7 ms·

In Germany we have extremely high property taxes (6% of purchase cost on new buy and 1.2% annual in my region). Plus very high transaction costs associated with

In Germany we have extremely high property taxes (6% of purchase cost on new buy and 1.2% annual in my region). Plus very high transaction costs associated with real estate business (notary costs). It is interesting fact that more developed European countries, such as Switzerland (42%) or Germany (51%), tended to have a lower home ownership rate compared to less developed countries such as Lithuania (90%) or Romania (96%).

rb808 8y ago
6% of purchase price is nothing :). Welcome to the US North East where 2-3% of current value every year is now standard.
- Rapzid 8y ago
  2.78 or so in Texas. Everyone gets to pay :D
  - lotsofpulp 8y ago
    At least TX doesn’t have state income tax. Northeast gets you with state income tax, state sales tax, property taxes, myriad hotel taxes, road tolls, vehicle registration fees, drivers license fees, court fees, etc. and everything keeps increasing every year as he unfunded defined benefit, healthcare benefit, and infrastructure debt comes due.
vorpalhex 8y ago
It's sort of an interesting tradeoff. On one hand, it's not desirable for most people to rent longterm, and owning property is an important way to store and grow wealth. On the other hand, you don't want a few well financed investors sweeping in and buying all the available housing just as a kind of depository for funds. Texas has an interesting setup. Property taxes are relatively high, but you can choose one house that you occupy to get a "Homestead exemption" that brings the taxes down quite a bit. This doesn't prevent you from owning say, a vacation home, but does make it quite a bit more expensive (which seems to be fair).
- TimJYoung 8y ago
  This may be a topic for a different conversation, but I also remember reading during the aftermath of the 2008 recession that the high property taxes in Texas were also one of the things that helped keep the state relatively unscathed from all of the same issues with rampant speculation/price increases that plagued similar areas like Florida and Nevada.
- grasshopperpurp 8y ago
  >It's sort of an interesting tradeoff. On one hand, it's not desirable for most people to rent longterm, and owning property is an important way to store and grow wealth. On the other hand, you don't want a few well financed investors sweeping in and buying all the available housing just as a kind of depository for funds. Wouldn't it also disincentivize people from lobbying for zoning laws that are only beneficial to homeowners?
- rory096 8y ago
  >On one hand, it's not desirable for most people to rent longterm, and owning property is an important way to store and grow wealth. Neither of these are particularly true in an economic sense, except in that homeownership in growing, zoning-throttled areas is a ticket to the rent-seeking wealth transfer those supply restraints create. Homeownership is driven by this effect, federal subsidies, and general social norms encouraging it, but it creates labor market frictions by tying you to a place and ties up all your wealth in a single asset. https://marginalrevolution.com/marginalrevolution/2016/02/67635.html https://marginalrevolution.com/marginalrevolution/2016/02/67... https://www.economist.com/free-exchange/2010/04/21/rent-or-buy https://www.economist.com/free-exchange/2010/04/21/rent-or-b...
  - vonmoltke 8y ago
    > [Home ownership] creates labor market frictions by tying you to a place I have never understood this line of reasoning. I agree that it increases friction, but there is a whole lot of friction that has nothing to do with renting vs. buying. Particularly friction in long-distance moves.
cozzyd 8y ago
I wonder how many of those property owners in Eastern Europe came to own their homes before the collapse of communism.
- dougmwne 8y ago
  Purely from anecdote, I think many people were in government owned housing and were able the cheaply buy when Communism fell. I'm sure there were various schemes, so not sure how often re-privatization happened below market rates, or even if there was such a thing as the "market" for the period directly after Communism. From stories I've heard in Poland there was somewhat of a mad dash to buy as much property and land as possible.
  - cozzyd 8y ago
    That's my impression as well in Romania, but I was too young to know what was going on back then and my family immigrated to the US shortly thereafter...
strictnein 8y ago
1.2% annual property taxes aren't out of the ordinary in the US (I pay ~1.5%), but having a sales tax (more or less) of 6% on homes is completely unheard of. Closing (transaction) costs in the US are in the ~$5k range.
- jackpirate 8y ago
  Except that the seller typically pays around 10% (would be $40k for my house).
  - strictnein 8y ago
    That's money towards the home itself though. The person I was responding to stated that it was a 6% tax, which is a very different thing.
    - jackpirate 8y ago
      That's not money towards the home. That's fees payed to brokers, the city, county, etc.
- lisper 8y ago
  The standard real estate brokerage fee in the U.S. is 6%. One also often pays "points" on the loan. A closing cost by any other name is still money that is in someone else's pocket when the dust settles.
  - strictnein 8y ago
    There's real estate brokerage fees in Europe too. https://tranio.com/articles/real_estate_agents_commissions_in_various_countries/ https://tranio.com/articles/real_estate_agents_commissions_i... Also, if you're paying 6% in the US you're doing something wrong. Selling through Redfin, for instance, and you'll be around 4.2% (1.5% for Redfin, 2.7% for the buyer's realtor).
  - bdhess 8y ago
    Brokerage fees cover the costs of a broker's involvement in the transaction (for the seller's broker, listing and marketing the property; for the buyer's broker, finding and showing properties; for both brokers, "event managing" the transaction toward resolution). Points on the loan is money paid to the bank in exchange for a reduction in the interest rate over the life of the loan. Both of those are different things than paying money to the government just for the privilege of consummating the transaction.
pcurve 8y ago
Check out my great state of NJ. https://www.zillow.com/homes/for_sale/Cresskill-NJ/pmf,pf_pt/37869234_zpid/17621_rid/globalrelevanceex_sort/40.948286,-73.932774,40.92757,-73.964789_rect/14_zm/ https://www.zillow.com/homes/for_sale/Cresskill-NJ/pmf,pf_pt... A house listed for sale for $1,350,000. Annual property tax of $35,700. I've seen annual property tax bill upwards of 6 figure for $3 million house. Other houses with hilarious price tags nearby. https://www.zillow.com/homes/for_sale/Alpine-NJ/pmf,pf_pt/23458_rid/globalrelevanceex_sort/40.969464,-73.880353,40.92804,-73.956228_rect/13_zm/ https://www.zillow.com/homes/for_sale/Alpine-NJ/pmf,pf_pt/23...
- zjaffee 8y ago
  New Jersey property taxes are horrendous, but at least it keeps the schools good (also it's what allows NJ to have so many purely residential towns, where as in California, many suburbs need corporations located in them to support them financially).
- nugget 8y ago
  Keep in mind that this property tax got relatively much more expensive in 2018 thanks to the elimination of SALT deductions in Federal tax reform. Assuming a top-earner who itemized, they were able to deduct about 50% of the tax which would bring it down to $17,850. Under new tax policy, they owe the full $35,700. Effectively a 100% property tax increase year-over-year. I'm watching the property markets in New Jersey particularly to see whether there is an impact on prices, but so far, it hasn't really materialized.
  - pcurve 8y ago
    What I noticed is that houses $1 million-$1.5 million in range, their prices have stagnated or declined over the years in NJ, especially in areas with high property tax. Some owners are taking a deep bath. Like this one. Purchased for $1,315 mil in 2005 (market peak). Listed for $899k. http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsnum=1817511&openhouse=true&dayssince=15&countysearch=false http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsn... This house is quite interesting too. http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsnum=1822076&openhouse=true&dayssince=15&countysearch=false http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsn... Sold for $1.5mil in 2014. Listed for $1.15mil now. It was sold for $860,000 in 1995 when real estate was very cheap. That house is in a very nice part of the town too. (Allendale is all nice to begin with)
kindatrue 8y ago
>1.2% annual in my region What is the denominator? Is it the current market price? The price you paid originally? Something else?
samsonradu 8y ago
Romania is quite terrible in that aspect. A program called “First House” has been running since 2009, giving loans with variable interest rate, 5% downpayment for 30 years with rates that can go up to 45% of their monthly income. They are guaranteed by the state. This keeps the estate market propped up and hurts people’s mobility. It’s the main way banks get to make risk-free money off the population in a country that has the biggest GDP growth in Europe based mainly on consumption.
twblalock 8y ago
> It is interesting fact that more developed European countries, such as Switzerland (42%) or Germany (51%), tended to have a lower home ownership rate compared to less developed countries such as Lithuania (90%) or Romania (96%). Another factor is tenant rights -- renters in places like Germany have so many rights and protections that renting is a lot more like owning than it would be elsewhere.
watwut 8y ago
Adding to other factors (such as buying cheaply from government after communism) I will add other tree: 1.) house ownership in traditionally rural families where it is seen as "return to normal" after communism 2.) less trust to economical system - if you don't own flat you are much more vulnerable in case of unemployment 3.) rent is almost as high as mortgage - if you can afford to buy you will bc it is almost the same money.
mFixman 8y ago
I would guess this is a legacy of Communism. Eastern European governments build homes at a much higher rate than its Western counterparts, thus making property values much lower many years later. Commieblocks may be aesthetically ugly, but they do serve a nice functional purpose.

rb808 8y ago

6% of purchase price is nothing :). Welcome to the US North East where 2-3% of current value every year is now standard.

Rapzid 8y ago
2.78 or so in Texas. Everyone gets to pay :D
- lotsofpulp 8y ago
  At least TX doesn’t have state income tax. Northeast gets you with state income tax, state sales tax, property taxes, myriad hotel taxes, road tolls, vehicle registration fees, drivers license fees, court fees, etc. and everything keeps increasing every year as he unfunded defined benefit, healthcare benefit, and infrastructure debt comes due.

vorpalhex 8y ago

It's sort of an interesting tradeoff. On one hand, it's not desirable for most people to rent longterm, and owning property is an important way to store and grow wealth. On the other hand, you don't want a few well financed investors sweeping in and buying all the available housing just as a kind of depository for funds. Texas has an interesting setup. Property taxes are relatively high, but you can choose one house that you occupy to get a "Homestead exemption" that brings the taxes down quite a bit. This doesn't prevent you from owning say, a vacation home, but does make it quite a bit more expensive (which seems to be fair).

TimJYoung 8y ago
This may be a topic for a different conversation, but I also remember reading during the aftermath of the 2008 recession that the high property taxes in Texas were also one of the things that helped keep the state relatively unscathed from all of the same issues with rampant speculation/price increases that plagued similar areas like Florida and Nevada.
grasshopperpurp 8y ago
>It's sort of an interesting tradeoff. On one hand, it's not desirable for most people to rent longterm, and owning property is an important way to store and grow wealth. On the other hand, you don't want a few well financed investors sweeping in and buying all the available housing just as a kind of depository for funds. Wouldn't it also disincentivize people from lobbying for zoning laws that are only beneficial to homeowners?
rory096 8y ago
>On one hand, it's not desirable for most people to rent longterm, and owning property is an important way to store and grow wealth. Neither of these are particularly true in an economic sense, except in that homeownership in growing, zoning-throttled areas is a ticket to the rent-seeking wealth transfer those supply restraints create. Homeownership is driven by this effect, federal subsidies, and general social norms encouraging it, but it creates labor market frictions by tying you to a place and ties up all your wealth in a single asset. https://marginalrevolution.com/marginalrevolution/2016/02/67635.html https://marginalrevolution.com/marginalrevolution/2016/02/67... https://www.economist.com/free-exchange/2010/04/21/rent-or-buy https://www.economist.com/free-exchange/2010/04/21/rent-or-b...
- vonmoltke 8y ago
  > [Home ownership] creates labor market frictions by tying you to a place I have never understood this line of reasoning. I agree that it increases friction, but there is a whole lot of friction that has nothing to do with renting vs. buying. Particularly friction in long-distance moves.

cozzyd 8y ago

I wonder how many of those property owners in Eastern Europe came to own their homes before the collapse of communism.

dougmwne 8y ago
Purely from anecdote, I think many people were in government owned housing and were able the cheaply buy when Communism fell. I'm sure there were various schemes, so not sure how often re-privatization happened below market rates, or even if there was such a thing as the "market" for the period directly after Communism. From stories I've heard in Poland there was somewhat of a mad dash to buy as much property and land as possible.
- cozzyd 8y ago
  That's my impression as well in Romania, but I was too young to know what was going on back then and my family immigrated to the US shortly thereafter...

strictnein 8y ago

1.2% annual property taxes aren't out of the ordinary in the US (I pay ~1.5%), but having a sales tax (more or less) of 6% on homes is completely unheard of. Closing (transaction) costs in the US are in the ~$5k range.

jackpirate 8y ago
Except that the seller typically pays around 10% (would be $40k for my house).
- strictnein 8y ago
  That's money towards the home itself though. The person I was responding to stated that it was a 6% tax, which is a very different thing.
  - jackpirate 8y ago
    That's not money towards the home. That's fees payed to brokers, the city, county, etc.
lisper 8y ago
The standard real estate brokerage fee in the U.S. is 6%. One also often pays "points" on the loan. A closing cost by any other name is still money that is in someone else's pocket when the dust settles.
- strictnein 8y ago
  There's real estate brokerage fees in Europe too. https://tranio.com/articles/real_estate_agents_commissions_in_various_countries/ https://tranio.com/articles/real_estate_agents_commissions_i... Also, if you're paying 6% in the US you're doing something wrong. Selling through Redfin, for instance, and you'll be around 4.2% (1.5% for Redfin, 2.7% for the buyer's realtor).
- bdhess 8y ago
  Brokerage fees cover the costs of a broker's involvement in the transaction (for the seller's broker, listing and marketing the property; for the buyer's broker, finding and showing properties; for both brokers, "event managing" the transaction toward resolution). Points on the loan is money paid to the bank in exchange for a reduction in the interest rate over the life of the loan. Both of those are different things than paying money to the government just for the privilege of consummating the transaction.

pcurve 8y ago

Check out my great state of NJ. https://www.zillow.com/homes/for_sale/Cresskill-NJ/pmf,pf_pt/37869234_zpid/17621_rid/globalrelevanceex_sort/40.948286,-73.932774,40.92757,-73.964789_rect/14_zm/ https://www.zillow.com/homes/for_sale/Cresskill-NJ/pmf,pf_pt... A house listed for sale for $1,350,000. Annual property tax of $35,700. I've seen annual property tax bill upwards of 6 figure for $3 million house. Other houses with hilarious price tags nearby. https://www.zillow.com/homes/for_sale/Alpine-NJ/pmf,pf_pt/23458_rid/globalrelevanceex_sort/40.969464,-73.880353,40.92804,-73.956228_rect/13_zm/ https://www.zillow.com/homes/for_sale/Alpine-NJ/pmf,pf_pt/23...

zjaffee 8y ago
New Jersey property taxes are horrendous, but at least it keeps the schools good (also it's what allows NJ to have so many purely residential towns, where as in California, many suburbs need corporations located in them to support them financially).
nugget 8y ago
Keep in mind that this property tax got relatively much more expensive in 2018 thanks to the elimination of SALT deductions in Federal tax reform. Assuming a top-earner who itemized, they were able to deduct about 50% of the tax which would bring it down to $17,850. Under new tax policy, they owe the full $35,700. Effectively a 100% property tax increase year-over-year. I'm watching the property markets in New Jersey particularly to see whether there is an impact on prices, but so far, it hasn't really materialized.
- pcurve 8y ago
  What I noticed is that houses $1 million-$1.5 million in range, their prices have stagnated or declined over the years in NJ, especially in areas with high property tax. Some owners are taking a deep bath. Like this one. Purchased for $1,315 mil in 2005 (market peak). Listed for $899k. http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsnum=1817511&openhouse=true&dayssince=15&countysearch=false http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsn... This house is quite interesting too. http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsnum=1822076&openhouse=true&dayssince=15&countysearch=false http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsn... Sold for $1.5mil in 2014. Listed for $1.15mil now. It was sold for $860,000 in 1995 when real estate was very cheap. That house is in a very nice part of the town too. (Allendale is all nice to begin with)

kindatrue 8y ago

>1.2% annual in my region What is the denominator? Is it the current market price? The price you paid originally? Something else?

samsonradu 8y ago

Romania is quite terrible in that aspect. A program called “First House” has been running since 2009, giving loans with variable interest rate, 5% downpayment for 30 years with rates that can go up to 45% of their monthly income. They are guaranteed by the state. This keeps the estate market propped up and hurts people’s mobility. It’s the main way banks get to make risk-free money off the population in a country that has the biggest GDP growth in Europe based mainly on consumption.

twblalock 8y ago

> It is interesting fact that more developed European countries, such as Switzerland (42%) or Germany (51%), tended to have a lower home ownership rate compared to less developed countries such as Lithuania (90%) or Romania (96%). Another factor is tenant rights -- renters in places like Germany have so many rights and protections that renting is a lot more like owning than it would be elsewhere.

watwut 8y ago

Adding to other factors (such as buying cheaply from government after communism) I will add other tree: 1.) house ownership in traditionally rural families where it is seen as "return to normal" after communism 2.) less trust to economical system - if you don't own flat you are much more vulnerable in case of unemployment 3.) rent is almost as high as mortgage - if you can afford to buy you will bc it is almost the same money.

mFixman 8y ago

I would guess this is a legacy of Communism. Eastern European governments build homes at a much higher rate than its Western counterparts, thus making property values much lower many years later. Commieblocks may be aesthetically ugly, but they do serve a nice functional purpose.