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?
Young families are at a disadvantage in planned home purchases, struggling to compete in bidding wars against dual-income, no-kids (DINKS), heirs, and others. While young families often rely on one to one and a half incomes supporting three to five members, DINKS benefit from two incomes for only two people, giving them a clear edge at current price levels.
Ideally, the first-time purchase of a property should be exempt from property transfer tax (also known as stamp duty or land tax), as it was in the past. This would also eliminate the need for government incentives like the so-called "child construction grant," which comes with rigid income thresholds that disqualify many families.
In England, property transfer tax is completely waived on purchases up to £300,000, and above that threshold it is charged on a sliding scale ranging from 1 to a maximum of 12 percent.
As long as buying a home costs about the same for a young family as it does for a childless middle-aged civil servant couple, little will improve for the former in the market. The child construction grant alone is not enough to change this.
Ideally, the first-time purchase of a property should be exempt from property transfer tax (also known as stamp duty or land tax), as it was in the past. This would also eliminate the need for government incentives like the so-called "child construction grant," which comes with rigid income thresholds that disqualify many families.
In England, property transfer tax is completely waived on purchases up to £300,000, and above that threshold it is charged on a sliding scale ranging from 1 to a maximum of 12 percent.
As long as buying a home costs about the same for a young family as it does for a childless middle-aged civil servant couple, little will improve for the former in the market. The child construction grant alone is not enough to change this.
Jean-Marc schrieb:
The child benefit for home construction alone is not enough. That’s true. We will benefit from the child benefit for home construction, but honestly, it’s quite pointless. I suspect there are few or almost no cases where this amount actually makes the decisive difference whether to build or buy or not. And for those few, one should probably advise against it anyway, especially since there still seems to be some confusion about whether all eligible recipients will really receive their share.
Tassimat schrieb:
The topic of inheritance again... The tax-free allowance for children is 400,000€ (about 441,000 USD). Only the amount above that is taxed at a modest 15%. On an estate worth one million euros, that would mean only 90,000€ (about 99,000 USD) in taxes, leaving 910,000€ (about 1,004,000 USD) remaining. The complaining fits spoiled only-children perfectly. If there are two children, each pays 15,000€ (about 16,400 USD). Only about 1.25% of the German population are millionaires. Are you one of them? What on earth is the complaining supposed to achieve here?Still, this type of inheritance tax is not okay! People who, for example, are fortunate enough to inherit a multi-family house in Hamburg or Munich but do not have a significant financial background themselves, cannot manage this without selling or taking out a loan, since the value will almost always be well above 400,000€ (about 441,000 USD). This often affects tenants because investors buy properties and push prices up.
And 15% is certainly no bargain!!!
C
chand198618 Apr 2019 10:44Muc1985 schrieb:
People who, for example, are fortunate enough to inherit a multi-family house in Hamburg or Munich without having a certain financial background themselves, cannot manage it without selling or taking out a loan, since the value will always be well over 400,000 euros (about 440,000 USD). Did the previous generation pass on this rental building as an inheritance? By slowly paying off the property, which was heavily mortgaged, through the tenants’ rent payments. So why is a new additional loan a problem now, when rental income is still ongoing? Certainly not for this reason:
Muc1985 schrieb:
So it often hits the tenants again Yes, if the property is sold. But that is not due to any tax; it’s caused by the prices investors are paying in Munich. If you get 40 times the annual net rent, of course you want to sell. That has exactly zero to do with any tax.
Anyone inheriting a fully paid-off rental building in a decent location receives an excellent additional retirement benefit, provided the building is not in need of major renovation. With that, one could easily afford a much higher tax — but then you don’t immediately get your hands on the money. Complaints at such a high level…
Muc1985 schrieb:
People who, for example, are fortunate enough to inherit a multi-family house in Hamburg or Munich without having a certain financial background themselves, cannot manage this without selling or taking out a loan, since the value will always be well above 400,000 (approximately $440,000). This often affects the tenants, as investors buy and drive prices up. And 15% is certainly not a bargain!!!No, you have a misconception.
- If the property is fully paid off, it is no problem to refinance 15% of the property value with any bank at the best possible conditions. The property essentially pays for itself.
- If the property is not paid off, then the inheritance value is lower than the property value. Extreme example: a property value of 10 million (about $11 million) with an outstanding mortgage of 10 million (about $11 million) means that no inheritance tax has to be paid.
No matter how you look at it: only the value minus debts is taxed, and this always works out positively for the heir.
And 15% is quite fair compared to capital gains tax and income tax. Be glad that an inheritance is not taxed as income.
Yosan schrieb:
That's true. We will benefit from the child building grant, but honestly, it’s really nonsense. I suspect there are few or no cases where this amount actually makes the decisive difference whether someone builds/buys or not. And those few should probably be advised against it anyway, especially since there still seems to be some confusion about whether all eligible people will actually receive any of the funding.The child building grant is well intended but poorly designed. A flat subsidy of 12,000 euros (about $13,000) spread over 10 years doesn’t really help middle-class families in urban areas right now, and in rural areas with more vacancies, it’s taken along but not really needed—and in the end, it might be invested in a home sauna or a branded kitchen (similar to what happened with the former home ownership allowance).
I also believe the number of people who build or buy solely because of the child building grant is very limited.