4 ms·

Because rent would hurt you really bad when you're pensioner.

HarryHirsch 5y ago
Old-age poverty is indeed a policy problem, but housing policy isn't really the way to address it. (Meanwhile you look at places like the Villages in Florida, where you are required to own a car because nothing is within walking distance, no social club, no grocery story, no physician, there's going to be a huge amount of pain in the future.)
nicbou 5y ago
The alternative is to tie up a significant amount of money into a home. In Germany, ~12% of the purchase price is lost to fees. A lot more is lost to interest. Some more is lost to things that are normally included in your rent. Oh and you need to pay for maintenance. You need to take care of maintenance. To illustrate my point, most German landlords fail to beat inflation. Some 20% are losing money. The homeowners I know chose a slightly worse location, because they couldn't afford to buy in the places where they actually want to live. Since a mortgage is a 30 year affair, they bought more than they currently need. They end up paying more and getting less (for now). Inflation and rising rents will work in their favour eventually, but it's far enough in the future to make me question the move. I meant to write about buying a home in Germany (I write about adulting in Germany), and the conclusions from my extensive research are the following: - Buying a home is not a financial decision, it's a lifestyle decision - Everyone who writes about buying a home has a financial incentive to recommend buying a home - Home ownership is also throwing a lot of money away: closing fees, taxes, interests, maintenance, opportunity cost...
- jjav 5y ago
  > Home ownership is also throwing a lot of money away It doesn't matter how much overhead it has in a vacuum. What matters is how much goes to overhead when compared to renting, which is the only other choice (other than being homeless).
- llampx 5y ago
  I'm not so sure that buying is always a bad decision. I live in Berlin, and see where you are coming from. Germany has strong tenant protection laws, and you generally don't get much or any freedom when buying an apartment in a building. You can't change the layout as you'd like, for example, due to load-bearing walls. However, in terms of building equity (not to become a small-time landlord), buying an apartment is a safe bet - the housing market has been in a bull market for a long time, and the last few years have been especially good. I suspect we're closer to a long-term top than many think, but that's another matter. Even if the market crashes, your house remains yours and keeps providing shelter. On top of that, selling is tax-advantaged whereas stocks aren't.
  - nicbou 5y ago
    A part of your payments will indeed build equity, but over 30 years of payments, most of it won't (see previous comment). If the market crashes, your house will not remain yours if you can't afford making payments. If things go south, I see unavoidable payments and illiquid assets as a liability, not an asset. Selling is indeed tax-advantaged after a few years though. That's a good point. The main pro for me is that it's a hedge against rent prices and inflation. However that's assuming that housing prices are reasonable, and that there are no better investments.

Old-age poverty is indeed a policy problem, but housing policy isn't really the way to address it. (Meanwhile you look at places like the Villages in Florida, where you are required to own a car because nothing is within walking distance, no social club, no grocery story, no physician, there's going to be a huge amount of pain in the future.)

nicbou 5y ago

The alternative is to tie up a significant amount of money into a home. In Germany, ~12% of the purchase price is lost to fees. A lot more is lost to interest. Some more is lost to things that are normally included in your rent. Oh and you need to pay for maintenance. You need to take care of maintenance. To illustrate my point, most German landlords fail to beat inflation. Some 20% are losing money. The homeowners I know chose a slightly worse location, because they couldn't afford to buy in the places where they actually want to live. Since a mortgage is a 30 year affair, they bought more than they currently need. They end up paying more and getting less (for now). Inflation and rising rents will work in their favour eventually, but it's far enough in the future to make me question the move. I meant to write about buying a home in Germany (I write about adulting in Germany), and the conclusions from my extensive research are the following: - Buying a home is not a financial decision, it's a lifestyle decision - Everyone who writes about buying a home has a financial incentive to recommend buying a home - Home ownership is also throwing a lot of money away: closing fees, taxes, interests, maintenance, opportunity cost...

jjav 5y ago
> Home ownership is also throwing a lot of money away It doesn't matter how much overhead it has in a vacuum. What matters is how much goes to overhead when compared to renting, which is the only other choice (other than being homeless).
llampx 5y ago
I'm not so sure that buying is always a bad decision. I live in Berlin, and see where you are coming from. Germany has strong tenant protection laws, and you generally don't get much or any freedom when buying an apartment in a building. You can't change the layout as you'd like, for example, due to load-bearing walls. However, in terms of building equity (not to become a small-time landlord), buying an apartment is a safe bet - the housing market has been in a bull market for a long time, and the last few years have been especially good. I suspect we're closer to a long-term top than many think, but that's another matter. Even if the market crashes, your house remains yours and keeps providing shelter. On top of that, selling is tax-advantaged whereas stocks aren't.
- nicbou 5y ago
  A part of your payments will indeed build equity, but over 30 years of payments, most of it won't (see previous comment). If the market crashes, your house will not remain yours if you can't afford making payments. If things go south, I see unavoidable payments and illiquid assets as a liability, not an asset. Selling is indeed tax-advantaged after a few years though. That's a good point. The main pro for me is that it's a hedge against rent prices and inflation. However that's assuming that housing prices are reasonable, and that there are no better investments.