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This was on another thread, but I thought I would move it out on its own to see if anyone can shed some light...

I'd be really interested to know why German and Italian banks basically discourage lending for house purchases. It is extremely at odds with the UK and US. If there is money to be made, you would imagine they would be doing it....

I know in Germany it has been traditional for the major banks to own equity stakes in german industry (e.g. Daimlerchrysler, volkswagen, in fact most large german corporates). Does this leave less cash available for mortgage lending?

It seems more sensible for banks to invest in industry which can create genuine wealth for a country rather than in individuals.

As the grandfather of economics Adam Smith pointed out for us:

"Ask any rich man of common prudence to which of the two sorts of people he has lent the greater part of his stock, to those who, he thinks, will employ it profitably, or to those who will spend it idly, and he will laugh at you for proposing the question. Even among borrowers, therefore, not the people in the world most famous for frugality, the number of the frugal and industrious surpasses considerably that of the prodigal and idle."

In this context, borrowing to buy a house is NOT a profitable use of money, as it does not lead to any increase in wealth. A house is a house is a house.

Have German banks maintained this sensible perspective, whilst in the UK we have (mistakenly) come to regard housing as an investment? After all, a house is a house is a house. Where is the increase in wealth?

Do German banks themselves choose to limit mortgage lending for this reason? Or is there a restriction on such lending in German banking law?

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This was on another thread, but I thought I would move it out on its own to see if anyone can shed some light...

I'd be really interested to know why German and Italian banks basically discourage lending for house purchases. It is extremely at odds with the UK and US. If there is money to be made, you would imagine they would be doing it....

I know in Germany it has been traditional for the major banks to own equity stakes in german industry (e.g. Daimlerchrysler, volkswagen, in fact most large german corporates). Does this leave less cash available for mortgage lending?

It seems more sensible for banks to invest in industry which can create genuine wealth for a country rather than in individuals.

As the grandfather of economics Adam Smith pointed out for us:

"Ask any rich man of common prudence to which of the two sorts of people he has lent the greater part of his stock, to those who, he thinks, will employ it profitably, or to those who will spend it idly, and he will laugh at you for proposing the question. Even among borrowers, therefore, not the people in the world most famous for frugality, the number of the frugal and industrious surpasses considerably that of the prodigal and idle."

In this context, borrowing to buy a house is NOT a profitable use of money, as it does not lead to any increase in wealth. A house is a house is a house.

Have German banks maintained this sensible perspective, whilst in the UK we have (mistakenly) come to regard housing as an investment? After all, a house is a house is a house. Where is the increase in wealth?

Do German banks themselves choose to limit mortgage lending for this reason? Or is there a restriction on such lending in German banking law?

The irony of the "spend it idly" BTL brigade is that they now have their sights on Berlin as the next under performing frontier. If, as you say, there are restrictions then these amateurs are probably over there in droves only just discovering that. However, note of caution, the UK used to have restrictions re. the amount that foreign instituitons could lend into the UK. On another thought you may wish to investigate the impact "Basel" will have on lending, particularly in relation to who and how lending can be facilitated in Europe, then ask yourself why GMAC sell chunks of their book to UK lenders..you`ll find heaps of info. on basel on the CML site...nice cure for insomnia :unsure:

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In this context, borrowing to buy a house is NOT a profitable use of money, as it does not lead to any

Now I know it would NOT be a profitable use of money to purchase housing, I shall refrain from even aspiring to do so myself. Hopefully everyone else will also see the light and stop wasting money in such an unprofitable way.

Thanks,

MoD

PS: new wealth *is* generated when money is invested in housing. Construction companies make profits, their workers get paid (having created something of value) and the purchasers are also better off as they freely decided to exchange money for housing (and so the housing is probably worth more to them). Obviously, in a system where additional housing cannot be easily built prices may rise with increased availability of credit but *someone* will eventully reinvest the increased supply money in something that you would describe as productive. I don't doubt that a housing bubble will cause asset misallocation but this would need to be worse than what can happen in industry before it made sense to restrict mortgage lending on that basis.

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PS: new wealth *is* generated when money is invested in housing.

But far less than when it's invested in something productive, like developing new technologies that can be sold around the world.

We'd all be better off if you could buy a decent house for a tenner and all that money currently being 'invested' in piles of bricks and mortar was available for real investments.

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Now I know it would NOT be a profitable use of money to purchase housing, I shall refrain from even aspiring to do so myself. Hopefully everyone else will also see the light and stop wasting money in such an unprofitable way.

Thanks,

MoD

PS: new wealth *is* generated when money is invested in housing. Construction companies make profits, their workers get paid (having created something of value) and the purchasers are also better off as they freely decided to exchange money for housing (and so the housing is probably worth more to them). Obviously, in a system where additional housing cannot be easily built prices may rise with increased availability of credit but *someone* will eventully reinvest the increased supply money in something that you would describe as productive.  I don't doubt that a housing bubble will cause asset misallocation but this would need to be worse than what can happen in industry before it made sense to restrict mortgage lending on that basis.

Ah, MillsandBoon, you're back to romanticise the perfection of this country's status quo. Please go away until you have something interesting to say.

The vast majority of the housing stock is not newly built so does not contribute in the manner you describe.

Your fixation with my posts was endearing for a while, but is becoming rather creepy of late. Please assure me you don't masturbate while reading them. :unsure:

Edited by Smell the Fear

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This was on another thread, but I thought I would move it out on its own to see if anyone can shed some light...

I'd be really interested to know why German and Italian banks basically discourage lending for house purchases. It is extremely at odds with the UK and US. If there is money to be made, you would imagine they would be doing it....

A few facts on German banks.

German banks are different to ours. They are far far less profitable. They are equally eager to lend for residential mortages but Germany hasnt had a house price boom (which is what drives mortage lending). German house prices are broadly flat on 1992 (with some regional variations).

Their equity investments in German industrials and other businesses have been a disaster. They lent heavily on both commerical real estate and tax driven residential (what we would call buy to let) throughout the 1990s. As property prices collapsed, loans turned sour and many banks had to be bailed out by shareholders (both private sector and public) during the last three years.

We have nothing to learn from the German banking sector.

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A few facts on German banks.

German banks are different to ours. They are far far less profitable. They are equally eager to lend for residential mortages but Germany hasnt had a house price boom (which is what drives mortage lending). German house prices are broadly flat on 1992 (with some regional variations).

Their equity investments in German industrials and other businesses have been a disaster. They lent heavily on both commerical real estate and tax driven residential (what we would call buy to let) throughout the 1990s. As property prices collapsed, loans turned sour and many banks had to be bailed out by shareholders (both private sector and public) during the last three years.

We have nothing to learn from the German banking sector.

While they may have had some disasterous investments in property (surprise, surprise) I don't think the same can be said for their investments in industry. They invested in companies like Mercedes Benz/Daimler a long time ago. These countries were responsible for raising Germany from the ashes post world war 2 creating one of the wealthiest countries in the world, and have undoubtedly been massively profitable for the banks.

To say we have nothing to learn on the basis of their property investments (and bear in mind that my argument was that residential property is not a means of creating wealth) is missing the point. Property is not industry.

Edit: if, as you state, they are as keen as UK banks to lend on residential property why do they require such large deposits and have a much less developed range of mortgage options available? That is a surefire way to dampen demand.

Edited by Smell the Fear

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Yes, MongerOfDoom does seem to luuurrve the status quo doesn't he? I can only assume he is a mortgage broker, banker, Estate Agent or some other form of parasite.

The Economist has for years been telling everyone that house price inflation adds no real wealth to the economy for years. STF is right...most of the housing stock is already there, and has been for decades if not longer.

Real...I mean R.E.A.L wealth is a measurement of productive capacity.

Pouring hundreds of billions of debt money into housing, an asset that is overwhelmingly unaffected by the influx of money (apart from maybe some new curtains) whilst at the same time allowing business investment to collapse, is NOT wealth creation.

It is the upmost in stupidity - and future generations will not forgive us.

This country is mortgaging the future. Great <_<

But carry on Monger, carry on....

Edited by marko

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But far less than when it's invested in something productive, like developing new technologies that can be sold around the world.

I agree. It would be *much* better if there were more investors with sufficient foresight to invest money in research and development.

We'd all be better off if you could buy a decent house for a tenner and all that money currently being 'invested' in piles of bricks and mortar was available for real investments.

I think the distinction is really between consumption and investment. People living in unneccesarily expensive houses overconsume, and cannot consequently invest as much. That is their choice, except maybe if they expect me to bail them out when they find themselves suffering poverty in retirement. I do not see a problem with money actually *invested* in housing (e.g. BTL) as that will generate a profit [1] that can be further reinvested in generating future value.

I think that in as far as it is ever reasonable to consume one's wealth, expenditure on housing is just as justifiable as e.g. on clothing. I see there is an apparent contradiction in that if everyone decides to spend a hi gher proportion of their income on housing then it seems as if there is much weath tied up in an unproductive way (and everyone appears to lose out). I still don't think that consumption of housing is fundamentally different from any other kind of consuption. Obviously, any housing bubble would result in losses through misallocation of capital [2] as some would probably prefer to postpone their consumption of housing if they knew that prices were about to tumble.

It would indeed be better if houses cost next to nothing to build (but the same argument applies to anything, even to factories making 'real' goods). I don't think that an investment in housing is any less real than other investments, at least if there is not a massive bubble in progress. How can you tell when an investment is real and when it is not? My way is to consider the profit it generates [1]

I think that the current level of consumption could possibly be reduced if housing costs were decreased. Even if it was not, it is likely that higher enjoyment could be obtained by consuming the saved weath in some other way. In any case, I think the society would benefit. This would seem to be a strong argument in favour of reforming the planning system even if it means concreting over the South-East. I am yet to see a convincing argument that the existence of the green belt somehow justiifies the cramped and inadequate conditions [3] in which much of the population live. It would be ridiculous to argue that housing adjacent to green-belt land should be demolished so as to enlarge it. This suggests it may be similarly ridiculous not to allow new housing to be built on green-belt land.

Thanks,

MoD

[1] which is something residential housing doesn't do at the very moment in much of Britain, however we are discussing a general point and the British housing market will eventually achieve a sensible balance between rents and capital values.

[2] which someone (possibly R Bootle) remarked is just like consumption, except without the enjoyment. BTW, his Money for Nothing is well worth reading IMHO.

[3] it is often claimed that housing is much better and cheaper in continetal Europe. I am inclined to agree although that is just based on my experience which may differ from that of others

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Pouring hundreds of billions of debt money into housing, an asset that is overwhelmingly unaffected by the influx of money (apart from maybe some new curtains) whilst at the same time allowing business investment to collapse, is NOT wealth creation.

You're correct to point out that most housing already exists, and therefore its construction is not financed by mortgages. But that means that you're incorrect to characterise it as "pouring hundreds of billions of debt money into housing" -- as you pointed out yourself, the money is for the most part simply being redistributed. For every buyer who has a bigger mortgage, there's a seller who now has more money. The losers are first-time buyers, people re-entering the market, and people trading up. The winners are STRs, people inheriting property, landlords selling up, and people trading down. But the wealth is neither being created nor destroyed, just moved around a bit.

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Smell the fear wrote:

It seems more sensible for banks to invest in industry which can create genuine wealth for a country rather than in individuals.

Precisely! Investment in new technology within the UK is less than half that of other industrialised countries. Manufacturing plants are being shut down all over the country as are science courses in Universities.

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Ah, MillsandBoon, you're back to romanticise the perfection of this country's status quo. Please go away until you have something interesting to say.

Some might be interested in my posts. I don't think anyone cares to be told that you are not.

The vast majority of the housing stock is not newly built so does not contribute in the manner you describe.

Neither does it have vast amounts of real money invested in it because it was bought before the bubble started.

Your fixation with my posts was endearing for a while, but is becoming rather creepy of late. Please assure me you don't masturbate while reading them. :unsure:

Fixation? You might be a little deluded there.

No-one else on this board posts so many whacky and entirely non-workable ideas. It is always fun to point out just how mistaken you are. I think you would be taken more seriously if you avoided comments such as the above, and instead supported your posts with arguments.

Thanks,

MoD

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Neither does it have vast amounts of real money invested in it because it was bought before the bubble started.

Ok, so new entrants to the market only ever buy newly built houses???

Fixation? You might be a little deluded there.

No-one else on this board posts so many whacky and entirely non-workable ideas. It is always fun to point out just how mistaken you are. I think you would be taken more seriously if you avoided comments such as the above, and instead supported your posts with arguments.

When did I ask to be taken seriously? You are clearly a very serious chap, and it's pretty tiring I have to tell you. Try taking that big poker out of your a ss.

In case you didn't notice, this is not the Oxford Union[1]

[1] Lose the footnotes, it makes you look like a twit. As does your "Thanks, MoD" signature. What on earth are you thanking me for?

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I would not normally reply but as it so personal ...

Yes, MongerOfDoom does seem to luuurrve the status quo doesn't he?

I merely don't think that you know how to make things any better. Neither does STF. It would be a clear disaster if any of your suggestions were put into practice.

I can only assume he is a mortgage broker, banker, Estate Agent or some other form of parasite.

They don't live off your taxes. You don't have to buy their services. I would rather have all of the above than lesbian outreach coordinators.

The Economist has for years been telling everyone that house price inflation adds no real wealth to the economy for years. STF is right...most of the housing stock is already there, and has been for decades if not longer.

I never claimed that housing inflation did any good. I answered STF's point (and so did Zorn).

Real...I mean R.E.A.L wealth is a measurement of productive capacity.

Yes? And what units do you measure said capacity in? Would it be pounds by any chance?

Pouring hundreds of billions of debt money into housing, an asset that is overwhelmingly unaffected by the influx of money

Unaffected? New-builds are starting up everywhere. Anyway, I never claimed there was not a bubble.

(apart from maybe some new curtains) whilst at the same time allowing business investment to collapse, is NOT wealth creation.

Much of the money borrowed against housing is eventually spent on goods and services. The industry would suffer more still if it was not for the housing bubble (and it in due course will, I fear). What do you suggest? Forcing the banks to lend to business whether the loans are wanted or not? There are all sorts of problems companies face in this country but a non-functional financial system is probably not one of them [1]. I suspect you will find that government interference is more damaging that even a very badly organised financial system could achieve. One of the problems that can squarely be blamed on the government is that young people leaving the education system know much less than they used to but get prettier bits of paper with better marks to compensate for that.

It is the upmost in stupidity - and future generations will not forgive us.

This country is mortgaging the future. Great <_<

You are right. That is again very little to do with the financial system. It has its problems but could never do quite as much damage as the lack of any credible pension reform. It is the government who are spending money that will be needed in the future, not the financial industry.

But carry on Monger, carry on....

Why don't you *read* what I write before replying. It would make things so much better. Come to think of it, so would leaving out the insults.

Thanks,

MoD

[1] I already said it. It might not be perfect but all alternatives known so far appear to be worse.

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While they may have had some disasterous investments in property (surprise, surprise) I don't think the same can be said for their investments in industry. They invested in companies like Mercedes Benz/Daimler a long time ago. These countries were responsible for raising Germany from the ashes post world war 2 creating one of the wealthiest countries in the world, and have undoubtedly been massively profitable for the banks.

To say we have nothing to learn on the basis of their property investments (and bear in mind that my argument was that residential property is not a means of creating wealth) is missing the point. Property is not industry.

Edit: if, as you state, they are as keen as UK banks to lend on residential property why do they require such large deposits and have a much less developed range of mortgage options available? That is a surefire way to dampen demand.

Banks are like any other business. They exist to make money for their shareholders. In this respect German banks have been fairly unsuccessful for as long as anyone can remember. This is what I meant when I said that they have nothing to teach our banking sector. We can learn from their mistakes, but not from their successes, because there arent any that I can think of.

Their industrial investments may have been a success from 1945 to perhaps 1990. Thereafter they have been a millstone and a drag on returns. Take Daimler Chrysler as an example. Its share price has halved since 1999 destroying over Euro 5 to 10bn of German banking capital.

I have read some of your previous posts and know that you hold the UK banks responsible for a large part of the housing boom. This is where we differ. I am an advocate of free markets and think that banks should be free to lend what ever amount they want to who ever they want. The banks (with perhaps the odd exception) are not stupid. They do not stand to lose as much as some people suggest from a housing market crash. Even in the early 90s their losses on residential mortages as a % of loans oustanding was tiny (I think about 0.2% a year). Remember that their loans are secured on the house. LTV on the average mortgage portfolio is about 40%. Some of their borrowers will suffer serious losses, possibly all their equity plus more, but the banks wont.

Where I see the failure of the market is in the supply side. In any normal free market, if prices doubled in four years, manufacturers would produce alot more. That doesnt happen in the UK housing market due to our planning laws. I think I've drifted onto the topic of another thread, but I hope you see what I am trying to argue.

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Banks are like any other business. They exist to make money for their shareholders. In this respect German banks have been fairly unsuccessful for as long as anyone can remember. This is what I meant when I said that they have nothing to teach our banking sector. We can learn from their mistakes, but not from their successes, because there arent any that I can think of.

Their industrial investments may have been a success from 1945 to perhaps 1990. Thereafter they have been a millstone and a drag on returns. Take Daimler Chrysler as an example. Its share price has halved since 1999 destroying over Euro 5 to 10bn of German banking capital.

I have read some of your previous posts and know that you hold the UK banks responsible for a large part of the housing boom. This is where we differ. I am an advocate of free markets and think that banks should be free to lend what ever amount they want to who ever they want. The banks (with perhaps the odd exception) are not stupid. They do not stand to lose as much as some people suggest from a housing market crash. Even in the early 90s their losses on residential mortages as a % of loans oustanding was tiny (I think about 0.2% a year). Remember that their loans are secured on the house. LTV on the average mortgage portfolio is about 40%. Some of their borrowers will suffer serious losses, possibly all their equity plus more, but the banks wont.

Where I see the failure of the market is in the supply side. In any normal free market, if prices doubled in four years, manufacturers would produce alot more. That doesnt happen in the UK housing market due to our planning laws. I think I've drifted onto the topic of another thread, but I hope you see what I am trying to argue.

I take your point from a shareholder perspective. In germany the banking system is seen more as an integral part of the economy. It exists for the common good to some extent.

In the UK it is a mechanism used for holding the rest of the economy to ransom, whilst abusing the private individual.

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You're correct to point out that most housing already exists, and therefore its construction is not financed by mortgages. But that means that you're incorrect to characterise it as "pouring hundreds of billions of debt money into housing" -- as you pointed out yourself, the money is for the most part simply being redistributed. For every buyer who has a bigger mortgage, there's a seller who now has more money. The losers are first-time buyers, people re-entering the market, and people trading up. The winners are STRs, people inheriting property, landlords selling up, and people trading down. But the wealth is neither being created nor destroyed, just moved around a bit.

Errrrrrrr Hang on.

Estate Agent (if you are an idiot and have to use one to sell) Takes MORE commission!

Banks/B.S's take far MORE interest payment from you (and devise even creepier ways of taking more off you)

House Insurance = Higher

Mortgage Indemnity = Higher payments

Council Tax = Higher Band

Inheritance Tax Threshold

etc

etc

The Real Wealth is being distributed to Banks, Banking Families and Insurance companies and back to government coffers in those Xtra 'little stealth taxes'

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Guest magnoliawalls
You're correct to point out that most housing already exists, and therefore its construction is not financed by mortgages. But that means that you're incorrect to characterise it as "pouring hundreds of billions of debt money into housing" -- as you pointed out yourself, the money is for the most part simply being redistributed. For every buyer who has a bigger mortgage, there's a seller who now has more money. The losers are first-time buyers, people re-entering the market, and people trading up. The winners are STRs, people inheriting property, landlords selling up, and people trading down. But the wealth is neither being created nor destroyed, just moved around a bit.

Depends how you define wealth. House price increases have transferred a great deal of money from younger generations to older generations and from the less well off (FTBs with little hope of wage inflation) to the already well off (people who were in a position to buy houses before house price increases).

£1000 is worth a great deal more to someone who earns £1000 a month like me, than it is to a wealthy individual like TTRTR. The £££££s transferred from FTBs up the chain to relatively wealthy downsizers would arguably have a greater value to the FTB and their young families.

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Guest magnoliawalls
I'd be really interested to know why German and Italian banks basically discourage lending for house purchases. It is extremely at odds with the UK and US. If there is money to be made, you would imagine they would be doing it....

I see nothing to suggest that the difference in housing markets between Germany and the UK has anything to do with German banks discouraging lending for house purchases. If you can provide anything to back up that theory I would be interested.

Meanwhile to quote expat on housepricechat today re the German housing market:

Despite much lower interest rates than in the UK, neither speculators nor single property buyers feel the need mortgage themselves to the hilt.

No fear. - Landlords can only evict tenants under exceptional circumstances and the level of rent is regulated. As most properties are large enough to house a family, many tenants stay put for decades and never contemplate buying. This is particularly true of the purpose-built blocks in the city, less so in the countryside.

No greed. - Not because Germans are less entrepreneurial, but because the BTL becomes less attractive if the tenants have more rights than the landlords.

FTBs get generous tax rebates/income support to build new homes. This does not apply to FTBs who buy existing property. Most of this, at least in Hamburg, is on greenfield sites outside the city. The banks are happy to lend 5X salary to young people wanting to build, because they know the tax breaks/income support will keep them solvent.

To me this argument is much more plausible than blaming the UK based banks or the planning process which I understand is even more restrictive in Germany.

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I see nothing to suggest that the difference in housing markets between Germany and the UK has anything to do with German banks discouraging lending for house purchases.  If you can provide anything to back up that theory I would be interested. 

Meanwhile to quote expat on housepricechat today re the German housing market:

To me this argument is much more plausible than blaming the UK based banks or the planning process which I understand is even more restrictive in Germany.

Ilive in Germany and I had no problems getting a housing loan. Also, unlike in England age isn't taken into consideration, i.e. they don't say "OK, you're 50. We'll work out your loan over 15 yrs". It's a loan at the going rate - however long it takes to pay back

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Ok, so new entrants to the market only ever buy newly built houses???

No. It is because a bubble-inflated price is paid only when a new entrant invests in housing (although this may trigger further investment along any chain).

Either way, the original argument was whether investment in housing is productive or not. I still claim it is as good as any other investment with the same risk profile, although given the current stage of the bubble it does not appear attractive to me. It certainly cannot be described as 'NOT productive', however. Even risky investments sometimes pay off. Housing is probably a sensible hedge against rising salaries or RPI, and may well be in demand by investors for those reasons. If you are suggesting that banks should not lend against housing as security then you are confused.

MoD

PS: if you are going to make childish jokes by taking bits of my posts out of context then please at least quote contiguous segments of text. I am afraid that the inability to cut-and-paste correctly can make you look a little silly. Oh, and can you please stop the namecalling? Thanks.

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Errrrrrrr Hang on.

Estate Agent (if you are an idiot and have to use one to sell) Takes MORE commission!

Banks/B.S's take far MORE interest payment from you (and devise even creepier ways of taking more off you)

Mortgage Indemnity = Higher payments

You get to decide whether or not you pay the above.

House Insurance = Higher

Council Tax = Higher Band

I don't think this is true. Council tax certainly does not go up with market values, especially now that the coming revaluation has been cowardly abandoned. House insurance might go up with rebuild-cost but that would not have risen nearly as much as houseprices.

Inheritance Tax Threshold

You can always arrange to give the money to charity and thus avoid the tax :-) I certainly don't think that inheritance tax is in any way fair but I am not sure it is relevant here, seeing as it applies to all assets [1].

The Real Wealth is being distributed to Banks, Banking Families and Insurance companies and back to government coffers in those Xtra 'little stealth taxes'

I still struggle to comprehend the distinction between real and unreal wealth. Banks do not have any way of forcing you to hand over your money. I am not going to defend the government.

I don't think there is some massive conspiracy designed to impoverish everyone but the VIs through a housing bubble. I also don't think it is primarily the banks that should be blamed for the bubble.

Thanks,

MoD

[1] there are some exceptions, including for agricultural land or if you happen to be the Queen

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No. It is because a bubble-inflated price is paid only when a new entrant invests in housing (although this may trigger further investment along any chain).

Either way, the original argument was whether investment in housing is productive or not. I still claim it is as good as any other investment with the same risk profile, although given the current stage of the bubble it does not appear attractive to me. It certainly cannot be described as 'NOT productive', however. Even risky investments sometimes pay off. Housing is probably a sensible hedge against rising salaries or RPI, and may well be in demand by investors for those reasons. If you are suggesting that banks should not lend against housing as security then you are confused.

MoD

PS: if you are going to make childish jokes by taking bits of my posts out of context then please at least quote contiguous segments of text. I am afraid that the inability to cut-and-paste correctly can make you look a little silly. Oh, and can you please stop the namecalling? Thanks.

As usual, so many words, so little content.

I have a tip for you: try to be succinct.

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QUOTE

Despite much lower interest rates than in the UK, neither speculators nor single property buyers feel the need mortgage themselves to the hilt.

No fear. - Landlords can only evict tenants under exceptional circumstances and the level of rent is regulated. As most properties are large enough to house a family, many tenants stay put for decades and never contemplate buying. This is particularly true of the purpose-built blocks in the city, less so in the countryside.

No greed. - Not because Germans are less entrepreneurial, but because the BTL becomes less attractive if the tenants have more rights than the landlords.

FTBs get generous tax rebates/income support to build new homes. This does not apply to FTBs who buy existing property. Most of this, at least in Hamburg, is on greenfield sites outside the city. The banks are happy to lend 5X salary to young people wanting to build, because they know the tax breaks/income support will keep them solvent.

I am German but live in the UK. I think the above arguments are all valid. Given the choice between buying and renting, there is simply not the same incentive to buy a house in the first place. As a tenant you are also entitled to do redecoration and even rebuilding work almost as you please.

As far as mortgages are concerned, the market is far more prudent. AFAIK, you have to produce 40% of the price of the property. There are savings schemes in place supported by the government to help you get to that stage (Bausparvertrag), and (at least in the past - not sure they still do it) employers would contribute, too.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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