> "housing is an investment" policies have been propped up by lending. What an insane idea.
Lending money for housing is not insane. Houses are durable goods where most of the cost needs to be paid up front. The builder of the house is paying for a structure that will house people for 50+ years. This duration mismatch is exactly what lending is supposed to help with.
Lending is not the problem. People were complaining it was when interest rates were at 0%. Now they are at 7%, but housing prices are still high.
Houses are not durable goods. Their value should go down as they get older (this is in fact how housing is valued in Japan for example).
And yes lending per se is not the problem, the problem is using lending to prop up this ponzi scheme that has artificially inflated prices due to constricted supply and then selling it to the citizens as a tool to "create wealth".
The average person needs a commodified asset that's useful to them from the onset - and builds value over time - in order to strengthen their possibility of upwards mobility now, and generational wealth in the future. A 401K does nothing for you in the 40 years you're accumulating it, a car depreciates substantially - as soon as after purchase, the stock market is oftentimes a playsake for the already well-off, there's simply nothing like housing for individuals in most sectors of the status quo "bell curve".
Upwards mobility? But that's exactly what younger generations can't do since housing is completely out of reach for them.
My example from Munich, a condo going for a 1m €. Median software engineer salary is around 66k € per year. Income tax ~40% so your take home is around 40k year.
That means that if you put all your net income towards your home you'd need 25 years just for the principle not counting interest or spending money on essentials such as food or energy.
So how do you do it? You don't. It's simply not possible unless you have exceptional circumstances (top %1 job, rich mom & dad etc).
This also means you now have no chance but to rent and and all your rent money just goes forward to the generations of individuals who invested in this ponzi scheme earlier or to the investment firms and businesses who operate in this domain. Regardless again all the wealth moves up the pyramid to the top.
Also even those older generations, all this "wealth" is imaginary. You can only realize your gains when you actually sell (so you realize the market price you sell on) and in addition you still gotta live somewhere, so to win in this game is to buy early and cash out by selling and then moving to somewhere low cost. (Perhaps retirement).
In summary, expensive housing is only benefiting those who already have amassed wealth and it's obstructing those who haven't from amassing any wealth.
Makes a big difference to your calcs. I worry when I see people quote their marginal rate because it shows a fundamental ignorance of finance. I know nothing about Germany, but in NZ top marginal rate is 39% and actual tax rate is below that.
Houses do go down in value. The value of the land, and the permission to build a house on that land, typically go up (over the last decade an awful lot).
> Houses are not durable goods. Their value should go down as they get older (this is in fact how housing is valued in Japan for example).
Um, yes are you familiar with depreciation of the built structure? Durable doesn't mean immortal. Perhaps you don't know what durable good means in this context.
It's the lack of supply that is the reason why having a mortgage market is a bad idea.
You HAVE to live somewhere. This means any cash you can get your hands on, such as a mortgage, it's going to be used to compete with all the other people who need to live somewhere.
The problem can be solved in two ways. Either you make it really hard to get a mortgage, or you make enough houses that people are not competing over musical chairs.
The only solution is build build build. Preferably with good building (more modern, flame resistant with that in mind) and zoning codes (more like Japan's quality of life impact based ones).
Lending money for housing is not insane. Houses are durable goods where most of the cost needs to be paid up front. The builder of the house is paying for a structure that will house people for 50+ years. This duration mismatch is exactly what lending is supposed to help with.
Lending is not the problem. People were complaining it was when interest rates were at 0%. Now they are at 7%, but housing prices are still high.
Lack of supply is the problem.