House prices in Germany

145 posts in this topic

 

Has anyone ever picked up property at a German auction? It seems like a great option, lower price and no agent fees.

 

 

It can be good, however in most cases it isn't. Anything worth buying normally never makes it to auction because someone (generally a builder) manages to contact the owner and make a deal before it goes. I followed loads of auctions here in Munich and the same thing happens each time.

In the east, where there isn't so much demand, you might indeed end up with a bargain though.

 

If you want to check it out what is on the market, you can see here. A lot of scammers out there package exactly what is on this site and then charge you to access it. The one I just linked to is the source though and it's free.

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Has anyone ever picked up property at a German auction? It seems like a great option, lower price and no agent fees.

 

CamperMan has experience in that regard.

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Has anyone ever picked up property at a German auction?

 

I believe my FIL did that many years back (in village North of Husum).

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I would not use a mortgage to buy a property to live in. My parents never did, they bought all their properties in cash, my parents in law didn't either, they inherited their properties, and my husband and I will definitely not be the pioneer for this scheming from the banks.

Using mortgage to buy investment property, on the other hand, may still be viable, due to the tax breaks in Germany, and if you can get good renter it could possibly be a good investment.

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I would not use a mortgage to buy a property to live in. My parents never did, they bought all their properties in cash

 

 

Wouldn't that be nice to be able to do, eh... :rolleyes:

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There is absolutely nothing wrong with a mortgage either, depending on the circumstances. And again, depending on the circumstances, it could also be a bad idea to buy a house cash. There really is no one answer for this.

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Wouldn't that be nice to be able to do, eh... :rolleyes:

 

 

The way my folks did, they saved and saved and saved until they have enough for their first house. And then saved and saved and saved for the second house. Then second house is rented out and they have more cash. Guess where the cash went? Saved up until it is enough for the third house. And so the cycle continued until they have several properties.

Granted, it is in Indonesia, where properties are much cheaper than Germany. But my parents' salaries are also paid in Indonesian money. They're just prudent and like real estate investment. Even now when inflation is 6% and price of real estate have quadrupled from the last time they bought property, they still refuse to get a mortgage and are currently saving to buy their latest target. It's just different mentality.

I'm not against mortgage, as I mentioned before it can be a good idea for investment property in germany. But only in special circumstances, I.e. You have good tenant and the tax saving + rent > monthly mortgage payment. Can check also NPV of the interest payments (plus the refurbishment cost, say every 2 years) and compared against that of the tax saving + rent, allowing probably 20% vacancy throughout the lifetime of the interest rate payment, and check if tax saving + rent NPV is bigger. If not then it's not a good investment.

While we are at it we can also compare the NPVs of 30 years mortgage cost against 10 years rental + 20 years mortgage costs against 20 years rental+ lump sum property price against the price of the property in cash today. The year variable can be changed depending on your preference. Then we will know for sure which option is better.

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Even now when inflation is 6% and price of real estate have quadrupled from the last time they bought property, they still refuse to get a mortgage and are currently saving to buy their latest target. It's just different mentality.

 

 

If this is the case, they would be a lot more wealthy now had they taken mortgages and bought houses twice as quickly.

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Leverage works if you buy on the rise, get your area right and take your profits.

 

I am nothing like as property rich than my peers who bought with big mortgages and sold up a few years ago. But I never wanted that risk. Yet I - the tortoise who got by "only" having one house during the UK boom - am suddenly clearly considerably better off and with much better cash flow than the people who spent the middle part of the decade buying their holiday homes and moving up etc. A lot have them have sagging capital values (negative equity) and tiny rental streams.

 

I think it's not really hit home yet. I notice from time to time that the mates who thought nothing about dropping cash all over the place five years ago now can't even afford a single city break or cheapo ski holiday with me. And that their "holiday" is paid by someone else (a conference or something). Their money is tied up and their worth is falling.

 

Also, the value and accessibility of assets changes. A lot of people now cast a very beady eye on the (government) pension fund I spent 20 years building up. Particularly now they do not exist in the same generous form. In 2011, it's apparently "unfair" that I have that. But, of course, 10 years ago, I was considered stupid - not to mention dull - for building that up rather than having a swanky holiday home.

 

I can buy another house in the next 20 years if I want. But those guys know they can't buy my pension, which has a value far more than their houses. But of course their financial worth, and consequently their status, is perceived to be far higher than mine because people can see their houses. A pension fund or a bank balance or a share portfolio is invisible.

 

People also underrate compounding too. That helps desdemona's parents. That once you have, say, 100k, that'll generate (conservatively) 6k for every year of the rest of your life, including on each year's gain. Can very much out-perform the occasional speculative gain long-term.

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The European home/house buying mindset is very different than the one in the US/UK/AUSSIE/NZ. I am German living in the UK for a few decades now owning a very big 5-bedroomed-semi in a leafy sought after area here in London - we also own a part commercial/part residential property in another area- both fully paid - no mortgage. The commercial part is used for hubby's shop, which he ran for the past 2 decades. The residential part consists of two 1 bed-roomed flats which have always been rented out. When we bought our home we bought it because we wanted our own home and not for speculation purposes. We were both over 35 when we bought our 1st home with a substantial deposit here in London.

 

We rented whilst living in Germany before that and it was dirt cheap at that time - 'cause I was a member of a housing association. Nearly all my friends in Germany own their own home - but some do rent because it is more economically for them. In general there are different property rules + regulations between the UK and Germany. Here in the UK homeowners invest in property partly because of their meagre retirement pension and since rents in general are sky-high compared to paying a mortgage for 25-30 years.

 

UK homeowners do not pay CGT on the sale of their home whereby in Germany you will if you sell before the first 10 year period - designed to clamp down on speculators. So climbing up the "housing ladder" has become a desirable hobby for many British homeowners. Germany has a very well functioning government backed rental- protection-system in place, which in turn protects renters from spiralling rents, substandard premises, and falling victim to scrupulous landlords. This in place helps to keep inflation/living costs down in the country in general. In Germany buying a home is something you consider very careful since financial intuitions are reluctant to lend to anyone that comes along.

 

A lot of Germans start saving young into a specially designed home-saving-scheme (Bausparkassen) helping to achieve the required 20%-30% deposit - these are also tax-saving tools - a generous annual premium is paid as well by he government. Variable interest rates are not common - in most cases they are fixed for 10 years at least when setting up your mortgage-contract, which somehow helps planning/budgeting the monthly outgoings. Also the terms are quite often shorter than 25 years - which means people have paid off of their mortgage 10 years before their retirement. Germany didn't suffer such a disastrous housing bubble as seen here in the UK/US.

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Thanks for reporting on your experiences, cyberbabe. And welcome to Toytown. Just a couple of corrections:

 

1) There is no capital gains tax on a property that you use as your primary residence, even if you hold it for less than 10 years.

2) One of our resident financial experts, Starshollow, debunked the attraction of Bausparen in this thread.

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Yes, isn't it time this "CGT on your residential home" urban myth was put to bed? It's been dismantled enough times here now. And the "that nice German government will subsidise your home purchase" one as well?

 

The 10 year term is also misleading. This is a loan period. It does not mean an obligation to pay of 100% of the capital, or that most people can / will / do. You set the repayment portion (Tilgung). johng recently reported that he specifically asked for a 5% Tilgung - the bank suggested a mere 2% was somehow better for him!

 

Do the maths. Typical my way - 400k purchase, call it 250k mortgage. Someone on c. 55k net (80k gross). Most are not paying 35k+ a year on housing (ie. 25k capital plus 10k interest).

 

It seems quite normal to have mortgages for ever and ever, plenty of people well past retirement age with big mortgages - it a way of financing later life.

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If someone can't afford to buy a house, renting is the only option. People fresh out of college, can't go and buy a house two days later, and they haven't made a full years salary yet. That is debt waiting to happen. My dude has the same mind set as SpiderPig. He says that buying a house is cheaper than renting. So I'm like ok, lets buy a house. His dad has a crap load of property, and he offered us the rest to build our house. My dude doesn't want to do that, but I am all for it. I want my son to have something when we whither away. The only thing when he is an adult, that he would need to replace, would be the furniture. But for now, if money is tight, renting may be the best option. Don't tell people what they are doing is wrong and a waste of time, because you don't know their situation.

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Don't tell people what they are doing is wrong and a waste of time, because you don't know their situation.

 

Yes, we don't know their situation, do we? Yet you drop your "dude's" family money into the conversation, although almost everyone reading this won't have the luxury of inherited wealth or people offering them free houses. Seems it's just the rest of us that should be super-sensitive to the situation of every other possible reader.

 

Everyone is entitled to their opinion. They cannot address the personal situation of everyone on the plant who might happen to read it. I don't think most people are of the belief that they are so influential that anyone reading what they say thinks: "well, Ms/MrRandomPosterWhoHappensToHaveAMindOfTheirOwn off OneOfTheMillionsOfRandomWebsitesOnTheInternet.com said this and therefore I must do what they say".

 

The trick is to read the reply as someone else's opinion. Not to project it onto oneself. Particularly if you then go on to do exactly what you have lectured the rest on not doing.

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So long story short :

 

What is better:

 

Buying an apartment with 3 rooms that costs 60000 euro, lets say 30000 downpayment and 5 year mortgage, or renting it with aproximately 500 euro rent and probably 150 euro costs monthly?

 

How should I calculate to find the answer?

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You could probably get a 30k loan for around 100 euros a month at the moment, so if you can really find a flat that would cost 650 in warm rent for 60k, it sounds like a good deal to me. The figures seem a bit strange though.

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