Most Germans don’t buy their homes, they rent

So in Germany, the interest on a mortgage is non tax deductible. The article doesn&#x27;t mention it but I understand that property owners are also liable for capital gain tax if they hold the property less than 10 years.<p>I think that makes sense. There is no reason to favor individuals investing into an unproductive investment (property) over productive investments (stocks and bonds, which enable companies to raise money to start new projects, create jobs, etc). Over-borrowing to bid the maximum amount one can to buy a nineteenth century house doesn&#x27;t create any job for anyone, it just transfers wealth to the hands of the seller.

Being German I want to pPoint out that the article leaves out one cruicial detail: Building your own home puts you into debt for quite literally the rest of your life. We do not like debt.

I am a German CS-Student and currently renting in a shared flat with 4 other students. We call it WG (living-community) and its really popular not only with students, but i know a lot of young professionals and even middle aged ones that share an apartment (it gained popularity in the 60s, so i think its more of an culture thing that older do not share a flat). If you are in a partnership, you can move out and share a smaller one with your partner, but if your not in a partnership (or not that close yet) i wouldn&#x27;t want to miss living in a shared apartment. You come home, talk about your day, cook together and on the weekend you can go out together. There is always something going on. I can&#x27;t imagine living in my own apartment all by myself. Working long and then coming home into an empty, dead, dark apartment with no one to talk to.<p>Serious question: Why is it not very popular in other countries?

The Germans seem to be far ahead of the curve here. From a financial planning perspective, buying a home results in:<p>1) The vast majority of your assets becoming concentrated in a single plot of land, in a single neighborhood, in a single city<p>2) Your future mobility to pursue jobs in other cities, becoming significantly constrained<p>If you want to invest your savings, then invest them in the stock&#x2F;bond markets. If you really love real estate investments for some reason, invest in a REIT fund where your assets will be diversified across thousands of properties, and fully managed by others on your behalf. Pursuing a national policy of home-ownership makes little sense.

The idea that owning a home is a great investment is an article of faith, not evidence.<p>Imagine if large public companies owned most of the housing stock and rather than buying a house you invested in these companies. Instead of bearing all the location and liquidity risk of owning a house, you would spread that risk over large numbers of markets. In fact being stuck owning a house in an unfavorable market can keep someone from moving, which reduces labor mobility.

On the other hand, many Germans believe: renting is paying someone else, buying is paying yourself (which is nonsense). Especially in more rural areas, buying&#x2F;building a house is considered a big achievement in life. People are even willing to move from a smaller city to little towns just to be home-owners.<p>Buying a house can be a net loss over the years, if you&#x27;re not located in a major city. Especially in East Germany, house prices are declining. See this graphic [1]. Everything yellow basically doesn&#x27;t yield any returns. Housing prices in orange and red areas decline over the years.<p>But even in green areas, there are so many knobs you can turn to make buying or renting more feasible than the other. It boils down to lifestyle decision: Do you want to live in your own house or not? If you prefer to rent: Are you willing to save money by other means? Because buying a house works for many people simply because they&#x27;re forced to &quot;save&quot; a certain percentage of their income every month.<p>I prefer renting, because of the flexibility. I put quite a bit of money in stocks instead.<p>[1]: <a href="http:&#x2F;&#x2F;cdn3.spiegel.de&#x2F;images&#x2F;image-726182-galleryV9-uttw-726182.jpg" rel="nofollow">http:&#x2F;&#x2F;cdn3.spiegel.de&#x2F;images&#x2F;image-726182-galleryV9-uttw-72...</a>

Germany is a two-class society divided into landlords and renters. A landlord will usually not own only one but ~3-20 houses that total to ~15-100 flats. The landlords often are renters themselves.<p>When compared with big housing companies, private landlords require bigger profit margins, leading to low quality maintenance of existing houses and ex-orbital rents. Especially in crowded cities, rent regulation is non existent and its a sellers market, inflated by wealthy students that rent expensive micro-flats during university.<p>You or your parents don’t own houses, and are self sufficient on a regular job? Well, you are shit out of luck then. As much as 70% of your income will go towards your rent, effectively financing the better-off and the further expansion of their inefficient renting businesses.

The only liberty that renting provides is the protection from the whims of the housing market.<p>Aside from that it takes liberties right left and centre. I cannot structure my house and life as I want from painting and shelving through pets and kitchen appliances.<p>I cannot fix something without causing a hassle and days off work.<p>I cannot register a business here.<p>I am at the whim of my landlord.<p>Renting in the UK is a pain in the arse. I do to see renting as particularly positive for the individual.

It&#x27;s an interesting article. I&#x27;m from Belgium, one of the highest house owners countries. Even though it&#x27;s true it&#x27;s a life-long debt and it might be risky (in case of crisis), housing is still considered as a Long Term Investment so that you can pass that investment to your children (after heavy tax deduction :)). I find interesting the article does not mention who actually owns all these houses and who benefits in the long term. After all, renting has a guaranteed zero ROI.<p>Also, recently, I&#x27;ve been looking at housing market in Munich and it&#x27;s very very expensive. Renting is ~20% more expensive than in Brussels and acquisition is +100% more expensive. So, although I admit I do not know rest of Germany housing market, I have some troubles thinking why Munich would be more expensive than Brussels. And I certainly miss, from that perspective, why German system would be more interesting.

According to the article, mainly: 1 - Government doesn&#x27;t subsidize homeowners; 2 - Renting rules are reasonable for renters, increasing supply which makes renting affordable.<p>There, saved you a click.

I agree it is a good thing for Germany to have so much renting. Indeed I think home-ownership will be the #1 driver of inequality in other contries over the next generation or two.<p>Those countries will have policies that lcaim help poor people buy houses, but the effect is to just inflate prices and increase financial risk -- as the world has already seen. The one thing that would really help -- increased supply is blocked by a powerful home-owners lobby damanding zoning rules and other restrictions.<p>In Germany the bloc is powerful, and probably gets more goodies than it should. But at least here they are constant building new housing.

Having lived in jurisdictions that limit annual rent increases via a rental index and jurisdictions that do not, I prefer the former. In America such action is dismissed as a price control, unfortunately for me.

How does Germany handle retirement? In the US, your home is seen as an investment, one that can partially fun retirement or depending on the market, pre-retirement income.

Article misses the hyperinflation of the 20s and the capital markets in the 50s.<p>By the time the cold war made it apparent that 20s style economy destroying reparations would not be paid, renting was already baked into the cake.<p>Residential real estate is non-productive and post WW2 Germany had not use for a capital drain if anything they needed capital along the lines of the Marshall Plan so its not like anyone was interested in wasting capital in a modern USA style housing bubble.

And how is that working out in Berlin now? Rents in Prenzlauer Berg and Neukölln increasing significantly every year. There wasn&#x27;t a need to buy before because rent was dirt cheap. That&#x27;s changing fast. It&#x27;s obviously going to push out those who are poor but perhaps this will lead to more people realising the benefits of owning property.

The culture is so much different in México, the first thing you do when you start working is to buy a house even if rents are cheap.

I would be curious to know or hear if anyone thinks this trend has been altered since 2008. For close to a decade now we have had extremely low or in some case negative(in Europe) interest rates. Thats a lot of cheap financing. As the article points out the data is from 2004.

I think in small cities people still buy houses. When they cannot afford the price they rent. Or is there really some strong reports that this happens in Germany only

Sure. Housing prices in metropolitan areas are sky high, thanks to the asset price inflation of the ECB. Hey, even a house in a tiny village easily sets you 300k Euro back. The secret of the German export&quot;wunder&quot; is extremely low wages.<p>&quot;Most Germans don’t buy their homes, they rent.&quot;<p>Yes. Because they can&#x27;t fucking afford a house. Riddle solved. Move on.

&gt; more than 93% of German respondents tell pollsters they’re satisfied<p>You only trust the statistic you created yourself. That is not a true statement.

I realize that Berlin is nothing like the rest of Germany but I noticed that the rental housing stock there seems to be pretty tight. There&#x27;s a fair amount of construction going on but it looked like a premium housing stock that was going up. I assumed these were probably for sale but maybe they are high end rentals?

Can somone explain what the article means by:<p>&gt; Germany also loosened regulation of rental caps sooner than many other countries,<p>Does that mean the amount of rent control was deregulated? I thought the rent control here in Germany was pretty strict -- at least in the sense that the landlord can&#x27;t increase the rent during an existing tenancy.

So who then owns the property to rent out for most of the Germans?

Who owns most of the homes then ? Institutional investors ?

It seems to me a huge problem when they retire?