ᐅ Is Buying a House a Wise Decision in the Current Market Situation?
Created on: 23 Sep 2020 14:32
A
Alibert87
Good day and hello everyone,
Some time ago, I joined this forum to gather information and read experience reports.
I would like to get your neutral opinion on whether buying property at this time would be advisable. We currently rent in a "very good location" and would like to purchase a home here. Many properties are sold "off-market" or only available at very high prices (I’m talking well over 500,000). There is no land available for development; if there is, a property is demolished and rebuilt. I want to gather some input on whether this whole situation is crazy or if such a project is feasible.
Since we don’t have a specific property in view yet but have been monitoring the market for about 1.5 years and have already done quite a few viewings, I assume the median price for homes or condominiums that suit us would be around 600,000.
He, 33 years old, permanently employed in the public sector, net income 2,600 euros (plus 14 monthly payments plus bonus, around 5,000) – from 2021 about 3,000 net (fixed)
She, 32 years old, permanently employed part-time, 25 hours per week, net income 2,300 (plus additional payments around 2,000)
1 child (child benefit) – possibly a second child within the next 3–5 years
Married, tax class 4
Equity around 110,000 (plus 30,000 as a buffer)
Regarding equity, I have a question: Are bank conditions tiered, so that having, for example, 10,000 more in equity results in a better loan offer (how does this tiering work)?
We are really torn whether or not to take this step. It feels very surreal to spend so much money on housing.
I am grateful for any advice
Regards
Some time ago, I joined this forum to gather information and read experience reports.
I would like to get your neutral opinion on whether buying property at this time would be advisable. We currently rent in a "very good location" and would like to purchase a home here. Many properties are sold "off-market" or only available at very high prices (I’m talking well over 500,000). There is no land available for development; if there is, a property is demolished and rebuilt. I want to gather some input on whether this whole situation is crazy or if such a project is feasible.
Since we don’t have a specific property in view yet but have been monitoring the market for about 1.5 years and have already done quite a few viewings, I assume the median price for homes or condominiums that suit us would be around 600,000.
He, 33 years old, permanently employed in the public sector, net income 2,600 euros (plus 14 monthly payments plus bonus, around 5,000) – from 2021 about 3,000 net (fixed)
She, 32 years old, permanently employed part-time, 25 hours per week, net income 2,300 (plus additional payments around 2,000)
1 child (child benefit) – possibly a second child within the next 3–5 years
Married, tax class 4
Equity around 110,000 (plus 30,000 as a buffer)
Regarding equity, I have a question: Are bank conditions tiered, so that having, for example, 10,000 more in equity results in a better loan offer (how does this tiering work)?
We are really torn whether or not to take this step. It feels very surreal to spend so much money on housing.
I am grateful for any advice
Regards
N
nordanney25 Sep 2020 09:54Alibert87 schrieb:
Are Dr. Klein and Interhyp always free of charge?Not exactly. The consultation is always free. However, the broker’s commission is always included in the terms of your loan. So, it’s not free, but you will not receive a separate bill.P
Pinkiponk25 Sep 2020 10:09If you have the funds for a house with a garden or can secure financing, I see no reason against buying one, especially with a child. What else would you want to do with your money? It is possible that you might experience a property bubble at some point over the next few decades, but it will eventually reverse.
H
hampshire25 Sep 2020 13:33I have not seen anything here indicating that building your own house is a heartfelt goal for you. There is also no urgency to act. Much of this seems to revolve around finances. Therefore, my assessment:
Continue renting and invest your money in garages located in areas with a shortage of parking. This investment is scalable, tenants are straightforward, there are no tenant protection issues, occasional vacancy is not a disaster when you own multiple garages, there are no complicated utility cost statements, the return is high, and the value development is low risk.
Continue renting and invest your money in garages located in areas with a shortage of parking. This investment is scalable, tenants are straightforward, there are no tenant protection issues, occasional vacancy is not a disaster when you own multiple garages, there are no complicated utility cost statements, the return is high, and the value development is low risk.
Yes, I have to agree with hampshire on this. Property ownership, especially a house but also an apartment, would never be viewed by me as a “purely profitable investment” from the perspective of an average private individual, because it usually is less profitable than many think and, unlike the parking space mentioned above or some kind of investment in the stock market, has several disadvantages.
However, to be fair, with reasonable calculations and a good property in a good location, it is not a mistake either. If you want to be on the safe side, you plan your financial framework so wisely that, besides covering the property maintenance, you also manage an ETF portfolio—these two do not exclude each other.
But ownership is more than that. For me—and I can only speak from my own experience—it is above all a way of life. It makes a difference if I live in a place that “belongs” to me, where only the local zoning plan and, above all, my budget limit how far I can carry out my design ideas. You are literally your own boss and owe no accountability to anyone (except the zoning regulations, applicable laws, your wallet, and maybe your neighbors) for what you do or don’t do. For example, no landlord tells you whether or how to retile the bathroom.
Of course, you are responsible for everything yourself: maintenance, repairs, compliance with legal and municipal requirements. But if you have budgeted sensibly, that is not a problem.
The conclusion of my hopefully not too confusing post is this --> yes, it is important to calculate carefully and thoroughly and to consider whether a specific property is a worthwhile investment on its own—but not only that. Owning property is also a way of life and a personal value. If someone cannot relate to this, they can still be completely happy in a rental property, invest at the stock market, or spend their money on consumption—and that is perfectly fine too.
However, to be fair, with reasonable calculations and a good property in a good location, it is not a mistake either. If you want to be on the safe side, you plan your financial framework so wisely that, besides covering the property maintenance, you also manage an ETF portfolio—these two do not exclude each other.
But ownership is more than that. For me—and I can only speak from my own experience—it is above all a way of life. It makes a difference if I live in a place that “belongs” to me, where only the local zoning plan and, above all, my budget limit how far I can carry out my design ideas. You are literally your own boss and owe no accountability to anyone (except the zoning regulations, applicable laws, your wallet, and maybe your neighbors) for what you do or don’t do. For example, no landlord tells you whether or how to retile the bathroom.
Of course, you are responsible for everything yourself: maintenance, repairs, compliance with legal and municipal requirements. But if you have budgeted sensibly, that is not a problem.
The conclusion of my hopefully not too confusing post is this --> yes, it is important to calculate carefully and thoroughly and to consider whether a specific property is a worthwhile investment on its own—but not only that. Owning property is also a way of life and a personal value. If someone cannot relate to this, they can still be completely happy in a rental property, invest at the stock market, or spend their money on consumption—and that is perfectly fine too.
Yesterday, I happened to read an article about inflation. It included a chart showing the current value of the euro compared to the day it was introduced. General living expenses are down by 30%, real estate by 50%. This means that prices have, on average, doubled over the last 20 years. And the curve was (almost) linear! That is, the price development for real estate was steady and moved only in one direction: upwards.
Therefore, I would expect prices to continue rising in the future, at least in thriving areas. Of course, in rural or remote regions, there are certainly places where this does not apply. The original poster (OP) seems to be in one of those highly sought-after regions. He may consider the prices crazy, but as he rightly points out, the prices are being paid nevertheless. There is not much more to say: if someone is willing to pay the asking price, then that is simply how expensive real estate has become.
I find it very important what @nordanney wrote a few posts ago: many renters would certainly not spend as much money on housing as they would in their own home. However, they also have lower living quality — renting a comparable house is hardly going to be cheaper than covering the mortgage payment. Many people, however, find ways to quickly spend the “saved” money and end up with “not much” in the end. Personally, I am experiencing the “forced savings effect” quite clearly at the moment. My project has been extremely challenging, and now I have to be a bit careful with money (I’m not struggling financially, don’t get me wrong, but I cannot spend freely without limits). If I had continued renting, I would probably work less (which would be a real gain in quality of life, even though I really enjoy my work), so I would earn less, and I would have a few additional expenses here and there that I am now consciously avoiding. Building a similar net worth as with my single-family home (which is located in a thriving small city) would definitely be out of reach as a renter.
Therefore, I would expect prices to continue rising in the future, at least in thriving areas. Of course, in rural or remote regions, there are certainly places where this does not apply. The original poster (OP) seems to be in one of those highly sought-after regions. He may consider the prices crazy, but as he rightly points out, the prices are being paid nevertheless. There is not much more to say: if someone is willing to pay the asking price, then that is simply how expensive real estate has become.
I find it very important what @nordanney wrote a few posts ago: many renters would certainly not spend as much money on housing as they would in their own home. However, they also have lower living quality — renting a comparable house is hardly going to be cheaper than covering the mortgage payment. Many people, however, find ways to quickly spend the “saved” money and end up with “not much” in the end. Personally, I am experiencing the “forced savings effect” quite clearly at the moment. My project has been extremely challenging, and now I have to be a bit careful with money (I’m not struggling financially, don’t get me wrong, but I cannot spend freely without limits). If I had continued renting, I would probably work less (which would be a real gain in quality of life, even though I really enjoy my work), so I would earn less, and I would have a few additional expenses here and there that I am now consciously avoiding. Building a similar net worth as with my single-family home (which is located in a thriving small city) would definitely be out of reach as a renter.
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