Why are there no real estate bubbles in Germany?

whiteonion · 29-04-2011 12:20AM #1

You blame cheap credit on the real estate bubble in Ireland but why was there no real estate bubble in Germany? Germany is very crowded compared to Ireland, yet rent is cheaper and houses are cheaper. How come there hasn't been a real estate bubble in Germany?

Are Germans more rational than Irish people? The answer is most likely yes.

OutlawPete · 29-04-2011 12:21AM

Cause they spend all their money on porn and sauerkraut.

W.Shakes-Beer · 29-04-2011 12:21AM

whiteonion wrote: »

You blame cheap credit on the real estate bubble in Ireland but why was there no real estate bubble in Germany? Germany is very crowded compared to Ireland, yet rent is cheaper and houses are cheaper. How come there hasn't been a real estate bubble in Germany?

Are Germans more rational than Irish people? The answer is most likely yes.

Case solved.

holystungun9 · 29-04-2011 12:23AM

Porn - yes, more rational -yes, also don't forget that it is more common to rent long term than buy you own place. We are pretty obsessed here about owning our own place. (and sticking a wall or fence around it)

Pauleta · 29-04-2011 12:24AM

There isnt an obsession in Germany to own their houses. Developers here, were building house and apartments to make fast money purely from sales. In Germany they built houses and apartments with a long term strategy to make money from sales and rents.

Turtyturd · 29-04-2011 12:25AM

It's down to Walmart.

whiteonion · 29-04-2011 12:26AM

Pauleta wrote: »

There isnt an obsession in Germany to own their houses. Developers here, were building house and apartments to make fast money purely from sales. In Germany they built houses and apartments with a long term strategy to make money from sales and rents.

For a society it's better if most people are renters instead of owners. This makes the workforce much more mobile and they will be able to move where there is work.

Here in Ireland people can't move because they are stuck in a house in NE.

Dj Stiggie · 29-04-2011 12:26AM

I'm living in Berlin right now and its very rare for someone to own a place. Its also very common to live in a flat-share, so there's never a huge demand for somewhere to buy.

Most of my friends here, who are from all across Europe, have no desire to own a house, and don't see rent as dead money. Plus Germans seem to move a lot, so buying somewhere doesn't make sense to them.

aligator_am · 29-04-2011 12:26AM

OutlawPete wrote: »

Cause they spend all their money on porn and sauerkraut.

From what I've seen, they sure as fook ain't spending it on ladyshaves!

cson · 29-04-2011 12:27AM

whiteonion wrote: »

You blame cheap credit on the real estate bubble in Ireland but why was there no real estate bubble in Germany? Germany is very crowded compared to Ireland, yet rent is cheaper and houses are cheaper. How come there hasn't been a real estate bubble in Germany?

Are Germans more rational than Irish people? The answer is most likely yes.

Because the Irish Dream of a one off two story house in the middle of the countryside isn't quite as prevalent there. That and the fact they probably don't have as deep rooted a fear of rent being 'dead' money which we're so fond of in Ireland.

Owning a house or land is really a huge thing over here.

oppenheimer1 · 29-04-2011 12:28AM

Germans don't have a tradition of owning, they rent.

whiteonion · 29-04-2011 12:28AM

cson wrote: »

Because the Irish Dream of a one off two story house in the middle of the countryside isn't quite as prevalent there. That and the fact they probably don't have as deep rooted a fear of rent being 'dead' money which we're so fond of in Ireland.

Owning a house or land is really a huge thing over here.

So Irish people are basically irrational?

Saila · 29-04-2011 12:30AM

because they lent all their savings to us

KerranJast · 29-04-2011 12:31AM

whiteonion wrote: »

So Irish people are basically irrational?

Pretty much. Most sociologists blame the Famine and the horrible effects of subdivision. It's ingrained in Irish people's psyche that you have to own land/a house to be self sufficient.

amacachi · 29-04-2011 12:33AM

They understand and accept graphs like this: http://thismatter.com/money/real-estate/images/mortgage-payments-interest-principal-portions.gif
For all the "rent is dead money" rubbish there's a fair amount of "dead money" paid particularly at the start of a mortgage.

geetar · 29-04-2011 12:34AM

there is an actual reason besides porn and saurkraut.

they had a housing boom in the nineties caused by incredibely low tax incentives following the reunification of germany in a bid to get things moving. the tax incentives ceased, and the prices fell. they were well sobered to the concept of a bubble, and their housing market had a correction and remained stagnant for the last decade or so.

so enough of this anti-irish blah blah we're so crap stuff. its feckin depressing reading the same stuff every day. there's logical reasons for everything, we are all human. hopefully like germany we will have learned from our mistakes.

holystungun9 · 29-04-2011 12:34AM

whiteonion wrote: »

So Irish people are basically irrational?

essentially yes, we are complete lunatics (but shur aren't we great craic?)

cson · 29-04-2011 12:34AM

whiteonion wrote: »

So Irish people are basically irrational?

No, not at all.

My uneducated guess would put it down to sociology. It's not that long ago that land was a huge issue in this country with the land wars, you're talking maybe 5 generations or so, thus it wouldn't be a stretch to say the love of ownership stems somewhat from that and the plantation era. It gets passed on from generation to generation. I know my parents always say to me that it'll be a great time to buy a house when I start working - operative word being buy. You can multiply that across the board and you can see how ownership is such a huge deal in Ireland, its how we were brought up. That and the Irish Dream thing I referred to in my post above - we all want the two story semi-mansion on 2 acres out in the beautiful countryside, well most people do. You just don't see that type of one off housing on the continent in my experience. It's intrinsic to Ireland.

Seeing as this is AH, for the tl:dr's -> It's the Brits fault.

TheUsual · 29-04-2011 12:36AM

Saila wrote: »

because they lent all their savings to us

Then they built 50,000 euro BMW's for people to pose around Dublin in.

Smart people aren't they ? Got us twice.

cson · 29-04-2011 12:36AM

geetar wrote: »

so enough of this anti-irish blah blah we're so crap stuff. its feckin depressing reading the same stuff every day. there's logical reasons for everything, we are all human. hopefully like germany we will have learned from our mistakes.

We're like a crack addict [kind of intended pun]; the highs are very high and the lows are very low. We were the best country in the world 5 odd years ago and weren't shy to shout it, now we're the worst and we aren't slow to bemoan it. :P

Cavehill Red · 29-04-2011 12:38AM

Ah, doncha just love simple national stereotypes?
Of course there have been real estate bubbles in Germany. The most recent was post-unification, when Western investment flooded into the East, shooting up prices and leading to a developer free-for-all which means that even today, two decades or more on, there are hundreds of thousands of vacant properties across Eastern Germany. Check how many vacant apartments there are in Berlin alone if you don't believe me.
Also, Germans did plug into the recent bubble in a big way, but it just didn't manifest in their domestic market. They bought in Spain, Bulgaria, Turkey. They bought the bonds that were basically repackaged mortgages from countries like Ireland. They bought these because there was no return on domestic property.
Finally, it's worth considering how bubblicious a property market can get when the price of a two bed apartment is already half a mill to begin with. In a country with generally high property values and multi-generational mortgages, there isn't much upside left for a bubble to take hold. Bubbles require a low base to commence from. They proceed upwards towards value, then overshoot as human exuberance takes hold.
But hey, let's run with the 'Smart Germans, Silly Paddies' theory. It's so much easier.

whiteonion · 29-04-2011 12:44AM

Cavehill Red wrote: »

Ah, doncha just love simple national stereotypes?
Of course there have been real estate bubbles in Germany. The most recent was post-unification, when Western investment flooded into the East, shooting up prices and leading to a developer free-for-all which means that even today, two decades or more on, there are hundreds of thousands of vacant properties across Eastern Germany. Check how many vacant apartments there are in Berlin alone if you don't believe me.
Also, Germans did plug into the recent bubble in a big way, but it just didn't manifest in their domestic market. They bought in Spain, Bulgaria, Turkey. They bought the bonds that were basically repackaged mortgages from countries like Ireland. They bought these because there was no return on domestic property.
Finally, it's worth considering how bubblicious a property market can get when the price of a two bed apartment is already half a mill to begin with. In a country with generally high property values and multi-generational mortgages, there isn't much upside left for a bubble to take hold. Bubbles require a low base to commence from. They proceed upwards towards value, then overshoot as human exuberance takes hold.
But hey, let's run with the 'Smart Germans, Silly Paddies' theory. It's so much easier.

Can you provide me with a chart that proves there was a bubble in German real estate? I myself have never seen any evidence of this.

Cavehill Red · 29-04-2011 12:48AM

whiteonion wrote: »

Can you provide me with a chart that proves there was a bubble in German real estate? I myself have never seen any evidence of this.

www.iwh-halle.de/d/publik/disc/11-09.pdf

Sonnenblumen · 29-04-2011 12:49AM

whiteonion wrote: »

You blame cheap credit on the real estate bubble in Ireland but why was there no real estate bubble in Germany? Germany is very crowded compared to Ireland, yet rent is cheaper and houses are cheaper. How come there hasn't been a real estate bubble in Germany?

Are Germans more rational than Irish people? The answer is most likely yes.

Economies of scale. Nothing to do with 'rational'. It would take many bubbles to come close to match the damage caused by 2 x WWs. Does that prove your theory? I think not.

geetar · 29-04-2011 12:49AM

whiteonion wrote: »

Can you provide me with a chart that proves there was a bubble in German real estate? I myself have never seen any evidence of this.

look at post reunification germany. the government encouraged low taxing to get the property market and investors moving. it all happened in the nineties. germany even had a recession in 2001. they were one of the few western countries not to have a housing collapse in the last few years because their markets already had a correction.

whiteonion · 29-04-2011 12:50AM

OK, there was a real estate bubble in parts of Germany but that seems to be more of a regional thing. It didn't get so crazy like in Ireland or Japan where the entire economy was ruined.

strobe · 29-04-2011 12:53AM

A distinct lack of Lebensraum, I have been led to believe.

Cavehill Red · 29-04-2011 12:55AM

whiteonion wrote: »

OK, there was a real estate bubble in parts of Germany but that seems to be more of a regional thing. It didn't get so crazy like in Ireland or Japan where the entire economy was ruined.

Well, that depends on how you look at it. A million empty apartments for two decades and a massive subsidy and demolition policy are hard to ignore.
And East Germany isn't a region so much as half the country. Germany's economy was badly affected by it, just as Japan's was, but both countries recovered due to their manufacturing base and export-driven economies. Germany further benefited from being able to set the euro interest rates to suit their (and France's) economies at the expense of smaller eurozone economies like Ireland or Greece, who required higher interest rates just as the ECB was slashing them to near zero.

geetar · 29-04-2011 12:57AM

whiteonion wrote: »

OK, there was a real estate bubble in parts of Germany but that seems to be more of a regional thing. It didn't get so crazy like in Ireland or Japan where the entire economy was ruined.

yeah id agree with that. it would seem the german government made the bubble to help boost their economy, whereas our government just relied on the bubble like a crutch

Morag · 29-04-2011 12:58AM

There are long term leases in Germany from 3 to 20 years, we don't have that and there are multi genertional houses which people move back into once they start having kids.

Wibbs · 29-04-2011 01:00AM

This is real crayons in kindergarten join the dots stuff, even for a sub bridge dweller like yourself, trying to get some here to "admit" the Irish are irrational. Stormfront eager for new members are they?

Germany has a much bigger population. This tends to put the breaks on madness in general. Like ecosystems in nature, the bigger they are the less vulnerable they are to environmental change. It's got nothing to do with "national" rationality or not. In any event there are enough examples of German rationality gone askew to fill this thread with debate.

Why are there no real estate bubbles in Germany?

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