Have to agree with the majority of commenters here. I’m an American expat in Berlin for 2 years now and the housing market is completely broken. Not only are prices continuing to go up, but the governments are blocking building to meet demand for affordable housing and renovations of older housing. If a person is able to buy something that is affordable in a major city, it is guaranteed to need an equal amount invested in renovations. In general the German population doesn’t care about owning property (last I saw only 40% of the country had actual interest in home ownership) and so this puts the market in the hands of the landlords entirely.
Germany is currently trying to combat against conglomerates coming in and buying out buildings to own outright and rent out, setting their own price for the rent. This kind of renting is becoming more and more widespread which is also contributing to the ever rising prices for rental housing.
Sounds like they’re fighting the symptoms instead of the cause.
You can’t pump billions in subsidies into the market, lower interest rates to the floor to prevent that money from going around capital markets and not expect some kind of dysfunctional price rise in the real estate market. Money finds its way to where it provides the best return, and right now that is real estate in most markets. Trying to fight this tide at the real estate end is somewhat futile. The governments need to give the money a better place to go.
> In general the German population doesn’t care about owning property (last I saw only 40% of the country had actual interest in home ownership) and so this puts the market in the hands of the landlords entirely.
In general, at least around big cities(100 km radius from München, for example), the "german" population does not afford a house. A new house is around 450000 euros and the land under it is also between 200 - 500 Euros per square meter. For a lot of people, especially migrants, this is undoable. If course if you go in forgotten places with no industry, no public transport and a lot of neo nazis you can find affordable housing.
I too am an expat in Germany, and I come from a country where most people buy. I bought.
That only 40% of Germans have any interest in buying doesn't mean that 60% of Germans have no clue. It means that they have a system where buying isn't nearly mandatory. Rents are often only barely higher than the cost of capital for buying plus maintenance.
Both have grown, particularly in Berlin and some other places. (I live in Munich, which has had very high prices by German standards for a long time.) But that growth doesn't mean that the cost of renting is much higher than the cost of a bank loan plus maintenance etc. AFAICT, both have grown together.
> Germany is currently trying to combat against conglomerates coming in and buying out buildings to own outright and rent out, setting their own price for the rent.
> it is guaranteed to need an equal amount invested in renovations
Unless you mean that as a hyperbole, I doubt it very much. Prices for flats, I believe, range from 400.000EUR up, and investing that much into renovations would bring you a marble, teak and gold leaf finishing house.
Sorry to say but reading this as a native Berliner is really difficult.
It seems like the author has never spoken to any German that has been involved in housing in the last 10+ years.
I can only second what others in the comments here have already pointed out: current housing and housing prices feel fundamentally broken and completely disconnected from wages and realistic mortgages.
It's not only in the major cities like Berlin, Munich or Hamburg. Prices skyrocketed even in smaller cities like Karlsruhe or Heidelberg. A 40m² flat can be 300.000€++ and you will need to renovate it. 20 years ago, you could get a house for the money.
German prices are extremly high compared to the sallary. If you want to buy a house in a German major city, you would have to take a credit for your whole life.
Really everyone is complaining. It is not affordable. So even persons with high income like doctors or engineers are struggeling. So often you just hear, the only chance is to inherit it...
Prices are high in pretty much any big city in Europe. You say to buy a house in Berlin you have to get a mortgage for your life. Sure but even with a life mortgage it's impossible to buy a house in London, New York or SF.
It's a function of how incredibly high wealth disparity is. Go to the richest part of town in any big city sometime in the evening. >70% (often more than 90%) of the lights are off, because nobody is home in these multimillion $ homes, because they are 2nd, 3rd or 4th home. So the people who can afford houses that >90% of the people can never afford, can buy many of these without blinking an eye.
Isn’t “take credit for your whole life” expected for most homes?
The expected market price of a home in terms of rent should be “what you can afford”, and with that argument the expected purchase price would be the number that makes the capital cost of a loan the same as the rent (minus some maintenance and other factors).
If interest rates are tiny then the expected mortgage for a house will be huge. Especially if there are no regulations requiring the length of mortgages.
We have been in Germany for a couple of years and in my experience things are changing rapidly. First, it is nearly impossible to get an apartment for rent in the big cities. Second rents are rapidly rising and I don't think it will get better in the near future.
I think your confusing Germany with another country, I've never seen a 100 person line for an apartment there. Mind you Sweden has those (although they are virtual). This is mostly a function of completely missing the boat on population growth and the necessary investments. It's been the same all over the world, lobbyist hamstringing the public systems reducing investments because "government bloat" the systems then fail to work adequately which is being used to lobby against the systems as "not working".
I live in an eastern German city with a university with ca. 24.000 students. The prices have doubled within 10y and weren't affordable for any two incomes below the 95th quantile.
The prices in _every_ major city have increased dramatically.
The only affordable houses are run down, old ones, half an hour away from public transportation -- barely anybody wants to live there, because of high rate of right wings (eastern Germany), or lack of infrastructure (e.g. medical care). These broken minor towns and cities might decrease the average prices -- failure of the averages!
Regarding prices, from my POV the article is made-up nonsense.
I have a hunch it's the same with Japan (part 1 of this).
House prices in attractive areas (in and around Tokyo) have increased drastically over the last few years.
Meanwhile, houses in the countryside are on the market for almost (and often literally) nothing.
I guess the question is what the data is actually measuring. would still expect the graphs to show an increase if they measure the price of actually sold property.
Just checked OECD data and to me it looks like prices are rising in similar ways in Germany and the US since 2015. Japan does in fact seem less steep but it's still rising, not flat as the graphs on TFA would suggest: https://data.oecd.org/chart/6ztU
What is the desire effect? Increase homeownership by increasing housing stock? Germany as a whole does much worse at homeownership than most other countries according to this list.[0]
Is the goal stable prices over long period of time? And are we comparing house prices of individual US cities to entire countries (ie. Germany)?
I bet that prices in large German cities are much less stable than in smaller ones.
In general the goal in Germany is to make housing affordable. Buying a house is an investment decision and less regulated. But if you own a house and you don't live there or the house is owned by a company, then you are legally required to rent it out at a fair price. So rental tends to be quite affordable, even in cities and nice areas. That's why in cities like Hamburg you can have €1000 monthly rentals but purchasing an equivalent house would be 1200000€
This article and the other articles on this subject by the author confuse me greatly. He claims that the housing is extremely affordable in all of these countries. The countries he mentioned as good examples or large improvements are Japan, Germany, France, New Zealand, and the United Kingdom. Yet the home ownership of all these countries is around the 60 ~ 65% mark according to wikipedia[1], In germany it is as low as 51%. And this number is for the entire country, This number would be even lower in the urban cities I would wager. If the housing was truly affordable then why is home ownership so low? Furthermore looking at the highest home ownership rates it is mainly ex socialist countries, China, India, smaller Asian countries, and some Caribbean countries. I would guess that the large push to create commie blocks then the subsequent liberalization and deregulation in ex socialist countries is a large factor in this. So if the author wanted examples of "Doing housing better" (subjective) he should have looked elsewhere.
> If the housing was truly affordable then why is home ownership so low?
If rent is dirt cheap, and tenant protections are large, most people prefer to pay little rent, and invest their money in stocks or some other asset, than put all of their money into a single asset with very questionable performance and high risk (a house).
You can have financial independent, fully passive income from stocks, and just pay a little bit of rent with it. Or you could have a house, be tied to a 60 year credit plan, and have to work until you are 70 years old.
I wouldn't consider the UK as a good example of affordable housing.
First of all, compared to the rest of Europe houses are small - my parents have a house that's slightly larger than the average, it has 3 bedrooms in 90m2 including the
garage. The housing stock - even new houses - are all pretty inefficient and need a lot of energy to heat. The rest of Europe has been pushing energy efficiency standards (in terms of heating demand), especially Scandanavia and the Baltic's, while the UK has pretty much stood still and builds houses today the same as they did 30 years ago.
For this you are going to be paying a lot. Two people on average salaries would not be able to get a mortgage for my parents' house, and it's not anywhere near London or other big cities. And that's assuming you could earn an average salary - in their area that would be a bit of a push as most of the jobs are in the service and tourism industry.
Lower home ownership may be an indication that the rent/buy tradeoff moves more towards rent, and that it's less critical to use leveraged asset price inflation to build wealth.
But you're right that any article describing UK housing as "affordable" needs suspicion. Should also compare by size; the one advantage the US does have is much larger houses, on average.
Because the goal is affordable housing, not necessarily home ownership. With affordable rent, people can invest their money into other, better-diversified assets. They can move more easily (due to growing family size, different work situation, geographic preference) with lower transaction costs.
The scale and demographic complexity of the US means you can't compare it as a whole to mono-cultural relatively small states. Brazil or India would be a more apples-to-apples comparison. Or you can compare Germany to US states. Housing is different in new england vs california or vs missisipi.
The rent favouring culture and policies that give strong protections to tenants are really the smart thing to do in housing policy. It doesn't make sense for most people to borrow and put large amounts of capital into one basket where you can't use the #1 risk management tool of normal investment (diversification).
Like the article says, Austria is another country where housing is really well run.
[+] [-] jebentier|4 years ago|reply
Germany is currently trying to combat against conglomerates coming in and buying out buildings to own outright and rent out, setting their own price for the rent. This kind of renting is becoming more and more widespread which is also contributing to the ever rising prices for rental housing.
[+] [-] Joeri|4 years ago|reply
You can’t pump billions in subsidies into the market, lower interest rates to the floor to prevent that money from going around capital markets and not expect some kind of dysfunctional price rise in the real estate market. Money finds its way to where it provides the best return, and right now that is real estate in most markets. Trying to fight this tide at the real estate end is somewhat futile. The governments need to give the money a better place to go.
[+] [-] hulitu|4 years ago|reply
In general, at least around big cities(100 km radius from München, for example), the "german" population does not afford a house. A new house is around 450000 euros and the land under it is also between 200 - 500 Euros per square meter. For a lot of people, especially migrants, this is undoable. If course if you go in forgotten places with no industry, no public transport and a lot of neo nazis you can find affordable housing.
[+] [-] Arnt|4 years ago|reply
That only 40% of Germans have any interest in buying doesn't mean that 60% of Germans have no clue. It means that they have a system where buying isn't nearly mandatory. Rents are often only barely higher than the cost of capital for buying plus maintenance.
Both have grown, particularly in Berlin and some other places. (I live in Munich, which has had very high prices by German standards for a long time.) But that growth doesn't mean that the cost of renting is much higher than the cost of a bank loan plus maintenance etc. AFAICT, both have grown together.
[+] [-] MisterTea|4 years ago|reply
Sounds like we're returning to good ol Feudalism.
[+] [-] mariusor|4 years ago|reply
Unless you mean that as a hyperbole, I doubt it very much. Prices for flats, I believe, range from 400.000EUR up, and investing that much into renovations would bring you a marble, teak and gold leaf finishing house.
[+] [-] creed|4 years ago|reply
I can only second what others in the comments here have already pointed out: current housing and housing prices feel fundamentally broken and completely disconnected from wages and realistic mortgages.
[+] [-] bierjunge|4 years ago|reply
[+] [-] MichaelRazum|4 years ago|reply
Really everyone is complaining. It is not affordable. So even persons with high income like doctors or engineers are struggeling. So often you just hear, the only chance is to inherit it...
[+] [-] nivenkos|4 years ago|reply
I'd note that Doctors and Engineers don't really get high salaries compared to the US though. Europe is all about landlordism and inheritance.
[+] [-] cycomanic|4 years ago|reply
It's a function of how incredibly high wealth disparity is. Go to the richest part of town in any big city sometime in the evening. >70% (often more than 90%) of the lights are off, because nobody is home in these multimillion $ homes, because they are 2nd, 3rd or 4th home. So the people who can afford houses that >90% of the people can never afford, can buy many of these without blinking an eye.
[+] [-] alkonaut|4 years ago|reply
The expected market price of a home in terms of rent should be “what you can afford”, and with that argument the expected purchase price would be the number that makes the capital cost of a loan the same as the rent (minus some maintenance and other factors).
If interest rates are tiny then the expected mortgage for a house will be huge. Especially if there are no regulations requiring the length of mortgages.
[+] [-] chii|4 years ago|reply
is renting not an option? Why is only purchasing counted?
[+] [-] whinvik|4 years ago|reply
[+] [-] vogre|4 years ago|reply
How is it better than anything?
[+] [-] cycomanic|4 years ago|reply
[+] [-] _iziv|4 years ago|reply
The only affordable houses are run down, old ones, half an hour away from public transportation -- barely anybody wants to live there, because of high rate of right wings (eastern Germany), or lack of infrastructure (e.g. medical care). These broken minor towns and cities might decrease the average prices -- failure of the averages!
Regarding prices, from my POV the article is made-up nonsense.
[+] [-] quelltext|4 years ago|reply
House prices in attractive areas (in and around Tokyo) have increased drastically over the last few years.
Meanwhile, houses in the countryside are on the market for almost (and often literally) nothing.
I guess the question is what the data is actually measuring. would still expect the graphs to show an increase if they measure the price of actually sold property.
Just checked OECD data and to me it looks like prices are rising in similar ways in Germany and the US since 2015. Japan does in fact seem less steep but it's still rising, not flat as the graphs on TFA would suggest: https://data.oecd.org/chart/6ztU
[+] [-] gego|4 years ago|reply
Also look at the conference series Working Class Districts and Urban Policies https://www.google.com/url?sa=t&source=web&rct=j&url=https:/...
[+] [-] 627467|4 years ago|reply
Is the goal stable prices over long period of time? And are we comparing house prices of individual US cities to entire countries (ie. Germany)?
I bet that prices in large German cities are much less stable than in smaller ones.
[0] https://en.m.wikipedia.org/wiki/List_of_countries_by_home_ow...
[+] [-] Ozzie_osman|4 years ago|reply
The goal is affordable housing. With good housing stock, that means people can own OR rent in an affordable manner, depending on what they need.
[+] [-] fxtentacle|4 years ago|reply
[+] [-] Aurelius3|4 years ago|reply
[1]: https://en.wikipedia.org/wiki/List_of_countries_by_home_owne...
[+] [-] maxwell86|4 years ago|reply
If rent is dirt cheap, and tenant protections are large, most people prefer to pay little rent, and invest their money in stocks or some other asset, than put all of their money into a single asset with very questionable performance and high risk (a house).
You can have financial independent, fully passive income from stocks, and just pay a little bit of rent with it. Or you could have a house, be tied to a 60 year credit plan, and have to work until you are 70 years old.
[+] [-] fy20|4 years ago|reply
First of all, compared to the rest of Europe houses are small - my parents have a house that's slightly larger than the average, it has 3 bedrooms in 90m2 including the garage. The housing stock - even new houses - are all pretty inefficient and need a lot of energy to heat. The rest of Europe has been pushing energy efficiency standards (in terms of heating demand), especially Scandanavia and the Baltic's, while the UK has pretty much stood still and builds houses today the same as they did 30 years ago.
For this you are going to be paying a lot. Two people on average salaries would not be able to get a mortgage for my parents' house, and it's not anywhere near London or other big cities. And that's assuming you could earn an average salary - in their area that would be a bit of a push as most of the jobs are in the service and tourism industry.
[+] [-] pjc50|4 years ago|reply
But you're right that any article describing UK housing as "affordable" needs suspicion. Should also compare by size; the one advantage the US does have is much larger houses, on average.
[+] [-] Ozzie_osman|4 years ago|reply
[+] [-] badrabbit|4 years ago|reply
[+] [-] avgcorrection|4 years ago|reply
[+] [-] fulafel|4 years ago|reply
Like the article says, Austria is another country where housing is really well run.