Most Germans Don’T Buy Their Homes, They Rent. Here’S Why

[Eddie_George]

It’s just a fact. Many Germans can’t be bothered to buy a house.

The country’s homeownership rate ranks among the lowest in the developed world, and nearly dead last in Europe, though the Swiss rent even more. Here are comparative data from 2004, the last time the OECD updated its numbers. (Fresh comparisons are tough to find, as some countries only publish homeownership rates every few years or so.)

http://qz.com/167887/germany-has-one-of-the-worlds-lowest-homeownership-rates/

Nothing we didn't no already, but nicely summarised nonetheless.

[Democorruptcy]

They don't like servicing debt as much as UK women.

I was surprised at how few German mums work. On average two-thirds of mums with children under three don’t work compared to a third in the UK

http://www.bbc.co.uk/blogs/tv/posts/Make-Me-A-German

[Wurzel Of Highbridge]

Under the magic 50% mark, that's why the have sensible economic policy not geared towards rentierism and homeownerism.

In other words 60% of Germans could not give a flying **** about house prices.

[uptherebels]

So who owns the houses that are rented?

[Venger]

That figure was in 2004. Rates are coming down rapidly. I would imagine one thing that worries some of the more far sighted Tory Strategists is the possibilty that we will no longer be a 'home owning democracy' where the bulk of the population is co-opted to support the landowners.

One advantage, maybe, that has seared hard into their collective memories, is the Weimar hyperinflation.

Not a bad time to be a renter. Perhaps equally in the current time, in the UK, not a bad time to be a renter when there is a prospect of hyperdeflation. Rents showing signs of slipping against low-order goods inflation and falling real wages. There's very much a time not to be a home-owner, with jumbo mortgage to pay, unless you don't mind HPC and treat it as a home you could afford when you bought.

With house prices bid up to such heights, as they are, in so many parts of the UK, with authorities peddling HTB debt scheme in an effort to help people maintain such heights.

Google books link extract: 'Culture And Inflation in Weimar Germany' (Bernd Widdig).

On the other hand, rent became an almost negligible outlay

for many households due to strict rent-control regulations

after the war. Yet for those who depended on rental income

this development often meant a financial catastrophe.

[kjw]

So who owns the houses that are rented?

“While the majority of rental dwellings in Germany are private, rents are regulated and prices are prevented from increasing sharply. Tenants also have security of tenure as long as they pay the rent and behave well, except on the rare occassion when a member of the landlord’s family needs the accomodation or when the building is going to be replaced.”

http://www.macrobusiness.com.au/2011/06/how-germany-achieved-stable-affordable-housing/

The UK rental system used to be a lot more like this before Thatcher’s *reforms* in the late 80s.... under the old Rent Acts, tenants had security of tenure and price controls...

[Tankus]

Be quite interested to see a graph of outright ownership and mortgaged. A considerable difference in lifestyle perhaps

[kzb]

So that's all right then? We can all be tenants of a property-owning elite (probably consisting of arabs etc), and you don't have a problem with that?

Being a "property-owning democracy" was an absolute cornerstone of Toryism let us remember.

Edited January 23, 2014 by kzb

[kjw]

So that's all right then? We can all be tenants of a property-owning elite (probably consisting of arabs etc), and you don't have a problem with that?

Being a "property-owning democracy" was an absolute cornerstone of Toryism let us remember.

Yes, Mrs Thatcher's vision of Britain was of a property-owning democracy of savers with moral restraint... but she got indebted spendthrifts.... in other words, she wanted the British people to be like her father... but they turned out more like her son...

[renting til I die]

One advantage, maybe, that has seared hard into their collective memories, is the Weimar hyperinflation.

Not a bad time to be a renter. Perhaps equally in the current time, in the UK, not a bad time to be a renter when there is a prospect of hyperdeflation. Rents showing signs of slipping against low-order goods inflation and falling real wages. There's very much a time not to be a home-owner, with jumbo mortgage to pay, unless you don't mind HPC and treat it as a home you could afford when you bought.

With house prices bid up to such heights, as they are, in so many parts of the UK, with authorities peddling HTB debt scheme in an effort to help people maintain such heights.

Google books link extract: 'Culture And Inflation in Weimar Germany' (Bernd Widdig).

However we don't have strict rent-controls in this country. If high inflation was to start to become a problem I'm sure LL's would be doing their best to push up rents!

Edit:spelling

Edited January 23, 2014 by renting til I die

[Georgia O'Keeffe]

Yes, Mrs Thatcher's vision of Britain was of a property-owning democracy of savers with moral restraint... but she got indebted spendthrifts.... in other words, she wanted the British people to be like her father... but they turned out more like her son...

, now thats some funny sh@t, id love to hear of just one policy between 1979 and 1992 that encouraged savings above subsidised private debt leverage

Next up, Gordon Browns vision of Britain was of an entrepreneurial Britain with dynamic productivity

Edited January 23, 2014 by Maria Gorska

[evetsm]

20 reasons why a house is a terrible investment

http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/

[Venger]

However we don't have strict rent-controls in this country. If high inflation was to start to become a problem I'm sure LL's would be doing their best to push up rents!

We've been through some years of inflation in low-order goods and services, and falling real wages for many people.

Rents are coming under pressure, except perhaps at the lower end of the market.

They can't push up the rents beyond what market will pay, and also restructuring in housing benefits can only have a dampening affect on rental values.

Some of the newspaper stories I've read of recent times, with VI pieces using words like 'blame' (re economy) in the context of not being able to up rents. They ought to brace for falling rents. Most of the rental market (except lower end) should feel pleased the UK mostly doesn't have rent-controls in place, in this moment in time. Such controls likely would have been set at a too high price (against HPI) and might prevent rents falling below what those rental-control prices would have been set at.

I don't see any salary inflation in our future for years to come, and that's the only kind of inflation that boosts house prices. Inflation in everything else (food, energy, medical) just takes away from the money people have to spend on housing.

Falling rents http://www.housepricecrash.co.uk/forum/index.php?showtopic=196070

[Quicken]

Most Brits don't buy houses, thus homeownership levels are falling. Here's why: it's a bubble.

[Dorkins]

Most Brits don't buy houses, thus homeownership levels are falling. Here's why: it's a bubble.

Yes, but unfortunately the majority of the electorate managed to lock in housing security back in the years when the UK still had something resembling a functioning economy. They absolutely don't care what is happening to those who are coming up after them. For all that the majority of Boomers and pre-Boomers care, we might as well tie everybody from Generations X and Y up in a big burlap sack and chuck them in the North Sea.

[kjw]

, now thats some funny sh@t, id love to hear of just one policy between 1979 and 1992 that encouraged savings above subsidised private debt leverage

Next up, Gordon Browns vision of Britain was of an entrepreneurial Britain with dynamic productivity

Apparently by all accounts, her relaxation of credit controls in the early 80s had a bigger economic impact than she intended... she envisaged these as a step towards economic freedom but they were more than that... they permitted a consumer-driven society and economy... this was not her intention... [so we are led to believe.. like you, I wasn't there so I cannot verify this ;-) ]

[Mugwump]

Under the magic 50% mark, that's why the have sensible economic policy not geared towards rentierism and homeownerism.

In other words 60% of Germans could not give a flying **** about house prices.

Not true, I'm afraid. Germans are very concerned about rising house prices. House prices are inextricably linked to rent levels. There is a rather strict relationship between the "value" of a building and the potential rent it can generate as a percentage of that value. House prices have been rising here of late. People are getting concerned. Whenever the price of anything starts to increase by more than what is considered a reasonable amount, the old fears of inflation raise their heads again.

[bear call spread]

I notice Denmark is very low as well right next to Germany, doubt we will buy over here. People really don't care for it here, and I notice the topic never gets raised in conversation at dinner parties etc How refreshing.

[Bland Unsight]

So that's all right then? We can all be tenants of a property-owning elite (probably consisting of arabs etc), and you don't have a problem with that?

Being a "property-owning democracy" was an absolute cornerstone of Toryism let us remember.

I think that your post neatly captures so many of the assumptions regarding what we, the great unwashed, have happily tolerated as inevitable, or alternatively, for our best.

If you own property, then you are vulnerable to a fall in the price of the property. You are only a locked in elite if you are confident that all the power structures that surround you and your investment will defend the price of your asset first and seek to defend the interests of the median household only to the extent that it does not interfere with the price of your asset.

That assumption is false.

If you look at a suitable time scale, that is you look at things over decades in sequence, it has always in the past been the median household than benefits from structural changes under democracy. Imperfect as it is, it's better than serfdom.

I buy Dianne Warren's analysis about how double income households and debt fuelled inflation of the price of shelter has stalled or reversed the trend for the time being, but one swallow does not make a summer. A mortgage-housing Ponzi has produced an economic conflict between older generations and younger generations. But the old will keep dying and the young will keep being born and the advantage with respect to the weight of numbers will shift in due course.

Crucially, owning property is better than renting property only under certain condition. The only game in town for decades has been the delegation of controlling the expansion of credit to the private banks. Under this frame, credit expands. If you are early into the game, you benefit as credit expansion drives asset price inflation. But that game has an end. As asset prices continue to inflate it is necessary to drive down interest rates and/or credit standards in order to enable the next cohort take out larger debts against the same thing. All the while misallocation of credit hollows out the economy and drives down the wages which must service the debt. This is all ending badly right now. If you are waiting for the BBC to tell you or for the political class to announce it in Parliament, you are in for a long wait, (though Cameron's 'three unstable pillars' was pretty f*ckiing close, all things considered!).

The game was up in 2003. The big signal that the game had already ended, too obvious for anyone to miss was 2008.

The 'property owning democracy' notion is political dogma. All the median household needs is housing that it can afford. It does not matter whether they rent from the cradle to the grave to get it, or whether they buy on a street sweeper's wages at 21. What matters is that their wages are consistent with the price of their housing - and that they are not exposed to undue risk, and that their cumulative choices do not incapacitate the broader economy.

We took a wrong turn. Rehearsing the political dogmas of the past that informed that choice will not change facts. We cannot afford our houses at these prices, even at these comedy interests rates. Something wicked this way comes.

Edited January 24, 2014 by ChairmanOfTheBored

[kzb]

Chairmanoftheboard:

I thought the prime reason for this site was that people actually want to own property. We want to get back to the position that a median income working person can afford a reasonable house. This is evidently desirable for most of the population and always has been. Hence the setting up of the building societies, then right to buy under Thatcher etc.

Yet here is this meme that no, renting is OK, after all most of Europe does it. This is throughout the media and we have people here on housepricecrash espousing it also. I'm sorry but I don't get it.

Don't get me wrong, prices can go down as welll as up long term I know. But I can't welcome a vision where 99% of the working population are paying rent to an elite, whether or not the value of that elites' portfolio is up or down.

[Quicken]

Chairmanoftheboard:

I thought the prime reason for this site was that people actually want to own property. We want to get back to the position that a median income working person can afford a reasonable house. This is evidently desirable for most of the population and always has been. Hence the setting up of the building societies, then right to buy under Thatcher etc.

Yet here is this meme that no, renting is OK, after all most of Europe does it. This is throughout the media and we have people here on housepricecrash espousing it also. I'm sorry but I don't get it.

Don't get me wrong, prices can go down as welll as up long term I know. But I can't welcome a vision where 99% of the working population are paying rent to an elite, whether or not the value of that elites' portfolio is up or down.

Hi kzb, I think the point is that both options are pretty rubbish at the moment in the UK - renting because of AST's, letting agent fees etc, and owning because of massively inflated prices. I would like to see both options improved.

[Bland Unsight]

Chairmanoftheboard:

I thought the prime reason for this site was that people actually want to own property.

I don't think that is right. There are a lot of stalwart posters who already own property outright, and a lot who are mortgaged owner-occupiers.

We want to get back to the position that a median income working person can afford a reasonable house.

Fair enough

This is evidently desirable for most of the population and always has been.

If the quality of rental property is poor and tenancy rights are non-existent, then undoubtedly you are right. Further, if you are framing the question as to whether or not people want to own, given endemic pwoperdee madness in the UK, you are definitely right with regard to the here and now. Hence if you mean desirable in the sense that they desire it - you are correct.

However, without wishing to be pedantic for its own sake, whether or not it is desirable in the sense that it is in their best interest is a different matter. IMO we are living through what happens if the median household is fed to the wolves of the banks and the builders - and what we have now is not desirable.

Hence the setting up of the building societies, then right to buy under Thatcher etc.

That's an interesting juxtaposition. On the one hand you have the building societies - a social welfare activity in which individuals pooled resources in order to protect themselves from risk, which arose in the 19th Century, and on the other hand you have an artefact of the 20th Century show down between collectivism (as enshrined in the idea that the state should house some members of society) and Thatcher's Hayek and Friedman inspired idolatry of market solutions to all problems always.

I don't think that either is particularly good evidence that home ownership has always been "desirable for most people and always has been".

Yet here is this meme that no, renting is OK, after all most of Europe does it. This is throughout the media and we have people here on housepricecrash espousing it also. I'm sorry but I don't get it.

The problem is not that renting is inferior to buying or that someone advocating renting is saying that you should tolerate high house prices which prevent you from buying. The problem is simple. The banks lent too much to people who aren't good for the money, and the people used the borrowed money to bid up the prices of houses. It's been the only game in town since the early 2000s.

Don't get me wrong, prices can go down as welll as up long term I know. But I can't welcome a vision where 99% of the working population are paying rent to an elite, whether or not the value of that elites' portfolio is up or down.

Which is great until you find that you need to magic £20k out of nowhere to stop water coming in and destroying the fabric of your asset. Then you realise that your income is pathetic compared to the borrowing you have undertaken. Of course, you don't see too much of that when the banks are advertising on the TV, suggesting that the only river to cross between here and happiness is a sod off great mortgage on a crap house.

Edited January 24, 2014 by ChairmanOfTheBored

[Bland Unsight]

Hi kzb, I think the point is that both options are pretty rubbish at the moment in the UK - renting because of AST's, letting agent fees etc, and owning because of massively inflated prices. I would like to see both options improved.

Exactly - and I think a big part of why this situation persists is because people believe so strongly that only by buying can they guarantee their financial future. Any society that has absorbed into its collective unconscious the idea that the only way to guarantee your financial future it to borrow a ridiculous amount of money to buy a deeply unsatisfactory house is frankly old-school mad.

[Frugal Git]

Exactly - and I think a big part of why this situation persists is because people believe so strongly that only by buying can they guarantee their financial future. Any society that has absorbed into its collective unconscious the idea that the only way to guarantee your financial future it to borrow a ridiculous amount of money to buy a deeply unsatisfactory house is frankly old-school mad.

Wonderfully summed up. I was talking to an old boy today - deep, deep in property. When I mentioned I preferred to invest in businesses - a productive part of the economy (though lots of the easy ways of investing in them are in the control of parasites of course) , he trotted out the old lines about pension theft, and how property is a productive asset because of the rental yield. It is ingrained in the psyche of our populace now - it's going to take a while for that to die off. But die of it will, and with the demographic changes will come the fairness. Might be too late for a lot of you who still want a house, but if you've been on here for 10 years or so (and I've lurked on here for that), surely at this point you've accepted the game is rigged and moved onto living your life until sanity prevails.

[BananaMan]

I met a young West German couple in Thailand last year and they were complaining about having to rent, and that they reason they did is because they needed a 25% deposit and the house prices where they lived were very expensive.

That low figure of people renting is possibly down to the fact pretty much all East Germans were in rented property up until 1989 and no doubt most still are.

Besides when they get to retire or should they just want a year or 2 out of work who pays the rent.

If renting was so great the rich would be doing it.