ᐅ Dreaming of a House: Realistic Goal or Just Wishful Thinking?
Created on: 9 Oct 2019 00:58
T
Trinity2019
Good evening,
I have been considering for some time now fulfilling my dream of owning a home. However, there are some factors that make me doubt how realistic this really is, or how much I could afford to spend, if at all.
Here are the basic conditions:
I am 40, single, and plan to cover the entire financing on my own, both now and in the future.
No children, equity of 100,000, income currently around 4,200, with a very likely increase of 15% over the next 3 years.
My additional expenses are very low, as my employer fully covers my car and mobile phone. What is important to me is a nice garden; the house can be smaller, since I will be living alone. I could save quite a bit on the interior finishing.
So, I would appreciate your opinion and assessment... should I really go for it, or would it be better to hold off?
Best regards
I have been considering for some time now fulfilling my dream of owning a home. However, there are some factors that make me doubt how realistic this really is, or how much I could afford to spend, if at all.
Here are the basic conditions:
I am 40, single, and plan to cover the entire financing on my own, both now and in the future.
No children, equity of 100,000, income currently around 4,200, with a very likely increase of 15% over the next 3 years.
My additional expenses are very low, as my employer fully covers my car and mobile phone. What is important to me is a nice garden; the house can be smaller, since I will be living alone. I could save quite a bit on the interior finishing.
So, I would appreciate your opinion and assessment... should I really go for it, or would it be better to hold off?
Best regards
N
nordanney9 Oct 2019 17:09guckuck2 schrieb:
Nice bias. Real estate prices have been rising for 10 years. So you really can’t lose. Well.Actually, it’s been the last 100 years. But that’s not the point here.guckuck2 schrieb:
A new build is like a new car. Right after moving in, at least 10% of the value is lost in my opinion.That’s the advantage of a new build. Right after moving in, no money is lost initially. There’s a reason why people commonly talk about “concrete gold.”guckuck2 schrieb:
Plus additional purchase costs and prepayment penalties.Additional purchase costs, yes; prepayment penalties, no. Property exchange is the magic word. It reduces prepayment penalties to zero.guckuck2 schrieb:
A few thousand? Rising prices lead to higher loans. I don’t have to explain that to you. Calculate the prepayment penalty, e.g. a €400,000 (about $430,000) loan running for 4 years. It’s rather several tens of thousands.As I said, prepayment penalties can be disregarded. Right now, it’s more of a three-part effect. Not just rising prices = rising loans. Falling interest rates = higher possible loans = higher prices.Maybe a few more words on prepayment penalties: given the current ultra-low interest rate period, it’s likely that rates will rise (at least slightly) within the next few years, along with reinvestment yields. This means that for loans taken out in the past (and possibly the next two) years, there will likely be no prepayment penalties in the future. Banks will be happy to see the cheap money return. This is at least my personal interest rate forecast for the next five years.
Pinky0301 schrieb:
400k for house and land?
I don’t know the area, but I can’t imagine that being possible within the Düsseldorf area, right?If we consider an area around Düsseldorf with a 30–45 minute commute to the city center, that’s very tight for a new build, but just still doable (small plot or semi-detached house). For existing properties, prices start around €175,000 (about $190,000) depending on condition, and for €400,000 (about $430,000) you can already find something nice.
Hey Trinity
Greetings from the Matrix )) I’ve often used that nickname myself...
So, it’s better to have bought yesterday than today or tomorrow.
I was at a client’s place yesterday; they are currently planning their follow-up financing. They bought a small house in the Rhineland metropolitan area back in 2014 for 210,000 EUR. Their financial situation was more critical back then. They even financed the additional costs through Hanseatic, etc. Today, almost 5 years later, according to my appraisal, the "small house" is worth between 330,000 and 350,000 EUR. Just for fun, I had it appraised by the local Sparkasse, and they confirmed the value with 340,000 EUR. This means that if the Sparkasse values it at 340k, you could offer it on the market for 400k EUR, and it would sell immediately!
But what I’m getting at is this:
Many people think there is a “bubble” in the market… I’d say there’s still some way to go before we reach a bubble… meaning:
1) Over the next 2-3 years, prices will continue to rise at the same rate or even as strongly as they have over the last five years! This is because demand remains high, and there is too little living space available.
2) Interest rates will remain at a relatively low level in the coming years, which keeps demand strong.
3) In 3-5 years, the market will cool down somewhat, but prices will likely continue to rise faster than inflation (current inflation in the EU region is 1.5-2%!!!!)
4) That means you are currently paying banks less interest than the rate of inflation!
Why is that?
In the 80s and 90s, there were many years with almost no price increases for real estate, despite higher inflation... and we have been catching up for years now.
Two years ago, I told my wife’s best friends: “Hey, the house you want to buy in Bergisch Gladbach (near Cologne!) is priced over 100,000 EUR above its actual value… I would be more cautious there…”
Today, two years later, they can ask for 200,000 EUR more, and would sell immediately because people are scrambling for it!
This is not meant as encouragement to pay far above value! However, depending on the region, buyers are often willing to accept some premium.
Speaking of your area in Düsseldorf: a few years ago, everyone was buying up everything in Neuss because it’s close to Düsseldorf and the prices were still relatively reasonable… not anymore.
I think that for 400,000 EUR, a KfW-40 house with a pool, garage, etc., will be hard to find… so either you need to stretch your budget or invest more!
PS: I live near Bonn, 10km (6 miles) from the city limits, and land prices here are also out of control—even for existing properties. If you want something decent and relatively new, you need to invest around 400,000 EUR for a small terraced house with a 250sqm (2,700 sq ft) plot.
Young semi-detached houses (max. 5 years old, 160sqm (1,700 sq ft) living space, 250-350sqm (2,700-3,800 sq ft) plot) start at 600,000 EUR…
And for new builds in condominiums, we’re well over 4,000 EUR per sqm (372 sq ft) here!
That’s the reality...
Greetings from the Matrix )) I’ve often used that nickname myself...
So, it’s better to have bought yesterday than today or tomorrow.
I was at a client’s place yesterday; they are currently planning their follow-up financing. They bought a small house in the Rhineland metropolitan area back in 2014 for 210,000 EUR. Their financial situation was more critical back then. They even financed the additional costs through Hanseatic, etc. Today, almost 5 years later, according to my appraisal, the "small house" is worth between 330,000 and 350,000 EUR. Just for fun, I had it appraised by the local Sparkasse, and they confirmed the value with 340,000 EUR. This means that if the Sparkasse values it at 340k, you could offer it on the market for 400k EUR, and it would sell immediately!
But what I’m getting at is this:
Many people think there is a “bubble” in the market… I’d say there’s still some way to go before we reach a bubble… meaning:
1) Over the next 2-3 years, prices will continue to rise at the same rate or even as strongly as they have over the last five years! This is because demand remains high, and there is too little living space available.
2) Interest rates will remain at a relatively low level in the coming years, which keeps demand strong.
3) In 3-5 years, the market will cool down somewhat, but prices will likely continue to rise faster than inflation (current inflation in the EU region is 1.5-2%!!!!)
4) That means you are currently paying banks less interest than the rate of inflation!
Why is that?
In the 80s and 90s, there were many years with almost no price increases for real estate, despite higher inflation... and we have been catching up for years now.
Two years ago, I told my wife’s best friends: “Hey, the house you want to buy in Bergisch Gladbach (near Cologne!) is priced over 100,000 EUR above its actual value… I would be more cautious there…”
Today, two years later, they can ask for 200,000 EUR more, and would sell immediately because people are scrambling for it!
This is not meant as encouragement to pay far above value! However, depending on the region, buyers are often willing to accept some premium.
Speaking of your area in Düsseldorf: a few years ago, everyone was buying up everything in Neuss because it’s close to Düsseldorf and the prices were still relatively reasonable… not anymore.
I think that for 400,000 EUR, a KfW-40 house with a pool, garage, etc., will be hard to find… so either you need to stretch your budget or invest more!
PS: I live near Bonn, 10km (6 miles) from the city limits, and land prices here are also out of control—even for existing properties. If you want something decent and relatively new, you need to invest around 400,000 EUR for a small terraced house with a 250sqm (2,700 sq ft) plot.
Young semi-detached houses (max. 5 years old, 160sqm (1,700 sq ft) living space, 250-350sqm (2,700-3,800 sq ft) plot) start at 600,000 EUR…
And for new builds in condominiums, we’re well over 4,000 EUR per sqm (372 sq ft) here!
That’s the reality...
Can someone explain the issue to me? I don’t really understand it here. Have we in Germany already reached a point where people with an annual income of nearly 100,000 euros can no longer afford a home to live in themselves? I don’t think we have gotten that far yet.
Conclusion: If not you, then we seriously have to ask: who then?
Conclusion: If not you, then we seriously have to ask: who then?
P-Kosmalla schrieb:
Hey Trinity,
Matrix sends regards )) I often used that nickname myself...
So, it’s better to have bought yesterday than today or tomorrow.
I visited a client yesterday who is currently planning their follow-up financing. They bought a small house in 2014 in the metropolitan area of the Rhineland, back then for 210,000 EUR. Their financial situation was more challenging than today. At that time, they also financed additional costs through Hanseatic, etc.
Today, almost 5 years later, the "small house" is worth between 330,000 and 350,000 EUR according to my valuation. Just for fun, I had the local savings bank assess it, and they confirmed a value of 340,000 EUR. That means if the savings bank values it at 340,000 EUR, you could list it on the market for 400,000 EUR, and it would sell immediately!
But what I want to say?
Many think there is a "bubble" in the market... I would say there is still a long way to go before a bubble forms, meaning:
1) In the next 2-3 years, prices will continue to rise at least as much as in the past 5 years because demand remains high and there is too little housing available!
2) Interest rates will stay at this favorable level for a few more years, keeping demand strong.
3) In 3-5 years, the market will cool down somewhat, but prices will still rise faster than inflation (current inflation in the EU area: 1.5-2%!!!)
4) So, right now you pay less interest to the bank than the rate of inflation!
Why is that?
In the 80s and 90s, there were many years with almost no price increases in real estate despite higher inflation... and we have been catching up for years now...
Two years ago I told my wife’s best friends: hey, the little house you want to buy in Bergisch Gladbach (near Cologne!) is priced over 100,000 EUR above its actual value… so I would be more cautious there...
Today, 2 years later, they can ask for 200,000 EUR more and would sell instantly because people are scrambling to buy!
This is not encouragement to pay far above market value! But depending on the region, people gladly accept some premiums.
In your area, Düsseldorf, I can say: a few years ago everyone bought up everything in Neuss because it’s close to Düsseldorf and prices were still relatively reasonable... not anymore.
I think you won’t find much for 400,000 EUR as a KfW-40 house with a pool, garage, etc. That means either push the budget higher or invest more!
PS: I live near Bonn myself, 10km (6 miles) from the city border, and here land prices are also outrageously high, even for existing properties. If you want something decent and relatively new, you have to invest 400,000 EUR for a small townhouse with a 250sqm (2,690 sq ft) plot.
Young semi-detached houses (max. 5 years old, 160sqm (1,720 sq ft) living space, 250-350sqm (2,690-3,770 sq ft) plot) start at 600,000 EUR…
And new builds for condominiums here cost well over 4,000 EUR per sqm (about 370 USD per sq ft)!!!
That’s the reality... Hmm, sounds good and hopefully there’s a lot of truth in that!
However, I only read about the pendulum swinging one way. Never the other…
House now worth 200k more than 5 years ago, etc.… I believe all that!
But it can also go the other way. That should never be forgotten.
If it were absolutely certain that prices would rise over the next 5-10 years, everyone would immediately take out a loan and build or buy.
What then can happen, we saw in the US some years ago...
Anything can happen, nothing is certain. As I said… many roads lead to Rome.
N
nordanney10 Oct 2019 19:07Maschi33 schrieb:
Can someone explain the issue to me? I don’t really understand it here. Are we in Germany already at the point where people earning nearly 100,000 euros annually can no longer afford a property for their own use?No, we are not. With that income, you can afford a property almost anywhere. In Munich, it might be smaller; in rural areas, more spacious and luxurious. Prices are indeed high (Munich is said to have the hottest real estate bubble in the world, according to recent studies), but money is extremely cheap. Overall, the situation is not that much different compared to the 1980s or whenever.