It's an interesting article.
I'm from Belgium, one of the highest house owners countries. Even though it's true it's a life-long debt and it might be risky (in case of crisis), housing is still considered as a Long Term Investment so that you can pass that investment to your children (after heavy tax deduction :)). I find interesting the article does not mention who actually owns all these houses and who benefits in the long term. After all, renting has a guaranteed zero ROI.
Also, recently, I've been looking at housing market in Munich and it's very very expensive. Renting is ~20% more expensive than in Brussels and acquisition is +100% more expensive. So, although I admit I do not know rest of Germany housing market, I have some troubles thinking why Munich would be more expensive than Brussels. And I certainly miss, from that perspective, why German system would be more interesting.
A guaranteed zero ROI is better than a negative ROI which you can get with buying a house (e.g. the house you can resell it drops due to the market and you can't afford the mortgage for some reason...)
negative ROI on investment is the risk component of your investment. This is true of any investment. Stock being certainly higher risks than housing and still people invest a lot in stocks.
But I should have said renting is a sunk cost. There is no investment component at all in renting.
Stock being certainly higher risks than housing and still people invest a lot in stocks.
I would say low cost index funds are a much lower risk investment than a mortgage. They also have the advantage of being very liquid in the case of actually needing your money. Rent is not a sunk cost, this is a common misconception.
There are many good reasons to buy a home, but do not think of it as an "investment". Compared to other investment options, it's a pretty terrible one.
You could also look at it the other way and say you have sunk costs either way, either on rent or on running costs for your (owned) property: mortgage interest, property taxes, maintenance, opportunity cost for your down payment.
The question is how do you invest the extra leftover money: in home equity tied to the property with running costs, or in other investments (stocks, bonds, your own business)?
You still need to rent something for you and your family. It's almost a fixed cost in your life. In any case, it's better to turn that fixed cost into an investment.
It's hard to believe you'll ever get your equation right. Even more when you weight investment risks and actual average ROI over 25-30 years in stocks.
What about property taxes? I know people who have paid their house off in full and still pay 12-15 thousand in property taxes each year.
Additionally, even if the house is paid off, you're still on the hook for all repairs, maintenance, etc. And if your neighborhood starts to go down the tubes, your house value can quickly decline as well.
What if Enron or Lehman Brothers utterly fail? What about taxes on stock gains?
I think property taxes in US already vary a lot from state to state. It certainly vary also from country to country. It's something you need to be aware to take a decision on whether it's a good investment or not.
Ultimately, all these costs are also embedded into renting price.
Munich might be the most expensive city on average but other German cities, even way smaller ones, also have comparable high rent prices in some of their more centrally located districts.
It is a cultural thing in Belgium for sure. It also has a few other things going for home buyers. The population density plays in its favor, there is less risk that changing jobs requires you to move. The high taxes and fees when purchasing (between 12-25%) are a break on speculation, so there are no bubbles to speak of. And even though land is expensive, there is sufficient supply in quality housing stock due to the backlog of six decades of sustained housing construction. It's affordable to buy at many price points.
Also, recently, I've been looking at housing market in Munich and it's very very expensive. Renting is ~20% more expensive than in Brussels and acquisition is +100% more expensive. So, although I admit I do not know rest of Germany housing market, I have some troubles thinking why Munich would be more expensive than Brussels. And I certainly miss, from that perspective, why German system would be more interesting.