ᐅ Is the real estate market increasingly forcing families to build their own homes?
Created on: 6 Apr 2019 11:35
T
Thierse
Actually, we would prefer to avoid building. Unfortunately, existing properties within a 20 km (12 miles) radius have become quite expensive, and affordable rental houses with small gardens are simply scarce.
Until now, we have been living in an old rental apartment without a garden. We would like to change that, but there is a lack of options. The listings on various platforms are overcrowded with families looking for affordable housing.
Who is familiar with this situation, and how do you deal with it?
Until now, we have been living in an old rental apartment without a garden. We would like to change that, but there is a lack of options. The listings on various platforms are overcrowded with families looking for affordable housing.
Who is familiar with this situation, and how do you deal with it?
C
chand198619 Apr 2019 12:59Thierse schrieb:
However, incomes are often too low to afford effective repayment rates. Friends of ours are repaying at 1 percent. Depending on the interest rate, it can take 40 years to pay off. This raises two questions:
1) Was it necessary to enter into this deal?
2) Which bank would offer something like this?
And regarding the ECB/TARGET issue, to bring the discussion back on topic: These balances mean that more euros flow into Germany(!) than flow out of Germany. This is partly due to Germany’s trade surpluses, but it also includes "flight capital" from southern countries. Some of this goes into real estate (especially in prime locations) and is therefore also part of the price inflation that sparked this thread.
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Why invoices that have already been paid become a problem if the party who has already paid falls into a subsequent insolvency (or devalues their own currency because they exit the euro) is a piece of “insider knowledge” in Germany on this subject.
In terms of a factual parameter outside the central bank, nothing changes: The money was received here, it was spent here or kept under the mattress, and what was acquired in return still exists after balancing the accounts; what’s kept under the mattress is not affected by devaluation since it is here and not in Italy or elsewhere.
That this balance is booked as a “claim” makes it sound like something can be demanded with it. In reality, nothing can be done with it—nothing can be bought, no investments made, simply nothing, nada, zero. So if these claims disappear, nothing is truly lost. Nobody loses anything if they have to dispose of invoice documents for goods they once sold.
Rising real estate prices hurt us right here and now. But how much of that increase is due to the mechanism described above is impossible to say. Interest rates, however, certainly play a much larger role.
And the two questions 1) and 2) I mentioned above remain completely unaffected by this.
Loose monetary policy with extensive bond purchases by central banks carries significant risks. Under normal conditions, a central bank earns income partly by refinancing banks. In times of zero interest rates, the securities held by the Bundesbank on the asset side of its balance sheet generate little return.
Target2 balances: If a large country like Italy were to leave the euro, it would create a serious problem. This scenario is not as far-fetched as it may seem. A sustainable reform of the Eurosystem would certainly be advisable, although the exact design of such reform is still open to debate.
Low interest rates combined with minimal loan repayment pose a risky mix. Borrowers repaying at 2 percent currently require around 28 years, depending on the interest rate. That is also a considerable length of time. The changing work environment, with increased flexibility, often involves more frequent relocations. This is another factor to consider. Remote work is available, but in many sectors and companies it still faces significant challenges.
Target2 balances: If a large country like Italy were to leave the euro, it would create a serious problem. This scenario is not as far-fetched as it may seem. A sustainable reform of the Eurosystem would certainly be advisable, although the exact design of such reform is still open to debate.
Low interest rates combined with minimal loan repayment pose a risky mix. Borrowers repaying at 2 percent currently require around 28 years, depending on the interest rate. That is also a considerable length of time. The changing work environment, with increased flexibility, often involves more frequent relocations. This is another factor to consider. Remote work is available, but in many sectors and companies it still faces significant challenges.
C
chand198619 Apr 2019 13:55Thierse schrieb:
If a large country like Italy leaves the Eurozone, it creates a problem. An epic one, even. It has nothing to do with TARGET and its balances. You make vague and unclear claims. Also here:
Thierse schrieb:
Low interest rates combined with low repayment rates are a risky mix. If you repay at 2 percent, depending on the interest rate, it currently takes about 28 years. That’s not insignificant either. The changing work environment with more flexibility often requires more frequent relocations. That’s also something to consider. Home office exists. However, in many industries and companies, it still faces significant challenges. What is the point of this string of statements?
I see this differently.
The key factor for settling Target2 liabilities in the event of a country leaving the Eurozone is the ability and willingness of the central bank of the departing country to repay the liability owed to the ECB. If this does not happen, Target2 can become a problem.
The key factor for settling Target2 liabilities in the event of a country leaving the Eurozone is the ability and willingness of the central bank of the departing country to repay the liability owed to the ECB. If this does not happen, Target2 can become a problem.
C
chand198619 Apr 2019 14:03Thierse schrieb:
If this doesn’t happen, Target2 can become an issue. What issue exactly? What happens then? Without an answer to this question, it’s all just speculation.
We can discuss it if you want, but please start a thread in the off-topic section.
You still haven’t answered why it’s necessary to finance with a 1% repayment rate and which bank agrees to this and for what reasons. I would argue that such problems are quite rare.
