Hmmm. To me, condos are always bought. If you live in it and you own it, its a condo. Of course the owner of a condo can then rent it out. If you are paying rent, its an apartment (or a townhouse, depending on how it is configured).
I have a question about housing loans in other countries. Here in the US there are many institutions vying to lend homeowners money to buy housing. There is also a huge secondary market in mortgages which these institutions sell to each other. All of this, in theory, makes the system very competitive and results in low interest rates for potential homeowners.
There is also a big choice in types of mortgages (loans). You have 30 year, 20 year, 15 year and less. You have fixed rate, adjustable rate, balloon mortgages etc.
There is also the popular federal income tax deduction on the interest on your mortgage.
What is the system in other countries? What type of mortgage market is there? Does your government have policies that make home ownership more or less attractive than renting? Are there any tax advantages either way?
I think the mortgage market in Canada is pretty much the same as in the US. There are all the varying options as Lagomorph pointed out however I don’t think we can deduct interest from taxes as yet, at least not in Ontario. We’re in the midst of a provincial election though and this is one of the Tory promises at the mo’, if I’m not mistaken. We are also seeing the competition between lending institutions but I think this is because the market is hot, interest rates are low. They’ll start screwing us again as soon as possible, no doubt.
In Ontario, (don’t know about the other provinces) we have a first-time buyers plan which is tied in with our RRSPs. (Registered retirement savings plan) First time buyers may use some of their savings plans, tax-free, for their down payment. You must begin to pay this back no more than two years after purchase (or start paying the taxes on the amount, which will be treated like regular income) but the payment amounts can be very low as you have fifteen years to pay it back in full. Anyone who has not owned a home for 4 years or more qualifies as a first-time buyer for the purposes of this plan.
As far as the whole “why buy as opposed to rent” question, I thought it was the same everywhere: So that when you retire, your home is paid for. The simple fact of not having to come up with huge sums of money monthly for the roof over your head would surely make the difference between having to continue to work or not work for everyone, wouldn’t it?
Obviously there are those who buy real estate for investment purposes only and they have to take their chances like everyone else. But to me, the whole point to working, investing, owning a home, is to one day not have to work but still be able to have somewhat the same standard of living, without necessarily being a frigging millionaire. Therefore it stands to reason buy your home and pay it off as soon as possible. There’s the largest expense in most people’s budget done with, and still worth a good chunk of change should you need to liquidate.
I have come to regard the people buying domestic property as “investments” as indistinguishable from the ticket touts who force you to pay an inflated price to see your favourite band, or the cybersquatters who hope to exort a fantastic price for a domain name.
All are essentially parasitic, useless, selfish activities, all the worse since in each case the parasite adds nothing at all of any value, but simply forces extra unwarranted effort and expense from the rest of us. It’s about time the buy-to-let brigade got the contempt they deserve.
If rents weren’t now 30%, 40%, even 50% of salary, you could see there’d be a point to renting, for some people at least. But when one is forced to give the bulk of one’s meagre earnings to lazy slob landlords who live the life of idle luxury on it; and when you know that no matter how hard you work there is no chance of ever owning even the smallest roof over your head, not any more, etc …
In San Francisco, an apartment is pretty much what you think of an apartment as. A flat OTOH usually has at least a couple of these distinguishing characteristics:
[ul]
[li]Takes up the entire floor of the building[/li][li]Has its own front door directly onto street (and own staircase up from front door, if necessary)[/li][li]Has its own street address i.e. instead of 800 Haight Street, Apts A-B-C the flats will be numbered 800, 802 and 804 Haight Street[/li][/ul]
Flats are generally larger and therefore dearer than apartments.
In Dublin the two terms are distinct also but have different meanings to San Francisco’s. Flats are generally self-contained units carved out of large houses; apartments are units in purpose-built, er, apartment buildings. Apartments are generally more modern and so tend to cost a lot more.
In both Dublin and San Francisco these distinctions are widely recognised and “flats” and “apartments” are kept separate in real estate listings.
Are there any other cities where “flat” and “apartment” mean two different things?
It is only fairly recently that real estate agents here started referring to flats as apartments. I think only superficial wankers would say they live in an apartment rather than a flat here. I have also noticed some flats are now been advertised as units and that is just wrong. Units are side by side and covered by different regulations, flats tend to go up. In my mind there is no such thing as a first floor unit (remembering that we have the ground floor on the ground). There is no name difference based on whether you rent or own until you come to buy or sell and the agents take over.
In the UK we we have another kind of home called a “maisonette” which my dictionary says is a “part of a house (usually not all on one floor ) let or used separately as a self contained dwelling” This a fairly old-fasioned term and I have not seen it much used recently.
My house on the Lancs/Cheshire border is worth around £250,000 which is about £50,000 more than I would pay for it. It’s all to do with locality and Cheshire being a prime spot and a very well-to-do area is a honeypot for those looking to go up in the world.
I’m lucky inasmuch as I actually own my place, no mortgage no nothing to pay other than the usual home insurance.
Don’t ask how I come to own it…I won’t tell; but what I will echo is that said by others, the price of a home is ridiculous and is spiralling way out of control and reason.
If you feel so stongly maybe you should spend you life savings on a house, pay the taxes, insurance, repairs, maintenace, advertising, mortage, and interest; Then let someone live there for free while you work 2 jobs to pay these costs. Unlike the ticket sales situations you mentioned, real estate is a very free market with lots of competition. It is NOT a monopoly, and prices are as low as they can be. The problem is that housing is expensive, and always has been.
Seems to me the real estate market is nothing like a “free” market – it’s heavily manipulated by all sort of interested prties, not the least of whom are real estate firms.
Here in America we have a phenom called “homelessness” and we have a lot of people complaining about the high price of housing but no one in the mass media ever links these two clearly linked phenoms. I remember reading in my local paper about a woman who was working as a waitress full time and yet lived in some cardboard boxes in a hidden patch of woodland. Her (adult) kids were horrified when they found out about it, but she said it was all she could afford.
The story’s atypical but not as atypical as it should be.
The market in Brisbane has taken off in the last year and I find it terrifying. We’re fortunate in that my parents have helped us buy a house 4 years ago but when I see how much this house has gone up in value it’s insane. I’d hate to be trying to buy now and I think that it won’t be as common in the next generation unless the bubble really bursts.
I can’t see how it would be possible to pay rent and save a decent deposit when the houses are going up in price each month. It looks to me like our house has gone up $30 000 in the last 6 months.
My sister bought a house for $22 000 20 years ago and it’s conservatively valued at over $600 000. Madness. Dear lord, I wish I’d bought one just down the street from her.
It’s sort of considered part of the Japanese dream, but there are still plenty of middle-class professionals (particularly in Tokyo) who go their whole lives renting.
My wife and I are looking around to buy a house or mansion (a wonderful loanword which in Japanese means “a room inside a large building which can be bought or rented, pretty much indistiguishable from an apartment, save for a little more space and fewer cockroaches”. Technically, I’m renting a mansion right now), but the one thing that nags at me is the thought of a natural disaster. Even the government agencies that have a vested interest in keeping their heads in the sand have been saying that a major earthquake hitting Tokyo within the next thirty years is almost a sure thing. If I’m renting and the place gets levelled, my only loss is the stuff inside the apartment. If I’m owning, I’ve lost everything and still have to keep paying my mortgage.
There is, but getting reimbursed will be a pain and a half. If the quake causes similar damage to the one in Kobe (the predictions are significantly worse), then hudreds of thousands of property owners will also be submitting claims at the same time. In addition, most insurance companies are headquartered in Tokyo, and so may need siginificant time just to get their own offices back up and running. Add into that the likelihood that, since Tokyo is both the administrative and financial capital, things will be in chaos for a while and the national economy will take a severe hit. From a personal standpoint, it’s also not helping that the current governor seems to want a reenactment of the massacre of foreigners that followed the 1923 quake.
Still, we’ll probably go ahead with buying a house. Must be lemming genes or something.
My mortgage 10 years ago was about twice what I currently pay in rent for a better standard of living. Interest rates are currently much lower than they were when I was in the game but over the next 25 - 30 years they are sure to bounce up again. That house has risen sharply in value now, so sharply that the annual rates and land tax are probably about 1/4 of my current annual rent, who knows where they will be in 20 or 30 years time. Add in ongoing maintenance and the fact that I can put any spare money now into planning my financial future (that is if I ever had any spare money ;)) I really do not see the benefit. It is not as though houses stop costing money when the mortgage is paid off.
Of course I have no kids and I believe the wish to provide for subsequent generations is perhaps one of the biggest factors in the desire to own.
Then for you, it makes more sense to do it your way. But don’t forget, the market goes up and down like a toilet seat. So do interest rates unfortunately but it’s still a good long term investment and as safe as anything else. Historically real estate does appreciate over time.
You’re right, houses don’t stop costing money after they’re paid off but it does end up being less money than rent. If land taxes are only a quarter of your rent, then theoretically, that would be 75% less per month for your “roof”, wouldn’t it?
So, I may be in essence paying the equivalent of your theoretical 75% remainder in maintenance and taxes after I’ve paid the mortgage off. But I don’t have to move because the landlord is selling, no one tells me what I can do with my place and I always have equity. Your landlord is the one ending up with the equity and you’re paying his mortgage for him. Definitely not a bad deal for him
You make a good point about subsequent generations, it is a factor for many people I’m sure.
Don’t forget I am only paying half now, probably much less really as I am not responsible for maintenance or renovations. I am also assuming in this plan that the extra money that would be put into a mortgage is going into other forms of financial planning for the future. Mortgages do provide a sort of enforced saving program on folks but there are other ways to see your capital grow.
People have to move for all sorts of reasons, home ownership or not.
To go back to the OP, here in Australia any choices but the home ownership one are treated as unworthy which is just ridiculous IMHO.
Chiming in to give the USA situation as comparison for non-US Dopers:
We’re a big country. Canada is technically as “big” but it’s much more like a European country with an enormous hinterland when population density is considered. That means there is an amazing amount of variety. In some areas, renting makes more economic sense. In other areas (like Indianapolis), renting is for people who consider themselves transient or can’t get together a down payment. The reason is pretty much economic.
Rent very often is as much on a given home as would be the aggregate cost of mortgage payment, property taxes, insurance, and upkeep. The difference is that mortgage payments usually don’t go up every year while rent does. Landlords pass on rises in property taxes (which are higher in Indiana for rentals than for owned homes due to a “Homestead Tax Credit”) to their tenants. Likewise, interest payments on mortgages for ones home are tax deductable in the USA. Once one has paid off a mortgage, the mortgage payment disappears, while rent is forever. Thus, in some areas it makes a great deal more long-term economic sense to buy a home than to rent.
Likewise, a lot of rentals in the USA have many restrictions on what tenants may do. Want permission to keep a dog or a cat? You very often have to pay extra rent.
Thus, in much of the USA, renting is a sucker’s game, only played by those who plan to move on soon or can’t get out of the trap.
Now, there is the “risk” of ones property not increasing a great deal in value, but that’s the risk of speculation. I didn’t buy a home to make money off it later, myself. I intend to leave it to my hapless heirs to dispose of or live in as suit their whims.
I agree with most of what you said about the Irish housing market but the first time buyer’s grant was a joke. Every builder of new estates targetted at first time buyers just capitalised it into the cost of the home and it was making no difference to the affordability of the property. Similar to irresponsible lending practices by financial institutions, it was just fuelling house price inflation. It was never applicable to second hand homes anyway so it gave little competitive advantage to first time buyers. Good riddance, say I.
Also your emphasis on the fact that the average prices you quoted relate to secondhand houses gives the impression that new houses are more expensive. In fact, they are generally cheaper, at least in Dublin.
