Oh wow. I had to read the rest of your comment twice to understand that you were saying these seem high to you. They seemed really low to me. To put it into perspective, you need a 10-20% deposit in Belgium (depending on various factors) and there's a 6% tax for an old house (10% up until very recently) or 21% for a new house. It's basically impossible to buy a house if you're young or single or come from a poor family. I feel your pain.
A 20% deposit is minimum to not have to pay a 'Mortgage insurance' which gets added to your mortgage to cover the bank if you default.
Belgium sounds like an even more painful situation, sucks for those of us who would just like to have a stable place to live and be allowed to add some personal character to (not allowed in most rentals ive lived in)
This seems such a weird condition to add. Someone who doesn't earn much but saves up over 22 years for a house has to pay stamp duty on his first house, but someone privileged who can buy a house when 30 years old doesn't?
One of the major political parties here (Centre Party, the agrarian-liberal party) wants people to live outside of the cities. Finnish cities are so small that it's easy to commute from a place with plenty of cheap land and thus it's possible for most people to buy or build a house there if they want to.
Granted that Finland has a very different culture (disclaimer: I live in Sweden) and we aren't in the 50s anymore to invest heavily on a car-centric society but incentivising people to move away from city centres can have unpredictable consequences 20-50 years down the line.
In my country, if you're poor and if it's the first house you buy, you can ask a 0% tax loan from the government and use it to pay your stamp duty with it.
Correction: I double checked and it looks like it can be added to your mortgage, which isn't as bad up front.
Thanks!
One (of many) big issue(s) is that the past has seen unchecked claiming of land for new projects leading to an acute shortage of land, while lots of existing houses and buildings are entirely outdated.
We are talking about houses which are 60 or 70 years old typically located in densely pouplated urban agglomerations and haven't seen little to no remodeling whatsoever during that time. These are hardly isolated, difficult to heat, are entirely outdated in terms of utilities and plumbing and so on.
The idea behind the difference is to incentivize people to buy and renovate older, existing houses and curbing the further occupation / use of free & open space with new construction and urban sprawl.
It should be noted: Belgium is also a country with an incredibly complex fiscal system. There are taxes as well as tax breaks on every aspect of life. Belgium is a complex federal nation with many levels of government. To put that in perspective: it's a country with 6 different governments. All of which turn politics and policy making, unironically, into 5D chess. The fiscal system tends to be the arena where everything comes together, generally as a compromise which is often more founded on pragmatism then necessity.
Historically, home ownership has been, and still is, massively incentivized in Belgium. But just like everywhere else, soaring housing prices and an ageing population are causing issues for younger generations who can't buy property without financial help from their parents.
And so, young people find themselves in a bind. They can't just buy any property, market dynamics and public policies push them towards buying outdated property only to face long, drawn out and expensive renovation projects just to bring everything up to date with modern, strict construction codes.
I'm in a nearby country and this accurately describes my house. I gave up, we live in it, halfway renovated, crazy plumbing, mixed masonry, hairball electric panel, dangerous corners everywhere. Contractors are too expensive and the DIY spirit only goes so far when you're working parents.
Sorry if my first comment was a bit coy and unclear. Both ancestor comments are about Australia & Belgium. Google tells me that in Australia new properties are incentivized over old:
>Grant: First home buyers can access a $10,000 grant when purchasing or constructing a new home, regardless of how much the property is worth. Stamp duty concessions: The territory government provides an up to $18,601 Territory Home Owner Discount (THOD) on stamp duty costs for first-time buyers.
My Aussie friends tell me this changes frequently, that it also differs by state, but some sort of incentive to prefer new properties have been policy for a long time.
GP says that Belgium penalizes existing houses:
>a 6% tax for an old house (10% up until very recently)
So there aren't lower taxes on older properties in either country. You get a discount on the taxes only when you purchase a new property, which is an incentive in alignment with the interests of property developers.
The big problem in Australia is that nobody really in the government wants to do things to make houses more affordable. Anything that would immediately lower house prices would be a disaster for the political party and somewhat for the country. In fact the government has been doing all it can to keep house prices rising further and further.
First by adding a first-home-owners' grant, which just increased the prices of cheaper property, and most recently by allowing people to take money out of their retirement savings to buy a property. All this does is just add more fuel to the real estate market so prices would increase.
The only real way to lower prices would be for a genuine crash to happen, one where the government would be incapable of doing anything to prevent. The other would be to get rid of negative gearing, maybe just for existing property initially, so that people won't leverage up the eyeballs buying more and more investment properties.
I'm on a decent salary by Australian standards and am going to be waiting at least 2 more years before I can afford a 10% deposit (have been saving for several years already at a lower rate).
Just have to hope all the decent land/houses are still around by then and that the house prices dont outpace my savings.
Anyway. I just wanted to say that, and also, this issue is seemingly everywhere. I’ve been in Toronto Canada for over a decade now and prices have gone crazy for almost that entire time. When i arrived a house in the city was 350-400k, that same house today might fetch 1.6m, or if renovated I’ve seen them sell for as much as $3.8m
And now they’re building like crazy, with people leaving in droves. Hopefully that’ll depress prices long-term.
Consumer mortgage debt is directly correlated with housing prices in Canada. This plus constraints on permits for single family dwellings.
Drive around and have a look at some of the high end condo's at night - there are no lights on. Mostly dark.
The no capital gains and no inheritance tax loopholes in Canada will eventually be closed.
(https://www.worldometers.info/world-population/canada-popula...) percentage population growth 0.9% is very low based on historical standards.
Condo rents have absolutely tanked, by the way
Goddamn those are some crazy numbers, how does anyone even begin to afford that? You'd be saving for 20 years just for a deposit....
Somehow there was only a small dip in prices during the pandemic and now the property market is back on the boil again.
I honestly don't think any family without high dual incomes can actually afford a home now close to the city. The only places that are close to affordable for middle income families are far away from the centre.
I get that not everyone can do it, but it's a possibility for more sanity in house ownership for a groups. Unfortunately that also allows Melbourne market to not crash for longer...
So basically, as long as regional towns keep up with development and infrastructure, the overall result may not be a crash, but rather slow exodus from the cities. Now if only transport/trains would keep up with the times...
There are other ways of looking at it where you are correct.
It’ll balance out when our lifespans max out somewhere (perhaps never?), and productivity is improving with technology as well, likely helping the situation somewhat.
This is not the only factor however.
The solution to the "problem of home ownership" is to stop making areas undesirable places to live. Portland springs to mind but there's San Fran. NYC, L.A. but it's not just the Big Blue cities in the US and elsewhere, it's nations run by totalitarians everywhere.
The solution is to export prosperity around the world. Then we can all enjoy the benefits of the developed world's population crash which translates into cheaper housing, amongst other things, both good and bad.
Since The Economist is looking everywhere for the West's biggest mistake, today's their lucky day, I happen to have it right here.
The West should have demanded of China and every other non-democratic regime in the world, as a condition of receiving manufacturing and industries and the privilege of importing their products duty-free, that they liberalize their political systems in ways which are hard to reverse.
This had the power to transform regions from Mexico and Central America to China.
We could have created a schedule of increasingly substantive requirements composed of democratic institutions, free speech and political assembly, (truly) free markets and anti-corruption metrics which had to be met in order to benefit from trade with the West. But we didn't.
We didn't because a small group of industry beneficiaries made small and large fortunes by outsourcing the West's industrialization. They leveraged the lack of environmental and labor standards endured by the world's poor, living under corrupt and totalitarian regimes, to lower the cost of goods sold then sell back into the first world at first world prices.
That's what the elite have been doing since Clinton gave China MFN status and even before.
Now no one in the West can afford the most basic thing every mammal requires- a place of their own. A home. A burrow. A nest. A place to which they can retreat, which they can control and experience sheer animal comfort and safety. Now even that has to go to satiate the boundless greed of our elites.
The only thing left for them to come after is reproduction. We should probably also start thinking about turning our mates over to them, since they can provide for them better than we can.
Good macroeconomic policy (like international trade agreements) can be used to push back against this trend somewhat.
Indeed, well before.
It primarily talks about the unfairness of the current system, the NIMBY problem reducing housing stock and the issue of regulations intended to curb new building reducing the stock of houses so that only the elite and existing homeowners can afford them.
The section on renting/alternatives is mainly just a discussion about alternatives to the current unfair approach and some cases where things work better.
That said the situation in most of the western world is insanity, If I want to buy a house in my hometown (Perth, Australia) I need a minimum 5% deposit + 3-5% stamp duty and the median house now costs 500k AUD.
Median salary is closer to 75k AUD, so you're looking at a mortgage of roughly 6 salary years and a deposit of at least 50k (if you have good credit and no debts).
Edit to add:
A 20% deposit is minimum to not have to pay a 'Mortgage insurance' which gets added to your mortgage to cover the bank if you default and is usually equivalent to the difference between your deposit and 20%.