Jump to content
House Price Crash Forum
Guest The Relaxation Suite

German Homeownership Rates At 43%

Recommended Posts

Guest The Relaxation Suite

Just read an interesting article by Michael Voigtlander in Housing Studies from 2009 about this - and interestingly one reason the German homeownership rates are so low is that private investors were included in the initial subsidisation scheme and in fact a large chunk of the rental sector in Germany is private. Extra stats - Spain has highest HO in EU at 80%, then Italy, Ireland, UK, Belgium, Austria, France, Netherlands, Denmark, and Sweden and Germany are down the bottom at about 49% and 43% respectively. The average across the EU is about 62%.

Voigtlander concludes by pointing out that due to liberalisation of rental markets in high HO states and tax-break cutbacks for owners, and conversely greater demand by Germans for private provisions for retirement, the various EU states are converging.

Germany often gets held up round these parts as some sort of wonderland, but I am interested as to who thinks over half the population paying rent to private landlords is a good idea or desirable in any way when compared to 70% paying off their own homes through a mortgage - however punitive.

Edited by Tecumseh

Share this post


Link to post
Share on other sites

Just read an interesting article by Michael Voigtlander in Housing Studies from 2009 about this - and interestingly one reason the German homeownership rates are so low is that private investors were included in the initial subsidisation scheme and in fact a large chunk of the rental sector in Germany is private. Extra stats - Spain has highest HO in EU at 80%, then Italy, Ireland, UK, Belgium, Austria, France, Netherlands, Denmark, and Sweden and Germany are down the bottom at about 43%. The average across the EU is about 62%.

Voigtlander concludes by pointing out that due to liberalisation of rental markets in high HO states and tax-break cutbacks for owners, and conversely greater demand by Germans for private provisions for retirement, the various EU states are converging.

Germany often gets held up round these parts as some sort of wonderland, but I am interested as to who thinks over half the population paying rent to private landlords is a good idea or desirable in any way when compared to 70% paying off their own homes through a mortgage - however punitive.

Its the degree of punitive-ness if that's a word.

Home ownership is a good and desirable thing but when easy and unsustainable credit has pumped that up so that it costs 2 people half of their income for 25 years to buy some sub standard dump, you have to look at the alternatives.

Out of interest, who owns all the housing stock and how well concentrated is it in Germany?

The state? Private companies? Or the individual equivalents of our amateur BTL slumlords?

Share this post


Link to post
Share on other sites
Guest The Relaxation Suite

Its the degree of punitive-ness if that's a word.

Home ownership is a good and desirable thing but when easy and unsustainable credit has pumped that up so that it costs 2 people half of their income for 25 years to buy some sub standard dump, you have to look at the alternatives.

Out of interest, who owns all the housing stock and how well concentrated is it in Germany?

The state? Private companies? Or the individual equivalents of our amateur BTL slumlords?

I'll have another look at the piece in question. Private landlords make up a fair bit I think but I need to check it. Agree about lebel of "punitive-ness" as well. Most interesting I thought was Germans moving towards higher HO rates because of pensions fears, basically.

Share this post


Link to post
Share on other sites

Its the degree of punitive-ness if that's a word.

Home ownership is a good and desirable thing but when easy and unsustainable credit has pumped that up so that it costs 2 people half of their income for 25 years to buy some sub standard dump, you have to look at the alternatives.

Out of interest, who owns all the housing stock and how well concentrated is it in Germany?

The state? Private companies? Or the individual equivalents of our amateur BTL slumlords?

I saw a television programme a few years ago about housing in Germany. Firstly it hi-lighted the percentage of rental to ownership, but also advised the rental properties are owned by pensions companies. They will buy whole apartment complexes or housing areas and rent them out, in the same way our pension companies buy and rent out commercial property.

I suspect the German method would generate a steady stream on income, as opposed to our method.

Share this post


Link to post
Share on other sites

Its the degree of punitive-ness if that's a word.

Home ownership is a good and desirable thing but when easy and unsustainable credit has pumped that up so that it costs 2 people half of their income for 25 years to buy some sub standard dump, you have to look at the alternatives.

Out of interest, who owns all the housing stock and how well concentrated is it in Germany?

The state? Private companies? Or the individual equivalents of our amateur BTL slumlords?

I bought an apartment in Germany in 2006 in a small high-standard block where all of the apartments were owned by an insurance company. I saw the flat on the Net and about 10 others, mostly existing tenants, bought there flats in a "Sammelaktion" - or bulk-buy process, meaning the notary fees were divided up so were very low.

Buying directly from the owner meant no agents fees at all, and I bought when I got €1.40 for each of my GBP.

If I had rented I would already have paid out nearly 40% of the apartment cost in rents over the last 5 years.

Amongst my friends here I am the only city flat-owner - all others rent, some own houses in the countryside.

Germans like the flexibility of renting, but tend to be afraid (fear is big in their culture) of the risks they see in buying - and the banks here are very conservative, do not do liar loans, and make it hard for people to borrow.

Share this post


Link to post
Share on other sites

Remind why Herman banks didn't escape the credit crunch if they are so conservative?

The bigger ones were busy spunking paper in other markets, presumably there are german laws to prevent such misbalances in their own country, france has stricter lending rules which helped them keep more of their industrial base.

Share this post


Link to post
Share on other sites
Guest

I can quite honestly see myself *never* owning a property. Sure one day if the price is right, and I'm settled into an area (and commited to staying there for 5+ years) I might. But it's not ever necessary to buy.

Consider that if I buy a house over 25 years that at the end of the 25 year term is worth say £250,000, or that I rent and invest the difference (rent vs mortgage difference, maintenance fees, buying costs etc) and therefore over 25 years gain assets worth say £250,000. I have a form of economic equivalence, in one case I own an asset worth £250k that provides no income buy does provide shelter, in the other case I have an asset worth £250k that provides an income but no shelter (and I can exchange the income for shelter).

Share this post


Link to post
Share on other sites

I don't really understand why the Germans don't buy (houses) even though tenancy rights are so secure. I can only give anecdotals so maybe you could come up with your own ideas (which I would be interested to hear). All the properties I will show here have good travel links, are in relatively wealthy areas and have numerous facilities and large companies within easy reach.

Firstly I think buying a flat here is a terrible idea. Take this one for example:

http://www.immobilienscout24.de/expose/58642882?&is24EC=IS24&style=is24&navigationbarurl=/Suche/S-T/Wohnung-Kauf/Baden-Wuerttemberg/Boeblingen-Kreis/Sindelfingen/-/-/EURO--50000,00

A €50K flat with extra costs (including heating, water etc) of €370 a month. In fairness this is an extreme example and probably includes charges for renovation of the whole building or a new heating system but it helps to explain why I think it's a bad idea to buy flats here. The extra costs are often high when compared to the value of the flat and you're often better off renting (with all fixed costs included in the rent).

Have a look at this flat:

http://www.immobilienscout24.de/expose/57875822?&is24EC=IS24&style=is24&navigationbarurl=/Suche/S-T/Wohnung-Kauf/Baden-Wuerttemberg/Boeblingen-Kreis/Bondorf

Nearly 300K for a new build flat! With only 2 bedrooms. But the Germans love their new builds for some reason and this flat will probably sell with no problems. The cost to buy this flat is more than my large detached 1970s house in the same village (bought 3 years ago) + my renovation costs + stamp duty. My house sat on the market for months with no takers and I bet I would have difficulty selling it now (even at the same price I paid despite renovations)

There are hundreds of new builds going up around the Böblingen area (SW Germany, lots of big companies, prosperous area) and they will not end up like ghost towns even though they probably should.

Then have a look at this house:

http://www.immobilienscout24.de/expose/59250122?&is24EC=IS24&style=is24&navigationbarurl=/Suche/S-T/Haus-Kauf/Baden-Wuerttemberg/Calw-Kreis/Nagold

This is by no means 'in the sticks' or in a bad area because there are no bad areas here. Sure, it needs a bit of renovation but it is HUGE. You could keep horses on the land and have enough space for 20 kids and yet it costs nearly 50K less than a new build large 2 bed flats in a nearby village.

Maybe ownership is so low because it's difficult to buy small and gradually upgrade to something bigger, or maybe people save and save until they can buy a house with a large deposit later in life. I know a lad here who grew up in a small flat. His parents are both teachers and have only now decided to buy a house in their 50s.

I agree with the comment that a lot of Germans appear scared of debt or buying and I know people who have had their fingers burnt when buying flats but buying a house here appears to be a no brainer. Especially if you're prepared to buy a 'used' house and do a bit of work on it.

So in conclusion to my rather meandering post, I think Germans rent flats simply because it's cheaper and more secure than buying and wait longer to buy houses for cash or with huge deposits.

They also don't suffer from dinner party peer pressure so are able to make clearer decisions in their own time :)

Share this post


Link to post
Share on other sites

Just read an interesting article by Michael Voigtlander in Housing Studies from 2009 about this - and interestingly one reason the German homeownership rates are so low is that private investors were included in the initial subsidisation scheme and in fact a large chunk of the rental sector in Germany is private. Extra stats - Spain has highest HO in EU at 80%, then Italy, Ireland, UK, Belgium, Austria, France, Netherlands, Denmark, and Sweden and Germany are down the bottom at about 49% and 43% respectively. The average across the EU is about 62%.

Voigtlander concludes by pointing out that due to liberalisation of rental markets in high HO states and tax-break cutbacks for owners, and conversely greater demand by Germans for private provisions for retirement, the various EU states are converging.

Germany often gets held up round these parts as some sort of wonderland, but I am interested as to who thinks over half the population paying rent to private landlords is a good idea or desirable in any way when compared to 70% paying off their own homes through a mortgage - however punitive.

not sure about the recent/current situation but after the war private investors received significant (tax) subsidies to encourage new house building for obvious reasons so many business owners would do this. I have relatives who recycled cash flow in this way. I suspect the returns were and still are very low but pensions, financial instruments and so on didn't really exist at that time. They ended up with thousands of flats in cities like Franfurt and Hamburg as a result of this. Where else would people live?

Share this post


Link to post
Share on other sites

...

This is maybe a bit sad, but it's awesome that they have proper technical drawings instead of the 'artist impression' floorplans UK EAs use.

I bet their surveys are better than some oik looking around and saying 'yep, it's a house' as well.

Share this post


Link to post
Share on other sites

As late as 1970 70% rented with the majority renting from private landlords. I'm not sure what changed in the UK to turn this the other way around. Maggie s right to buy would of had an effect in the late 70's and 80's but it must have been more than that. I can see a switch coming again. Still need the same number of new houses but patterns of tenure could change.

In Germany there is Rent control, of some sort which market long tenure possible and helped control house price inflation.

Share this post


Link to post
Share on other sites

As late as 1970 70% rented with the majority renting from private landlords. I'm not sure what changed in the UK to turn this the other way around. Maggie s right to buy would of had an effect in the late 70's and 80's but it must have been more than that. I can see a switch coming again. Still need the same number of new houses but patterns of tenure could change.

In Germany there is Rent control, of some sort which market long tenure possible and helped control house price inflation.

I suspect the decline in rented social housing availability/quality of neighbours and introduction of ASTs as the default way of renting in the private sector helped people see the "light" of ownership too.

Share this post


Link to post
Share on other sites

Germany often gets held up round these parts as some sort of wonderland, but I am interested as to who thinks over half the population paying rent to private landlords is a good idea or desirable in any way when compared to 70% paying off their own homes through a mortgage - however punitive.

I am one of those who see the attraction of paying private landlords to rent as more desirable than having 70% of the population having mortgages.

Firstly, you're confusing the issue - paying rent to a private landlord is equivalent to the the home owners paying the interest payment on their mortgages. The capital repayment part of the mortgage each month is an investment choice and needs to be compared to other alternative investments (eg index tracking ISA). The long run (30-40 years) shows that someone choosing to only pay the interest payment and investing their capital repayment into the stock market would do better than someone repaying capital.

Secondly, owning a home is enormously inflexible for the UK economy - if you try to recruit high skill staff in the UK (outside of London) you'll largely find it impossible if the person is over the age of about 35 because they'll likely have a mortgage on a home and can't sell, or even if they can sell, then b the transaction costs of selling and rebuying are so high. This UK obsession with home ownership really damages the UK economy.

Thirdly, the people buying houses are taking massively leveraged risks without really understanding what they are doing. Would they borrow 4-6 times their salary to invest in the stock-market despite it having better long term returns? Of course not. So why should they with housing?

Fourthly, the ridiculous UK obsession with housing is to the detriment of other (properly productive) areas of the economy. At the moment you'd have to award the points decision to the German economic model over the UK model.

A mortgage is renting the money from the bank vs renting the property directly. Buying a house with a mortgage means you make a leveraged bet on the UK housing market, renting a house allows you to make a bet on other assets - or more sensibly, allows you to make a diversified set of investments.

The one exception to all my points above relates to tax treatment. The person who pays off their capital eventually gets to live rent free. The person who chose to rent and invest ends up paying tax on their income from their investment. That seems the sole reason to make home ownership preferable to renting in the UK. I'd be interested to know how Germany taxes imputed rental income (probably don't because it is hard to calculate) and how it deals with capital gains on your first home?

Optobear

Share this post


Link to post
Share on other sites
Guest The Relaxation Suite

Hi Optobear

Firstly, you're confusing the issue - paying rent to a private landlord is equivalent to the the home owners paying the interest payment on their mortgages. The capital repayment part of the mortgage each month is an investment choice and needs to be compared to other alternative investments (eg index tracking ISA). The long run (30-40 years) shows that someone choosing to only pay the interest payment and investing their capital repayment into the stock market would do better than someone repaying capital.

Thing is, the majority of people understand housing (or think they do). They like the concrete nature of the investment. Also, someone paying off a mortgage may also be able to have additional investments as well as the market growth of the property they are living in. A further point is that the average schlub can see trouble coming from far away in terms of housing problems, whereas shit can hit the stock market fan much quicker and with less warning.

Secondly, owning a home is enormously inflexible for the UK economy - if you try to recruit high skill staff in the UK (outside of London) you'll largely find it impossible if the person is over the age of about 35 because they'll likely have a mortgage on a home and can't sell, or even if they can sell, then b the transaction costs of selling and rebuying are so high. This UK obsession with home ownership really damages the UK economy.

Owners of homes can let their properties and move anywhere for work, at least they can in a healthy economy.

Thirdly, the people buying houses are taking massively leveraged risks without really understanding what they are doing. Would they borrow 4-6 times their salary to invest in the stock-market despite it having better long term returns? Of course not. So why should they with housing?

Not intelligent people.

Fourthly, the ridiculous UK obsession with housing is to the detriment of other (properly productive) areas of the economy. At the moment you'd have to award the points decision to the German economic model over the UK model.

Of course I agree about the economies, but not sure Britain's relative failure is about homeownership rates. Some blame the use of war reconstruction money on the creation of NHS rather than broader economic infrastructure, for example. Also we must consider other less tangible concepts like work ethics and expectations of the two nations. About what constitutes "the good life". I think this is important.

A mortgage is renting the money from the bank vs renting the property directly. Buying a house with a mortgage means you make a leveraged bet on the UK housing market, renting a house allows you to make a bet on other assets - or more sensibly, allows you to make a diversified set of investments.

I don't disagree with this. However, when I look at those 60+ in my family who took mortgages, today they live rent free large pleasant houses and are free to make any changes they wish to the properties. Those who rented live in smaller accommodation and have to do what the landlords tell them. There are both quantitative and qualitative advantages to owning.

The one exception to all my points above relates to tax treatment. The person who pays off their capital eventually gets to live rent free. The person who chose to rent and invest ends up paying tax on their income from their investment. That seems the sole reason to make home ownership preferable to renting in the UK. I'd be interested to know how Germany taxes imputed rental income (probably don't because it is hard to calculate) and how it deals with capital gains on your first home?

This links to my previous point. One thing I would raise again is the apparent increase in Germany of private homeownership because of pension fears. Someone above said they see a switch coming in the British market moving to more of a German model but the evidence actually points in the opposite direction. I would also dismiss most material determinants in explaining these statistics because if you look carefully homeownership stats across the English-speaking nations are basically all 70%, and yet these countries' terrains, climates, work ethics, and economies vary quite widely. It is a cultural thing driving this.

Edited by Tecumseh

Share this post


Link to post
Share on other sites

I am one of those who see the attraction of paying private landlords to rent as more desirable than having 70% of the population having mortgages.

Firstly, you're confusing the issue - paying rent to a private landlord is equivalent to the the home owners paying the interest payment on their mortgages.

The capital repayment part of the mortgage each month is an investment choice and needs to be compared to other alternative investments (eg index tracking ISA). The long run (30-40 years) shows that someone choosing to only pay the interest payment and investing their capital repayment into the stock market would do better than someone repaying capital.

Let's simplify the claim somewhat ?

Renting would be the better choice, if investing the difference between rent and mortgage payments for the same property would return the new higher price of the property to the investor. That way he could rent rather than buy, invest the difference between the two payments and at the end of the process have more than the house to show for it.

Well, this is not the case, In fact, nothing like it.

Pretending that property doesn't create the giant advantage it does seems to be a part of trying to fit it into a reasonably equitable moral framework. I have a shortcut - real estate property doesn't fit into any reasonably equitable moral framework.

Share this post


Link to post
Share on other sites

Tecumseh

Thing is, the majority of people understand housing (or think they do). They like the concrete nature of the investment. Also, someone paying off a mortgage may also be able to have additional investments as well as the market growth of the property they are living in. A further point is that the average schlub can see trouble coming from far away in terms of housing problems, whereas shit can hit the stock market fan much quicker and with less warning.

Still missing the point. All the repayments beyond simply the rent are an investment choice. The issue is what to do with the repayment part - put it into the house or put it into something else. That they may have sufficient spare cash over time to make additional investments is irrelevent to their home purchase vs rent decision.

As to the merits of the housing market vs the stock market, well I'm not advocating just stockmarkets - indeed I'd suggest a balanced portfolio. Also, while the stock-market can fluctuate and drop it is also much more liquid than housing. Just ask anyone who has been trying to sell over the last three years.

Owners of homes can let their properties and move anywhere for work, at least they can in a healthy economy.

True, but many don't. I speak from experience in terms of hiring people, and it isn't fair on my part to only blame housing. Our screwy school system whereby quality of education is mostly determined by house prices in catchment areas doesn't help either. But your point about renting is telling.

Outside of London, and outside of areas with Universities or teaching hospitals the yields on rental properties are very poor, especially on larger homes. Small starter size housing tends to be equivalent in terms of rent vs mortgage, but once you're looking at 4 beds you'll probably find renting cheaper - for just the reason you've given - that people don't have to sell to get a job elsewhere.

Not intelligent people.

Not sure what you're saying? Are you saying that intelligent people can buy houses without taking very leveraged positions? Not my experience.

Of course I agree about the economies, but not sure Britain's relative failure is about homeownership rates. Some blame the use of war reconstruction money on the creation of NHS rather than broader economic infrastructure, for example. Also we must consider other less tangible concepts like work ethics and expectations of the two nations. About what constitutes "the good life". I think this is important.

Homeownership looks like a pretty big factor. In Germany you get rich and respect from doing something like designing BMW car engines, in the UK people have got rich by following Kirstie Allsop's recommendations.

I don't disagree with this. However, when I look at those 60+ in my family who took mortgages, today they live rent free large pleasant houses and are free to make any changes they wish to the properties. Those who rented live in smaller accommodation and have to do what the landlords tell them. There are both quantitative and qualitative advantages to owning.

I won't disagree that those who made the purchase decision have done well. I've done well too by buying at the lowpoint in 1997. Question is what is likely to work going forward/ Are you really thinking that housing can rise to still higher multiples of salary going forward? Doesn't seem likely. I'm not saying that it is always wrong to buy - just that buying at historically high multiples in the UK when all other countries worldwide that had housing bubbles have seen major falls seems a bit silly.

Also, do you have relatives who rented and put an equivalent amount into the stock-market on a monthly basis as those who paid off their mortgages? I'd suspect not. The mortgage model with (almost) compulsary capital repayment encourages a level of saving that few will match without the discipline of the mortgage scheme. Again, I'll make the point that the stock-market did as well as housing.

This links to my previous point. One thing I would raise again is the apparent increase in Germany of private homeownership because of pension fears. Someone above said they see a switch coming in the British market moving to more of a German model but the evidence actually points in the opposite direction. I would also dismiss most material determinants in explaining these statistics because if you look carefully homeownership stats across the English-speaking nations are basically all 70%, and yet these countries' terrains, climates, work ethics, and economies vary quite widely. It is a cultural thing driving this.

You're right that the UK is culturally obsessed with housing - and politically obsessed (and hence the stupid tax treatment). But the other factor that has driven those high home ownership rates has been the availability of loans for all. That was created by the monster of Mortgage securitisation - I don't see that coming back any time soon!

Share this post


Link to post
Share on other sites

I don't disagree with this. However, when I look at those 60+ in my family who took mortgages, today they live rent free large pleasant houses and are free to make any changes they wish to the properties. Those who rented live in smaller accommodation and have to do what the landlords tell them. There are both quantitative and qualitative advantages to owning.

I'd just like to point out that many Germans do, in fact, end up owning their own houses and living rent free, possibly the majority. It's quite likely that a similar proportion of German pensioners own their own houses as do British pensioners. They just tend to start buying them later, after they have saved a larger deposit than is typical in the UK.

I think it is this late starting that is largely responsible for the difference in home ownership figures between the two countries. It is very normal for German couples to live in (cheap and spacious) rented flats until their 40s before buying (or, frequently, building) their own place.

Edited by snowflux

Share this post


Link to post
Share on other sites

Let's simplify the claim somewhat ?

Renting would be the better choice, if investing the difference between rent and mortgage payments for the same property would return the new higher price of the property to the investor. That way he could rent rather than buy, invest the difference between the two payments and at the end of the process have more than the house to show for it.

Well, this is not the case, In fact, nothing like it.

Pretending that property doesn't create the giant advantage it does seems to be a part of trying to fit it into a reasonably equitable moral framework. I have a shortcut - real estate property doesn't fit into any reasonably equitable moral framework.

Simplifying doesn't help unless you're clear in what you mean.

When you say mortgage payment - do you mean the interest part of the mortgage payment or the capital part of the mortgage payment, or are you confusing the two?

To refute your second point. I sold a house at the end of last year and am receiving about 2%pa on average on the capital after tax. If I were still owning I'd have suffered a loss due to the fall in house price of approx 2% of taht amount over the last two months. So I'm better off than if I owned?

The way in which property made a massive advantage over certain periods relates to the massive leverage in buying a house relative to the size of deposit. If you'd taken a massively leveraged loan and invested in the stock market you'd have made a much bigger gain. Similarly if you'd bought a house outright (ie without a mortgage) then the returns don't look particularly special compared to say gold, or the stock market. Just compare the average house price graph over 40 years to the Dow or FTSE over the same period.

Share this post


Link to post
Share on other sites
Guest The Relaxation Suite

Optobear

Still missing the point. All the repayments beyond simply the rent are an investment choice. The issue is what to do with the repayment part - put it into the house or put it into something else. That they may have sufficient spare cash over time to make additional investments is irrelevent to their home purchase vs rent decision.

I'm not sure I disagree with the substantive point here but I was trying to illustrate that someone who has a mortgage while young may also be investing elsewhere, whereas someone who is renting may have more investments (or not) but is certainly not investing in property by definition.

As to the merits of the housing market vs the stock market, well I'm not advocating just stockmarkets - indeed I'd suggest a balanced portfolio. Also, while the stock-market can fluctuate and drop it is also much more liquid than housing. Just ask anyone who has been trying to sell over the last three years.

Agreed.

True, but many don't. I speak from experience in terms of hiring people, and it isn't fair on my part to only blame housing. Our screwy school system whereby quality of education is mostly determined by house prices in catchment areas doesn't help either. But your point about renting is telling. Outside of London, and outside of areas with Universities or teaching hospitals the yields on rental properties are very poor, especially on larger homes. Small starter size housing tends to be equivalent in terms of rent vs mortgage, but once you're looking at 4 beds you'll probably find renting cheaper - for just the reason you've given - that people don't have to sell to get a job elsewhere.

Agree about school system as well. Another unnecessary factor driving the housing market into mini bubble and trough pockets.

Not sure what you're saying? Are you saying that intelligent people can buy houses without taking very leveraged positions? Not my experience.

Just saying intelligent people don't borrow 6 times their salary. This choice is available to me but I won't do it. I continue to rent.

Homeownership looks like a pretty big factor. In Germany you get rich and respect from doing something like designing BMW car engines, in the UK people have got rich by following Kirstie Allsop's recommendations.

This interests me at the moment because here we have another cultural conception of what constitutes the "good life"/what can induce respect from others, etc., a cultural or ideational determinant driving a material force, in thiscase the housing market - like you say here - people getting more "respect" for being engineers, etc. I think people dismiss this factor at their peril. I really am starting to believe this is a serious motive force in the housing market, and broader economy.

You're right that the UK is culturally obsessed with housing - and politically obsessed (and hence the stupid tax treatment). But the other factor that has driven those high home ownership rates has been the availability of loans for all. That was created by the monster of Mortgage securitisation - I don't see that coming back any time soon!

We are getting closer to one of the major culprits here - the ideational notion of what constitutes the "good life" in conjunction with the material determinant of security in old age is what is driving the UK prices. Germany apparently, or we can cpeculate, places much less emphasis on homeownership as a means of gaining respect, and therefore we see lower HO rates there because of lower stigma attached to renting. The conclusion is that anything based on ideas can be changed with the introduction of a new orthodoxy, i.e., no stigma in renting.

Share this post


Link to post
Share on other sites

Simplifying doesn't help unless you're clear in what you mean.

When you say mortgage payment - do you mean the interest part of the mortgage payment or the capital part of the mortgage payment, or are you confusing the two?

I mean the total mortgage payment on a mortgage that will pay for the house after 25 years... and by 'rent' i mean the total payment in rent

For renting to be a better option, the renter must get a return on investing the difference between the two payments which is greater than the price of the house at the end of 25 years. This analysis prevents the payments by the tenant for occupancy being ignored or incorrectly compared to interest on money used to gain ownership (which they aren't) In this analysis the occupancy payments are compared like for like with the same payments made by the homeowner. They both lose their payments for occupancy during the period and at the end of the process the tenant wins if what he holds (cash) is worth more than what the buyer got with the larger payments (the house)

To refute your second point. I sold a house at the end of last year and am receiving about 2%pa on average on the capital after tax. If I were still owning I'd have suffered a loss due to the fall in house price of approx 2% of taht amount over the last two months. So I'm better off than if I owned?

But i made no claims about the housing market right now. If you look back at the price of housing in the eighties, it is far removed from present day prices despite there being two crashes (at least 1 1/2) in the interveening period and the present price being on a slow downward trajectory

Edited by Stars

Share this post


Link to post
Share on other sites

Optobear

We are getting closer to one of the major culprits here - the ideational notion of what constitutes the "good life" in conjunction with the material determinant of security in old age is what is driving the UK prices. Germany apparently, or we can cpeculate, places much less emphasis on homeownership as a means of gaining respect, and therefore we see lower HO rates there because of lower stigma attached to renting. The conclusion is that anything based on ideas can be changed with the introduction of a new orthodoxy, i.e., no stigma in renting.

Good point. I for one don't see any stigma in renting - and having someone else to sort out the leaking gutters rather than my having to climb a ladder is great!

As to a new orthodoxy - I think that can come - lots of very "nice" by modern taste houses become very unfashionable in the 1920s and 1930s (see large parts of South London for example). Ditto in the 1970s.

We've seen a great growth in home ownership that coincided with a fundamental lack of understanding by the banking regulators and politicians regarding the creation of money via securitisation of mortgages. My feeling is that we've seen a once in a lifetime scale housing bubble. Sadly people are prone to cargo-cult behaviours - and wish for a return of the supposed good times... they often don't recur!

Share this post


Link to post
Share on other sites

Here's another little nugget that might contribute to the difference:

Saving a large deposit is encouraged by the German tax system. Most people take out a Bausparvertrag or "building savings contract" to save for a house. If you're on a low income, the state also makes a contribution to this fund. In addition, the first EUR 1000 or so (the last time I was there) of your income from any kind of savings is not taxed, whatever your other income.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 311 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.