Why are UK house prices so much higher than in Germany?

GDB2222

Why are UK house prices so much higher than in Germany? Is there any justification for that? We are a bit more crowded here, but there are no barriers to moving to Germany apart from language. My son has been in Berlin for 3 months and now speaks passable German, so that's not that much of a problem. The German economy is better than over here.

2 bed flat for €15k anyone? http://www.findaproperty.com/displayprop.aspx?edid=09&salerent=0&pid=3844238

Maybe that's not a great example, but prices generally are much, much lower.

drc

It depends where you look in Germany. Some parts of Berlin are very desirable and have high property prices such as Prenzlauerberg, Mitte, Charlottenburg, parts of Kreuzberg etc.

Other parts (particularly in old Eastern cities) are very cheap. Not that diffierent from the disparity of prices between London and the North.

I do agree that generally Germany is cheaper than the UK but that is because of ripoff Britain and the onus placed on sustaining high house prices at whatever cost to the fabric of society.

Alan_M_2

I have a feeling that this is more to do with the Germans ambivalence about actually owning a home as opposed to renting.

It would be intersting to see what the percentage of ownership vs renting is compared to the UK, I imagine there's quite a disparity.

So if the demand to purchase is much lower than the availability of properties the prices are going to remain at a pretty much stagnant level. As a result of this the returns on property rentals will be quite decent whilst still keeping rents very afforable, therefore the compulsion to buy isn't anywhere near as strong as it is in the UK.

Then you need to take into consideration what rights tenants have and if these differ substantially than the UK (I have a feeling tenants have very strong rights and lifetime rentals are not entirely unusual).

HAMISH_MCTAVISH

GDB2222 wrote: »

Why are UK house prices so much higher than in Germany? .

Primarily because of German population decline versus UK population increase.

The price differential is particularly large in the areas of what was formerly East Germany.

Where you can find flats for 17K euros all day long. But there is no employment to support anyone living there.

So 1.7 million people have left..... Hence the cheap houses.

Population decline and economic stagnation has prompted 1.7 million people to move away from eastern Germany since reunification, leaving behind empty and aging towns and villages.

Some eastern German cities have lost 20 to 30 percent of their populations since 1990.

Nowhere in Europe are the demographic challenges as daunting.

Population decline, however, is not limited to eastern Germany; it is a nationwide trend.

Fertility rates on both sides of the wall fell to 1.4 children per woman during the 1970s, when Italy, Spain, and Greece - all of which have lower fertility levels than Germany today - were still reporting rates of over 2.

Thirty years of low fertility are now taking their toll on German demographics.

Germany's population officially began to decrease in 2003, and is set to drop to between 69 and 71 million people by 2050, down from around 82 million today.

http://knowledge.allianz.com/en/globalissues/demographic_profiles/germany/germany_demographic_profile.html

The UK's population is projected to increase to 70 million by 2030, and 80 million by 2050, from around 61 million today, and just 56 million a couple of decades ago.

carolt

No, it's primarily because, as Alan Coss said, tenants have proper rights there, so there is no particular incentive to buy at all costs as here.

I believe it is also harder to get a mortgage there - no lie-to-buy to artificially inflate prices.

GDB2222

Many Germans do rent, that is true. Also, there are rent controls in place, making BTL rather unattractive. Overall, it works rather well at preventing huge amounts of capital being sucked into property.

chucky

carolt wrote: »

No, it's primarily because, as Alan Coss said, tenants have proper rights there, so there is no particular incentive to buy at all costs as here.

I believe it is also harder to get a mortgage there - no lie-to-buy to artificially inflate prices.

why is the grass always greener on the other side by the people that think that the capital city of Germany is Berlin...

DervProf

The Germans might be cleverer than us.........

They have a decent car industry, and they aren`t "robbing" money of each other when they sell each other property. Sounds sensible to me.

Plus, I don`t think they have the equivalent of Kirsty Allsop, or Hamish McTavish.


Oh, as a matter of interest, did the German banks require as mush "help" as our banks after the credit crunch ?

PasturesNew

Kirsty/Phil took a young, excited couple out to see some German flats, for a BTL venture.

I think in the end they got credit crunched and didn't buy. But they believed (and K/P hyped) that there'd be big HPI growth for them to get their paws on at some future point.

I can't find out which town they were looking in though. They couldn't view inside the flats as they were tenanted already.

By contrast, Britain's continental neighbours have long approached property tenure very differently. In 2007 just 56% of French and 43% of German households were owner-occupied - thanks in no small part to legal systems which make renting more attractive and secure.

Source: http://www.bbc.co.uk/news/magazine-11002344

adecor

We now live in Germany and I think this is a big reason that the property prices stay pretty stagnant.

Capital gains

Currently profits made on sales of properties held as a private asset are not taxed if the property
has been held for over 10 years. However, there are plans to introduce a (20%) capital gains tax
in the coming years. If a property has been held for less than 10 years capital gains are taxed as

income (progressive tax rates).

Degenerate

GDB2222 wrote: »

The German economy is better than over here.

That's a highly debatable point. Larger, yes, but they are a larger country with a larger population. They also export much more, as is often discussed, but the doesn't make their economy "better", rather it highlights the weakness of their own consumption.

Compared to us they had rather sluggish growth for the decade or so leading up to the crash. They were hit just as severely in the crash (thanks in large part due to their reliance on demand for their exports), and have their own major banking problems which they still have taken little action to resolve (unlike us). They also have significantly higher unemployment and areas of economic deprivation. They have a larger national debt, though you'd never guess it if you fell for the hysterical coverage of our situation. The country is still paying the price for reconstruction in the East.

Finally, they have the unresolved Euro crisis dangling over their heads, the issue merely postponed, certain to come to a head again at some point and damage all members of the Euro-zone.

Of course, there are plenty of comparative weaknesses of the British economy too - my point that our economies are very different and it is far from clear that either is "better".