Start incentivizing treating housing as, you know, a place to live rather than a financial instrument and you'll see plenty more condos.
So, there are real differences aside from the lack of a yard.
Also banning children is illegal in the U.S. unless you have a 55 or older community.
I don't know why you wouldn't desire rules about noise if your home is attached to another home where loud neighbors would bother you.
But at any rate that concern has nothing to do with condominiums, your HOA in a planned development with detached housing can also serve you noise complaints.
The quality of construction has nothing to do with whether the project is a condo. Unless you think single- family detached homes can't have bad construction.
The level and type of noise that reaches nuisance levels is highly subjective, which leads to conflict between neighbors. You also have no control over your neighbors, so you might be able to practice your guitar for a decade and then suddenly your neighbors move and the new ones don't appreciate the sound as much.
It's the same issue all of these types of organizations have; HOAs suffer from the same problems. The rules tend to be defined by those most sensitive to them, who are generally those the most willing to waste a bunch of their own time screwing around with the HOA/condo association.
I personally refuse to own a condo or HOA home. It's worth it to me to exchange the equity for renting and being able to get out easily if I want to. I also find "ownership" to be a bit of a misnomer for either type of housing, since the rules can be arbitrarily changed and they can place a lien on your home. You live there at the grace of the HOA/condo community.
I get the reasons why those processes exist, especially for condos, but it's just not for me. I grew up in a rural area, so my idea of ownership is probably tainted by space being a non-factor and enforcement of any kind of laws, much less non-governmental ones, being sparse.
I'm hanging on to hope that remote work will become a major factor in the job market so that I can move back to the country without having to resort to the rural IT job market.
It depends on where the condo is. My condo in Boston has increased in value 2.5 times in the 20 years I've owned it. My friend's home in a wealthy suburb of Boston increased by 40% in almost the same amount of time. That's taking into account the last two years of the pandemic where we saw housing price increases slow or stop in the city while suburban prices rose much more quickly. Before that, the difference in appreciation was even greater.
My parents condo in Manhattan, which they bought 45 years ago, has probably appreciated close to two orders of magnitude.
I think overseas buyers, who like the fact that an association takes care of the repairs and services like these type of properties. Even those that moved and rented have ended up selling to those that have never seen the property except in photos. Our building has no rules about %owners living in the building so its gone from about 80% 20 years ago to 30%.
https://i0.wp.com/arizonarealestatenotebook.com/wp-content/u...
This graph only goes up to 2019, so it is probably higher now, but that is one heck of a drop.
Also, it isn't strange that a lower cost market appreciates faster than a higher price one. If say houses were $100k in Phoenix after the crash in 2008, now they are $400k, that is 4X! At the same time, a $1 million dollar house in Boston after the crash is only $1.4 or 1.5 million now, only 1.5X.
This happens in Japan, but happens mainly as a result of:
a. No one sees real estate as a sure shot after the excess of the 80s.
b. Declining population means even Tokyo has a lot of extra housing.
c. It is easy to rebuild housing, so people rarely buy "used" homes, leaving on the land as a real estate vehicle for appreciation (the structure is overhead). Condos are almost worthless speculative assets in that sense.
Don’t count new housing growth in Tokyo if you aren’t counting housing destruction as well, otherwise the numbers aren’t comparable to other cities (where new housing usually means “new” housing, not just rebuilt housing).
But. From when I lived there, my general observation was that in exchange for keeping the cost of the house fixed, rising property values is dealt with by making property lots smaller. Where 1 house stood now stands 2.
I would like to add
D. apartments are plentiful and cheap. I paid ~300USD a month for a small apartment in an outer suburb of a mediumish city. I was making ~2500USD a month.
Developers will often skimp on construction quality as a result, since they know that nobody will actually be living in them.
Thats just a link to a page on ghost cities.
That sounds ominous. Are there good comparisons of how excessive the real estate market is in the US today vs. Japan during the 80s?
https://www.scmp.com/magazines/style/news-trends/article/309...
The flipside is that a lot of people spend a big chunk of their lifetime earnings on rent with no return simply because the barrier of entry to home ownership is so high.
I agree that housing shouldn’t be an investment first or by default and I agree that condos would be an excellent vehicle to bring more into home ownership by lowering the cost of entry.
This is fine. I don't buy a condo with the hope of recouping my money. I buy a condo to have a roof over my head. I couldn't care less if my condo loses 80% of its value. It would lower my property tax bill in fact. I don't expect a ROI > 0 for the furniture either.
For my retirement, I contribute to a 401k and a Roth IRA.
The US has almost no tenant protections except for a few urban areas that passed municipal laws. I would prefer to rent if it provided almost as much protection as homeowning, and if it weren't so financially disincentivized in the US.
IMHO we need to eliminate the capital gains exemptions for homes, and also add on local capital gains taxes in addition to federal, to disincentivize real estate speculation.
depending on your local housing market, it could be much more risky. where i live, for the last few years renting has carried the real possibility of being unable to find a place to live, for any amount of money, when your lease ends.
the big upside to a condo is that nobody is going to kick you out.
If something major fails with the building, a repair bill could be so large that you have to take out another mortgage to pay for it, no matter your current financial situation.
Plenty of significant problems with condos that can force you to be kicked out.
Most of all, incentives are misaligned. Condos are designed to be marketed and sold. I’ve lived in several high end condos, as well as high end apartment buildings, and the apartment buildings always were built better and didn’t have weird custom made shit breaking.
If you own and can afford your fixed-rate mortgage, you are much less likely to be in this situation, or worse, homeless.
In France there's a maximum amount you can increase a tenant's rent with, defined yearly based on market prices. Combined with one of the most popular investment vehicles, which is a buy new ( thus incentivising construction) to rent (at defined affordable prices) programme which gets you tax breaks for 10 years, and after that most people usually sell. Alongside that cities are mandated by law to have a certain percentage of "social"(affordable) housing available, so when private construction adds housing stock, cities have to add on top of it. That helps keep renting affordable while also making sure new construction appears.
To illustrate my point, most German landlords fail to beat inflation. Some 20% are losing money.
The homeowners I know chose a slightly worse location, because they couldn't afford to buy in the places where they actually want to live. Since a mortgage is a 30 year affair, they bought more than they currently need. They end up paying more and getting less (for now). Inflation and rising rents will work in their favour eventually, but it's far enough in the future to make me question the move.
I meant to write about buying a home in Germany (I write about adulting in Germany), and the conclusions from my extensive research are the following:
- Buying a home is not a financial decision, it's a lifestyle decision
- Everyone who writes about buying a home has a financial incentive to recommend buying a home
- Home ownership is also throwing a lot of money away: closing fees, taxes, interests, maintenance, opportunity cost...
However, in terms of building equity (not to become a small-time landlord), buying an apartment is a safe bet - the housing market has been in a bull market for a long time, and the last few years have been especially good. I suspect we're closer to a long-term top than many think, but that's another matter. Even if the market crashes, your house remains yours and keeps providing shelter. On top of that, selling is tax-advantaged whereas stocks aren't.
If the market crashes, your house will not remain yours if you can't afford making payments. If things go south, I see unavoidable payments and illiquid assets as a liability, not an asset.
Selling is indeed tax-advantaged after a few years though. That's a good point.
The main pro for me is that it's a hedge against rent prices and inflation. However that's assuming that housing prices are reasonable, and that there are no better investments.
It doesn't matter how much overhead it has in a vacuum. What matters is how much goes to overhead when compared to renting, which is the only other choice (other than being homeless).
Renting is far more risky. You never know when and how much it will increase every year.
If you buy something (condo, or house) you now know what your "rent" will be for the next 30 years, it's never going up.