House prices in Germany

145 posts in this topic

It really depends where in the US and where in Germany you are talking about. Only the rich could afford a house in Munich with a "huge ass back and front yard", likewise basically anyone could own a similar house in, I don't know, North Dakota.

4

Share this post


Link to post
Share on other sites

 

because otherwise you'll have a mortgage which is basically the same as paying rent),

Except that the mortgage stops at some point. My house will be paid for in the next 5 years and then I will be living "rent" free for the rest of my life, whereas anybody renting will be paying a significant amount of their pension in rent for the rest of their lives, with no guarantee that the rent won't go up or the owner deciding that they want you out of there.

5

Share this post


Link to post
Share on other sites

Yes, but how much have you paid over the years more in mortgage than you would have in rent? Also, how much would have your down payment on your place be worth now had you invested it in the stock market?

 

It could very likely be that had you done that, you'd have enough cash in the bank to buy two houses. Of course, it could also be the case that your investments would be worth nothing now.

 

My point is, when you buy a house, you're choosing a method of investment. People from Australia/UK/US seem to always think it's a good investment choice, but that is certainly not always the case.

 

I would not immediately move to a new country and put all my savings into a new "investment" in a foreign country without having some seriously good professional advice or doing a lot of research about it beforehand. And anyone moving here and thinking to buy instead of rent is doing exactly that.

7

Share this post


Link to post
Share on other sites

Great advice Hutcho!

 

I think that would be the best choice for myself after going there is to rent first and suss it out while knowing that you have a stable job, the surrounding area is what you like and that you feel comfortable. I guess it also comes down to what future plans you hold.

 

As i am getting married beginning of next year, we of course will plan on having kids. Whilst i want in the future to have something my my kids and not be like my when i was growing up. My parents rented and i am still renting at home with them, they cant offer me anything.

 

It does come down to if you plan to settle down in one place, or if you career hop and or city hop, buying or renting might have their disadvantages.

 

Personally myself i want to settle down with the future wife and kids but that will be after i know where. So i think renting would be the best "first" option and then organize and plan for what you want for the future for yourself and your family. Times have changed and its hard to move from one house buying it, then deciding to move and buying another house whilst selling the other (here in Australia anyway).

0

Share this post


Link to post
Share on other sites

 

Also, how much would have your down payment on your place be worth now had you invested it in the stock market?

 

I some cases very little...

2

Share this post


Link to post
Share on other sites

 

Yes, but how much have you paid over the years more in mortgage than you would have in rent?

 

Really the interesting question is how much have you paid in mortgage interest over the years over what you would have paid in rent as you can, in many mortgages, vary your repayment percentage but your interest remains the same. If I repay interest + 100 euro a month is my flat cheaper or more expensive than if I pay interest + 1000 euro? The answer is, of course, it depends...

 

The question about your deposit is of course similarly impossible to answer - you have spent your money on a depreciating asset (if you look at it from a tax deduction perspective), that you bought because you wanted to live there and expect or hope the value to appreciate. The very act of purchasing cost you 8%+ of your money so how much profit did you make? You could have invested that money for 20 years and made 8%pa on it, or lost it all, or something inbetween.

 

 

 

 

I would not immediately move to a new country and put all my savings into a new "investment" in a foreign country without having some seriously good professional advice or doing a lot of research about it beforehand.

 

Amen.

0

Share this post


Link to post
Share on other sites

 

I some cases very little...

 

Even with the crash in 2008, the stock market has risen massively in the last 20 years, while house prices in Germany have remained fairly stagnant. You wouldn't have had enough for two properties as Hutcho suggested – you'd have had enough for three. (Graph shows FTSE 100.)

 

post-977-13116907563648.jpg

2

Share this post


Link to post
Share on other sites

So if you bought in 1996 and did not vary your investment in any way (such as taxes paid on any interest or dividends or loss of investment due to bankruptcy or dilution or commissions paid) you would be where you were then right now?

 

Not an answer.

 

And very different here in Germany, where tax treatment of stocks and investment opportunities are extremely different.

 

I wouldn't buy a place in Germany without living there for a while because transaction costs are extremely high. But that's a different reason than believing that other opportunities are greater or better.

0

Share this post


Link to post
Share on other sites

That's true STB but it's a selective reading of the data. Had you invested in 1930 you would have waited 30 years for that investment to break even. From the data in your graph you can see that money invested in 2000 hasn't returned a profit yet, and is still showing a decent loss. Of course you don't just throw money at the stock market and hope, you get a professional to do it for you, then you pay fees of up to 5% of your initial investment for the services he provides and he will guarantee you virtually nothing except his next Porsche.

 

It's fun this investing isn't it :unsure:

1

Share this post


Link to post
Share on other sites

 

but your interest remains the same.

 

Not if you refinance, which we have done ~ 5 times in the course of 8 years. Interest rate is now ~4.5% for a 30 year = very low for USA. Is it difficult/ costly to refinance your loan (switch lenders) in Germany?

 

And the comment about only old houses having large yards in the USA is silly. My CA house is a mere 8 years old, with [by European standards] a "big ass front and back yard".

 

@f_f, just got your PM, thanks, but the links you mention are missing! :) I emailed my Argentine lawyer/ real estate magnate buddy, and he said simply "WTF do you want to do in Nicaragua?!?" LOL. Oh, the snobbery!

1

Share this post


Link to post
Share on other sites

 

Not if you refinance, which we have done ~ 5 times in the course of 8 years. Interest rate is now ~4.5% for a 30 year = very low for USA. Is it difficult/ costly to refinance your loan (switch lenders) in Germany?

 

It's not impossible to refinance a fixed-term mortgage in Germany, but it might as well be, as you have to pay a Vorfälligkeitsentschädigung (prepayment penalty) to the bank - which is calculated as the difference between the interest rate you were paying and the market interest rate for the remaining term of the mortgage. A somewhat recent court decision limited the banks to charging the actual amount they would be forgoing, instead of the previous "whatever we feel like charging", but they can still charge you. It might be worth it if you have 2 years left and want to lock in a new rate for 10 more years, but in most other cases it removes nearly all the incentive to refinance.

 

Another huge difference between the U.S. and German markets is that the U.S. lets you deduct the interest payments on your primary residence from your income taxes, while Germany does not. This huge distortion shapes the entire U.S. housing market, as people are much more anxious to climb that first rung of the property ladder to capture those sweet, sweet tax benefits. In Germany, in contrast, it makes more sense to buy and rent out - at least from a tax perspective - because your interest payments are 100% deductible from your rental income (and any subsequent losses are deductible from your regular income).

1

Share this post


Link to post
Share on other sites

 

Not if you refinance, which we have done ~ 5 times in the course of 8 years. Interest rate is now ~4.5% for a 30 year = very low for USA. Is it difficult/ costly to refinance your loan (switch lenders) in Germany?

 

You can refinance easy in the US because you likely have a variable rate loan or a loan fixed for only a certain number of years. Here there are virtually no variable loans and everything is fixed so you have to ride it out for the most part.

0

Share this post


Link to post
Share on other sites

Ach, so. So it sounds like the key to buying in Germany would be to time it when interest rates are very low. Are they, currently?

 

My in-laws never bought, though I think they could have. My German teacher told us it's a cultural thing that renting is the norm. Risk aversion, oder?

0

Share this post


Link to post
Share on other sites

 

@f_f, just got your PM, thanks, but the links you mention are missing! I emailed my Argentine lawyer/ real estate magnate buddy, and he said simply "WTF do you want to do in Nicaragua?!?" LOL. Oh, the snobbery!

 

Sorry, I reset the privacy settings, try again see if they work now. LOL, the snobbery! Yeah, Nicaragua is not for the weak of heart, that's for sure. It's a rugged country but, never the less, the people and beauty of it grows on you.

1

Share this post


Link to post
Share on other sites

 

Another huge difference between the U.S. and German markets is that the U.S. lets you deduct the interest payments on your primary residence from your income taxes, while Germany does not.

 

While this is the case now, it wasn't when I bought my place. You could deduct the interest against tax for something like 8 years. It's a while since I did this so I can't remember exactly, but it meant that I paid significantly less tax for several years.

Something else that many people seem to forget is that rents are not static, they have risen steadily over the years. The last place I rented in Munich in 1988 cost approximately €350 a month warm for a 65qm flat in Neuhausen. It would cost double that now at least.

0

Share this post


Link to post
Share on other sites

 

Yes, but how much have you paid over the years more in mortgage than you would have in rent? Also, how much would have your down payment on your place be worth now had you invested it in the stock market?

 

 

Regarding the first question, it's always less than renting. Let's put it this way. If I am renting an apartment, I am renting for my entire life. Say I am paying 1000,-€ a month now, what will that be in 40years or so per month when I retire? I very much guess it will be higher than it is now. And when I retire, I will need every cent I can get. The last thing I also need is a high rent every month.

 

I was doing that until recently. Now I own, and I pay less than I did on rent including the Hausgeld each month. Outside of the Hausgeld, my mortgage will not increase over the next few decades and my mortgage will be paid off by the time I retire. So, for all we know, those who rented could be paying anything between their 1000,-€ per month to who knows what the price may be when they retire, and I will be living rent free. I will also have the entire capital of my apartment which I could sell.

 

There are also opportunities to sell before hand. In most cases, one makes an increase as house prices to generally trend upwards. But yes, there is always a chance of having to sell in a recession and make a loss. That loss though is NEVER as high as the loss in renting. The loss in renting is 100%. Everything you put in each month is gone for good. You never get it back. So, even if you sell in a recession and make a loss, you don't loose 100% of what you put in like renting. But there is still a good chance that you sell after following the general trend and make a profit.

 

As for the stock market, that is all very good but has nothing to do with house buying. The stock market is gambling. We may as well be talking then buying Lotto or going to Vegas. Gambling is a different subject and one can gamble if he rents or buys. It makes no difference. In fact, since I bought, I have more spare cash available to gamble more, so if I want to take on the stock market, I have more available funds.

2

Share this post


Link to post
Share on other sites

 

what will that be in 40years or so per month when I retire?

 

 

Probably much the same as the interest or investment income you would forego on having capital tied up in your house.

 

I own my apartment outright. That does not in any way make it "free" for me. Its cost is 12-14k a year (call the capital value = 300-350k). That's how much income I'd get (minimum) if I sold up and had the capital earning interest or rented it or something.

 

This is the big lie that home ownership is sold on of course. That your housing is "free" once the mortgage is paid. So many people seem to think that. And also that the cost to them was the purchase price. It's not. The price we pay and the costs are based on the current market value.

 

In addition, as we come to the later part of our life, it seems slightly illogical to have a large capital sum tied up in property! Can't take it with you! What on earth is the point.

 

OK, it's good to have a share of your wealth in property, like other assets. But I do see an element of it being used to keep the middle class in their place these days. Stuck in one place. Not consuming our money on the good life - god forbid that we plebs should do that, we should all be diligent thrifty savers, we'll get our reward in heaven. And so on.

3

Share this post


Link to post
Share on other sites

 

I own my apartment outright. That does not in any way make it "free". It costs me 12-14k a year (call the capital value = 300-350k). That's how much income I'd get (minimum) if I sold up and had the capital earning interest or rented it or something.

 

And where would you live? You can't just say I'd make money if I invested the capital tied up in a property, you would have to pay to live somewhere else, so you wouldn't have any more money, as you'd be handing over your income to someone else. You would however be at the mercy of your landlord who could raise the rent or decide he wants the place back and you'd have to move, which would also eat up a big chunk of your capital.

1

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now