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...
You can earn quite a lot as a Doctor (compared to the other population). The situation was much better about 10 years ago on the real estate market.
The main problem in my opinion regarding Germany is that it becomes really hard to accumulate wealth, you have high taxes, real estate prices are high and the consumer prices are rising. So inheritance plays a really big role.
> The main problem in my opinion regarding Germany is that it becomes really hard to accumulate wealth
That's by design, isn't it? You're not really supposed to build up private wealth, you're supposed to fund social security systems and rely on them when in trouble.
I remember some high-ranking politician (I believe SPD, but my memory is weak) said in regards to Germany's low personal wealth that in Germany your wealth is having a social system you can rely on (and thus you don't need to have personal wealth).
Still going on about the “landed aristocracy”, I see.
No developed country serves working people. And it isn’t made to serve the aristocracy, either. Businesses and business interests rule over all. That much the US and the apparent monolith of Europe has in common, at least.
The only difference is that professionals—those with “careers”—are probably paid less in Europe in general compared to their peers in the US. Which is probably the reason why there is so much seething on HN about how Europe is oppressing people—Europe (or at least Western/Northern Europe) is relatively egalitarian overall, but tech nerds aren’t paid five times as much as their plumber, which is a real injustice.
> Which is probably the reason why there is so much seething on HN about how Europe is oppressing people
Well, that's something new for me. On the opposite, I see many people complain about (1) medical care costs in the USA, and how the system is designed in a wrong way - in Europe, you can either pay (much less than in the USA) or get healthcare for free, (2) no guaranteed PTO - in Europe, you have guaranteed 26 days + public holidays, (3) extremely high cost of higher education (in most of Europe is free/quite cheap), (4) related to that, student debt getting out of control (this is showing up often on HN), (5) inhuman approach to parental leave - you often need to go back to your factory a few weeks after giving birth to your baby! FB boasts of 4 months - how generous of them! In many European countries you get a year. Moreover, there are laws giving similar rights to fathers.
I posted that article the other day, didn't get as much traction as the DoorDash delivery story.
You very much do have a nightmare for poor people in America, you can do everything right and stub your toe, and end up $30,000 in medical debt overnight. People die all the time just because they can't afford healthcare. It can actually be cheaper, assuming you can manage getting on a plane and all that to fly to London, and treat your stub toe there versus treating it here. It's absolutely ridiculous what we put working people through in America.
Mental health care is also extremely expensive, for example, your concerned about your spending habits. Your looking to therapy, but then you realize a therapist will cost upwards of $1,600 a month.
Or maybe you lose your job and can no longer afford to pay $3,000 a month for various psychiatric medicines. It's as if we're all living in a demented Dickinson's novel, you get fired on Monday, your daughter loses her health insurance Tuesday, and your daughter may die since she ends up skipping essential medical care.
Of course we have half-assed stop gaps, for example, if after losing your job you have a spare $1,500 a month you can keep your employee health insurance. Cobra as it's called is everything wrong with America.
Even with a job, it's cheaper for me to pay out of pocket for health care. I have this luxury since I know Pythons, but when I was younger I just didn't go to the doctor. This caused all types of strange issues which I'm still working on.
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.
Renting is the equivalent of throwing away your money paying more than a mortgage in a lifetime and without having anything tangible in your hands after.
It depends. I would have to pay my current rent for 83 years to match the purchase price of a similar house. Plus if I rent it, then repairs need to be paid for by the housing company. If I buy, then I'm paying for them.
So with the current high housing asset prices and low rental prices, purchasing a house doesn't make financial sense.
There's a line where if makes sense to own vs rent, and sometimes local market conditions will land you in one camp vs the other. But at the end of the decade, if you're paying, eg $2,000/month in rent vs mortgage, after 30 years, one person owns their house, the other can look forwards to paying rent for another 30 years.
the mortgage is not 100% comparable to the rent, since not 100% of the mortgage is unrecoverable cost, unlike rent.
Some percentage of the mortgage payment is the principle payment. If you subtract this principle payment, and add in the cost of capital for the mortgage (which is the opportunity cost of the initial deposit), you can then compare the cost of mortgage with rent.
In most cases, rent should be cheaper (but of course, not always).
A nice rule of thumb is to have a 5% rule - if you can rent annually for less than 5% of the cost of the property, you'd be ahead financially.
Right now you'd neither a) after 30 years own the house at 2k/month and b) would have to pay for all the renovations within the 30 years (and I'd expect at least one pipe burst in that time). There are advantages of just renting. Even beyond the "I can just move if I have to" part.
That's what's called a "Milchmädchen Rechnung" (milkmaid calculation) in German. It highly depends on the interest rate and the property market development. Now it has been true in recent years, largely due to the artificially low interest rates and the large housing demand. However, it could (and has historically before) make much more sense to invest your capital otherwise and rent instead.
It's a different model, like buying groceries vs loaning money to get a farm. There are responsibilities, tied capital, operating risks that may devalue the asset or render it useless, liquidity and asset price risks, and known money sinks and on the upside you may have a valuable asset still on your hands when you move on or kick the bucket. And upside possibilities of course too like windfall from apprecating asset prices.
The main thing that makes renting a worse deal in many jurisdictions are the tax subsidies towards home ownership and taxation of rentals, otherwise in a working market it's a little rentiers profit and a lot of risk pricing / speculation.
Generally renting may take a smaller slice of your cash flow and allow you to invest the difference which will decide which will affect which scenario will come out $$ wise ahead in the endgame.
This is ridiculous, there are many cities where it’s
vastly cheaper to rent than to own.
Look at London or Barcelona for example. Landlords in these cities aren’t hoping to come anywhere near covering their mortgages with rent payments, they are hoping to profit from real estate appreciation.
This is really basic economics, it’s incredible to see people railing against this on HN. Even the home-ownership obsessed US is full of cities where it’s a vastly better financial decision to rent instead of buying.
Oh please, I pay 6000GBP a month for my apartment. I know all about crazy rents, I also know that the purchase price would be disproportionally high compared to the rent I’m paying.
Most landlords here are betting on property values continuing to grow, they’ll never turn a profit on rents.
That's not always true. Renting can definitely be a better decision from a purely economic perspective (just Google "rent vs buy calculator" to see why).
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
Just looking around my town, new houses in Japan are also dramatically larger and higher quality than older ones.
Older homes were one floor with single pane windows and basically single plane plywood walls. New ones have double paned windows, 2-3 floors, and some degree of insulation in the walls.
I’m not sure if that’s the sole factor driving price increases, but I imagine it’s one thing. Houses are generally treated as something to rebuild every 20-40 years here. But I could see newer homes being a buy once, keep your whole life deal.
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.
Don't be disingenuous, the fact that home ownership is high indicates that the housing is cheap, and cheap housing dosen't require a "60 year" credit plan to obtain. Indeed, I would wager it is the countries with lower home ownership rates that require a large mortage and high debt to pay off.
At the moment, you can borrow large amounts of money at ridiculously low interest rates. That's why people can pay more. But that doesn't imply that they can ever pay it off.
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.
I agree on the diversified investment idea, but wouldn't also owning a home add even more diversity to ones portfolio? In a lot of these countries at the top of the wikipedia list it is possible to invest elsewhere as well as in a home.
The typical person will only ever be able to afford at most one apartment/house (simply because if everyone has more than one, nobody would be willing to rent the "extra"). So, by definition, this means that for most people it would be a significant if not outright majority of their net worth. So no binding that much assets in one class would decrease the diversity. If you want to be exposed to housing: Buy an appropriate fonds for a fraction of the worth of a single apartment/house
Isn't that the problem with the canadian and American housing market?
Most people are all in on housing and can't afford to diversify after that, thus, the government cannot let the market crash without wiping out the wealth of the majority of its citizens
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.
Then you don't understand cultural diversity in the US. There are regional differences like india for example but each city or region in the US tends to self-segregate, some more than others but just about every country has a significant immigrant community in the US which are comparable to smaller ethnic groups in other countries. You may have been thinking there is just racial culture (white, black,etc...) but that is inaccurate. To name a few Irish in boston, italian in nyc, cuban in miami, african american in harlem va NC vs Missisipi, mexican in texas vs california, so many more. The US has the diversity similar but not the how that diversity is defined as with india or brazil.
India for example has so many languages that one has to group them all into different language families. To compare that kind of diversity with third generation Italian-Americans in NYC and how cities have X district (Chinese or whatever) is laughable, and frankly a new low.
> The US has the diversity similar but not the how that diversity is defined as with india or brazil.
I don’t even know what this sentence is supposed to say but it’s probably not anything profound.
Every one of those languages in india have native speakers in the US, what's your point?
> it’s probably not anything profound.
Could say the same, just being pompous. We're not comparing third generation italians with all of india here, we are comparing them the whole of US where italians are one piece with india. If you want 1-to-1 check out immigrant communities in any major city and suburb. I've worked in a team of maybe 20 where at least 7 nationalities and 4-5 native langauges were represented. Unless of course you don't consider naturalized americans lr their children as real americans? I've met Chinese from different parts of china, mexicans from different parts if mexico, indians from different states speaking urdu, punjabi,etc... middle easter people with very different arabic dialects and somehow you think India or Brazil is more diverse? You don't have to have a long established native presence for your culture to count. Heck, ever heard of internet or hacker culture? It's real!
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.
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.