60 posts in this topic

17 minutes ago, BradinBayern said:

The thing that ticks me off is that there are people who see real estate as a place to live, not just an investment.  Those of us who want to buy because we want to live there are being driven out by people who see real estate as nothing more than a substitute for a stock or bond.  It is particularly annoying to see buildable land  sitting around and seeing nothing on the market for sale at any price.  

 

Lots of people don't want to buy in Munich or elsewhere for several reasons. This is as much true now as it was 10 or 20 years ago. Others are willing to risk it and invest their time and resources. That said, my Mietern are happy to rent from a a "small fish" private landlord instead of a big company.

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2 minutes ago, mtbiking said:

Lots of people don't want to buy in Munich or elsewhere for several reasons. This is as much true now as it was 10 or 20 years ago. Others are willing to risk it and invest their time and resources. That said, my Mietern are happy to rent from a a "small fish" private landlord instead of a big company.

That is true, but that isn't what I was talking about.   What I see is empty lots and empty buildings where the investor is just using places where people want to live as a chance to park their money.  Some of it dirty:  https://www.dw.com/en/german-real-estate-market-a-hotbed-of-money-laundering-transparency-reports/a-46637937

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27 minutes ago, BradinBayern said:

That is true, but that isn't what I was talking about.   What I see is empty lots and empty buildings where the investor is just using places where people want to live as a chance to park their money.  

 

Where do u want investors to park their money? In a bank?

 

As long as the era of ultra low interest rates continue, then people need to park their money somewhere.

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The right order if you want to buy property is buy a house to live in first, then use the spare cash to invest. So that if your investment does not provide you with the return you expect, you have at least spent your money on the roof over your head that you could theoretically keep forever.

Donkey years ago, I did a comparison of the property price trend against stocks and bonds, and the conclusion was the property and stocks/bonds trends are very similar. That means you don't necessarily diversify when you put your money in properties and stocks. If you want diversification, you better off choosing between property or stocks, then as a hedge against market contractions, some commodities ETF (or perhaps even real gold, haven't tried this before since I'm not interested).

Given the low yield environment in Germany, stocks seem to make sense for many people. I always dread the market risk, though, that can cause you to lose your initial investment. With property, despite low yield and long holding time (probably a lifetime...) the value of the land will not decrease, and if it's located in the city, rest assured you would at least recoup your initial investment. If the property is located in the country though, that's more risky as the trend until 2050 is that people moving to the cities and leaving the country. You might not even be able to sell the house at cost. 

Back to the OP, if you sell it after 10 years, your minimum asking price should cover original price + side costs from buying + mortgage interests + maintenance costs in 10 years. I can't tell the trend in 10 years, maybe the bubble will burst by then, but as I wrote before, at worst is the rise in property price will decrease, which means slower price growth, or stagnant prices. Property prices in the cities will not go down. What costs 700K now will not halve its price in 10 years, at worse it'll stay at 700K.

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2 hours ago, RenegadeFurther said:

 

Where do u want investors to park their money? In a bank?

 

As long as the era of ultra low interest rates continue, then people need to park their money somewhere.

Gold or stocks.  See above.  

 

And there should be more done about keeping dirty money out.  Apparently though, there has been some movement on that.  

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The option I'm not seeing here is just to buy a small rental, finance for 10 yrs. and then you have a steady stream of income. When the first is paid off, buy another. More income. 

You would still have to opportunity to sell at a later date if needed. 

 

We bought one small rental to supplement our retirement income. It has worked out well. We could now sell it for about triple what we paid for it but we'd rather have the steady income. It pays for our beer and wine. The selling option remains. You only hear all the nightmare stories about renters. We've never had a problem. 

 

Oh, before retirement, we invested the rental income so you can have it both ways.

 

 

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1 hour ago, BradinBayern said:

Gold or stocks.  See above.  

 

And there should be more done about keeping dirty money out.  Apparently though, there has been some movement on that.  

I read somewhere the Bavarian land bubble has been Russian dirty money laundering. 

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6 hours ago, RenegadeFurther said:

 

The whole situation is a actually bit depressing not just in Munich but in a lot of major cities.

 

The only thing in my opinion that will cause a price correction is higher interest rates.I can`t see central banks raising interest rates anytime soon.

 

The era of cheap money is unfortunately here to stay.

This can´t go on forever and it´s just a matter of how and where. My guess is a credit crisis in China that starts the snowball effect.

This will (again) collapse banks and drag economy with it, as investments are halted due to lack of credit.

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4 hours ago, desdemona said:

I always dread the market risk, though, that can cause you to lose your initial investment. With property, despite low yield and long holding time (probably a lifetime...) the value of the land will not decrease,

 

Neither of these statement is true.

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Insofar as the Berlin real estate market is concerned (and perhaps Munich) 10-15 years ago the cost per square meter compared to other EU capitals was far lower, even though the quality of construction was better.  That was the reason I bought.

My thinking was that it was more likely that Berlin would catch up to the other capitals rather than them dropping.  Also, the wall had come down and the move from Bonn would open up new inventory and demand.  All of that has happened, while at the same time prices in general have gone up in the EU.  I don't know if the german cities are on par with the rest of the EU, but until they are, prices will go up....unless they don't.

For example, Paris has become a highly speculative market.  Many apartments have been sold to large investors who do rentals (long and short term).  If these investors are no longer happy with returns and start to divest, it could cause a run which could drive down prices.  Those same investment companies might find the Berlin or Hamburg market more attractive and move their money there which would drive up prices.

 

Anyone who claims to know where any market is going is a fool.

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27 minutes ago, MikeMelga said:

This can´t go on forever and it´s just a matter of how and where. My guess is a credit crisis in China that starts the snowball effect.

 

Check out the "Repo Crisis" in banking. The entire system is running on fumes. Trump is desperately trying to keep the plates spinning and the Fed at ZIRP or NIRP until his reelection. They say the one weak link is Jamie Dimon at JP Morgan Chase which if the continuous bubble inflation bursts on his watch, he's toast. And the EZB is controlled by the Fed. 

 

The big deal is the shadow economy of narcotics and crime. That's what kept the banks in 2008 from dying.

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2 hours ago, MikeMelga said:

This can´t go on forever and it´s just a matter of how and where. My guess is a credit crisis in China that starts the snowball effect.

This will (again) collapse banks and drag economy with it, as investments are halted due to lack of credit.

 

And the central banks will just print more money. 

 

There is no rule which says it can`t go on forever. 

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58 minutes ago, RenegadeFurther said:

 

And the central banks will just print more money. 

 

There is no rule which says it can`t go on forever. 

Companies can go bankrupt even with "free" money. Then they fire people and their suppliers and customers are affected. Snowball effect.

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1 hour ago, RenegadeFurther said:

 

And the central banks will just print more money. 

 

There is no rule which says it can`t go on forever. 

There isn't, but there is a natural evolution of fiat system which mean they run out of steam after 30 years. Ours started in 1971 and began to sputter out in 2008.

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9 hours ago, desdemona said:

Property prices in the cities will not go down. 

That's what people thought in Japan in the 1980s...

 

 

japanese-home-prices globalhousingbubble.com.png

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Just now, LeChamois said:

That's what people thought in Japan in the 1980s...

 

Maybe that's because they were buying up Hawaii and California then. :rolleyes:

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On 1/14/2020, 8:50:27, Rushrush said:

Also, in theory, you can raise the rent 15/20% every three years. 

Where does that idea come from?

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👍  Thank you.  I've been looking for that entire body of information.  

 

If I'm understanding this the rent increase must still be tied to prevailing rents.  The 20% is an upper limit, but the landloed can't raise it by 20% if the prevailing rents only increased by 5%, or 10%?  Correct?  It is a form of rent control but with some protections in place for the landlord as well?

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@Beth The prevailing rents are calculated based on all rental contracts in the city, not just the new ones. That means the average rents or "Mietspiegel" only rise very slowly. As a new rental contract would typically start out slightly above the rental prices in the Mietspiegel and the landlord can only increase the rent up to this level - and not in line with its increase as you seem to think - it is not possible to increase the rent significantly or even at all for several years in a city like Munich.

 

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