaries to comply with FATCA.
  9.   Never heard of that ruleo f thumb. Investors generally expect a gross annual rental income of at least 4% the value of the property.   Most Germans don't like investing in the stock market as they are very risk adverse. The prefer to invest their savings in insurance products and real estate although these options are usually less lucrative than stocks.
  10. Thanks @murphaph. That's a great tip.   Getflix didn't work for me most of the summer so I cancelled the autorenewal, meaning I still have it but it's mean to expire. However, Getflix has been working again from November or so. I might sign up again. It's a risk because Netflix really has been playing hardball to block smart DNS. Who knows how long the party is going to last.
  11. Finace/Mortgage for apartment as foreign tax resident

    I would approach or They are top notch brokers. If they can't find a way there probably isn't.   Is there a property in Australia or elsewhere that you can use as security to get an Australian loan and buy the property in Germany? My other half did something similar many years ago (mortgaged a property in Germany to buy another property in the UK).
  12. The corn tortillas at Venos used to be with the frozen foods. I haven't been in a long time so maybe they don't have them any more.
  13. Tricks and traps from Deutsche Telekom

    Thank you @sneaker and @murphaph   Yes, he wants to be able to send faxes. He does that from one of those printer/scanner/fax machine printers.
  14. Are you on some sort of welfare/income support? Many of the documents your prospective landlord is asking for are guarantees from the authorities that they are going to pay your rent and deposit. I presume this is because your landlord thinks that your income is insufficient for you to afford the apartment. What's your exact situation? What does he know about you already? Your profile says you are from Singapore. Are you a permanent resident in Germany? If you aren't I can't imagine you getting the documentation that's being required of you as you might not be eligible for housing or income support. You might have to let go of the flat and look for a Wohngemeinschaft (roommates).
  15. Tricks and traps from Deutsche Telekom

    Thanks @sneaker I am not sure about VDSL or ADSL. I've checked the Telekom website and his address is shown as having MagentaZuhause available (up to 50MBits/s [optional mit Fernsehen]). It doesn't say if its ADSL or VDSL.   I thought the phone wasn't DECT because it's so old, but I've googled a bit more and it turns out it is. It's a Gigaset 3015.   He doesn't very demanding Wifi requirements. The most bandwidth intensive thing he does is watching Netflix streamed over Wifi but the TV and the router are in the same room so no great range is required. There's also very little interference in the house from other Wifi networks (just 3 or 4 at most are detectable).   I don't remember which Speedport was recommended. The 250 euros was including installation. I think 150 for the Speedport and 100 for the installation (or something like that).