I am just doing some theoretical thinking in general to try to understand why people buy property and whether it makes sense or not.

Imagine there is a flat that costs 125,000 Euros and the rent is 500 Euros.

I am now trying to calculate under which conditions it makes sense to buy that flat....or whether it is in general a stupid decision from an economical point of view.

The basis: Imagine the flat is in a good condition and good location with a long-term lack of nice flats/houses and you live in a country with roughly 50% income/other taxes. Also assume the price of the proprty only rises within the inflation rate.

Case 1: You would not need a mortgage. If you put the money on your savings account at maybe 5%, this would be 520 Euros per month before taxes and 300 Euros roughly after taxes.

Case 2: You get a mortgage on 50% of the property price and live in it yourself.

The mortgage would be about 300 Euros per month...with maybe 250 Euros interests rates and the rest would be the money you pay back.

As you paid 50% on the property (62,500 Euros), you are missing out on 62,500 on a savings account which is about 250 Euros per month.

So all in all it would be 300+250 = 550 Euros you pay per month in contrast to renting for 500 Euros. You also need to pay for repairs etc yourself so maybe all in all you would pay 600 Euros.

Case 2: You get a mortgage on 50% of the property price and rent it out.

In this case, the interests from the mortage are deductable from your income tax as well as 50% of the monthly bills....and you have some additional benefits for repairs....but also an additional risk of having to refurbish the flat more often as the people ruin it or break stuff.

In this case, the monthly mortgage payments are lower then the rent so you also have a taxable income.....maybe 50% is too high and it would need to be something like 25%

..sorry, I am bored now...I think I continue this later on ....or you could do it for me if you know more then I do...which is not difficult

You may be able to make more interest on the money you would put towards a mortage if you saved it, however, you would not have all of hte mortgage at the start of a rental agreement, possibly just the deposit (if you are taking this from a standpoint of an equal financial beginning). Plus this money that you had towards a deposit would get spent on the rent over time as well which would reduce your overall interest.

If you live in a rental property for 25 years, what do you have to show for it at the end, your example of paying £550 euros a month for the house only works out at 50 euros more a month than the initial rental agreement, a total (over 25 years) of 15'000 euros more, so for that amount more you would own the house(which, following economic trends over the last century or so, would have gone up by an average of 100% in value per decade in the UK, not the rate of inflation that you stated). So you would have made a substantial profit by the end of the mortgage period and with the rental agreement you would have no tangible assets.

IMO it is always better to buy than rent in the long term as you have the asset at the end, and the effective interest rate on property inthe long run has always been way more than a savings account. I bought as soon as I could and am still very happy with my decision plus I make money renting one of my rooms out which covers half of my mortgage.

It's always a slight risk, especially in the short term, but in the long term you should come out on top investing in property, of course the trends in Europe are slightly different to here so I can't speak for over there.
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In the UK it is easy to calculate - as your house prices rise all the time...so even with no rent at all, just owning an empty house would even be similiar to a savings account (assuming you bought it without any mortgage...).

I have seen a contract of a flat that was for sale for 130,000 Euros which was bought 1992 for 120,000 Euros (240,000 DM) - which is not unusual here.

In the UK the flat would be worth 300,000 Euros now, or even more.

This graph shows the house prices for example in Germany in the last 15 years....



They grey line is Eastern Germany (falling) the black line is Western Germany.

So there is not much happening there.....they are more or less stable.