ᐅ Is Buying a House a Wise Decision in the Current Market Situation?

Not to forget, the savings available today are just a number on paper. In 1929, 1945, and 1989, those papers became worthless overnight. Grandma’s house from 1910 still stands, and the 5000 marks back then have paid off over generations through rent-free living.

It would probably be economically sensible to let the house depreciate fully and stop investing any more money into it. If you carry out extensive renovations or refurbishments after 20-30 years, this can significantly reduce any increase in value. A house is and remains a luxury asset. Real estate is likely most profitable when your tenants are effectively paying it off for you.
The motto should therefore be: live cheaply by renting and invest your equity in rental properties.

Nida35a schrieb:

It’s important to remember that today’s savings on paper are just numbers. In 1929, 1945, and 1989, those numbers suddenly became worthless overnight. Grandma’s house from 1910 still stands today, and the 5000 marks from back then have paid off over generations through rent-free living.

It’s a pity that you can only give one “like” as a maximum; in my opinion, your post deserves more.

Just as a side note: Neither of my grandparents owned property, and everyone in my circle of family and friends whose grandparents did own property is now financially much better off, despite starting from almost the same position. I think the opportunities that come with owning land and a home are sometimes underestimated. However, I’m happy to be convinced otherwise through argument.

Pinkiponk schrieb:

I think the opportunities that come with owning your own land and home are sometimes underestimated. However, I am open to being convinced otherwise through good arguments.

There have already been several time series analyses comparing buying versus renting. If you look at these, the last 10 years are certainly an anomaly. However, in every respect, the never-ending rally in the stock market and ETFs is likely something for future generations of researchers to study as well.

Homeownership is forced savings. If you don’t need flexibility, it can definitely provide significant advantages, possibly financial ones — the profit is made when buying, and this is always true with real estate. Are we seeing good purchase prices today?
Those with old rental contracts from before 2010 and private landlords who prefer peace and long-term tenants still see a large gap compared to new rents or buying/building today. That gap invested in ETFs can work well. The problem, as in the original poster’s case, is a lack of flexibility due to family circumstances; a garden and more space are now needed and desired for the next 20 years.

So, one has to consider where we currently stand in the cycle. The statement that we could experience a housing bubble in the next 30 years is nicely phrased — it is certainly ahead of us, not just behind us. And it will come, that is just as certain. If you search “Munich” and “bubble” on Google, you’ll find plenty about the “naturally” ever-increasing prices there. But even if that is the case—where in Lower Saxony are there boom regions that justify such a comparable development? Where are the large companies still prospering, expanding, and paying well according to collective agreements? Where is demographic change not foreseeable?

In conclusion — if you want to afford the luxury of owning a home as a consumption component, your risk management must be solid; meaning your financial capacity must be secured even during crises and based on one income. If that rate is too low, the subject is off the table for the household. Since incomes are not growing, and not everyone inherits, more and more potential new and young buyers drop out of the market over time. And with the years, larger age groups move into the upper demographic range — the demographic “apple tree” if you will — since we haven’t had a “Christmas tree” shape for a long time.
Maybe that’s good for young families whose founders are now 15–20 years old — but the rest haven’t benefited much yet.

Alibert87 schrieb:

Since we currently don’t have a specific property in sight but have been monitoring the market for about 1.5 years and have already done quite a few viewings, I assume the median for purchases that are relevant to us (house or condominium) would be around 600,000€ (approximately 600,000 euros).

He, 33 years old, permanently employed in the public sector, net income 2,600 (plus 14 salaries plus bonus / about 5,000) – from 2021 about 3,000 net (fixed)
She, 32 years old, permanently employed part-time with 25 hours, net income 2,300 (plus special payments about 2,000)
1 child (child allowance) – possibly a second child within the next 3-5 years

So, with a price of 600,000€ (approximately 600,000 euros) for an existing property, there are additional costs like property transfer tax, fees, and realtor commissions. Without any expenses for renovations, etc., you would then be at about 680,000€ (approximately 680,000 euros). This means not much of your equity remains for the actual purchase. Consequently, you move into somewhat less favorable interest rate brackets, and, with some luck, you might qualify for a 90% financing – with full use of your equity. It’s doable, but given your income, it’s at the upper limit.

BackSteinGotik schrieb:

There have already been quite a few time series analyses on buying versus renting. Looking at these, the last 10 years are certainly an anomaly. However, in every respect, the never-ending rally in the stock market / ETFs is also something for future generations of researchers.

Owning property is forced saving. Those who do not need flexibility can certainly gain significant advantages, possibly financial ones—the profit always lies in the purchase price (and with real estate always). Do we have good purchase prices today?
If you have an old rental contract from before 2010, and a (private) landlord who prefers peace and long-term tenants, there is still a large gap today compared to new rental prices or new purchase/construction costs. Investing this difference into ETFs works well. The problem, as with the original poster, is a lack of flexibility due to family circumstances; a garden and more space would now be needed or desirable for 20 years.

So you have to consider where we currently are in the cycle. The statement that a real estate bubble might occur in the next 30 years is nicely put—it is certainly ahead of us, not just behind us. And it will happen, that is equally certain. Just search “Munich and bubble” on Google to find plenty about the “naturally” continuously rising prices there. But even if it were so—where in Lower Saxony are the boom regions that justify such a similar development? Where are the large companies that continue to thrive, expand, and pay well according to a collective agreement for the metal industry? Where is demographic change not foreseeable?

In conclusion—if you want to enjoy the luxury, that is the consumption component, risk management must be right; in other words, financial sustainability must be guaranteed even during crises and with one income. If this rate is too low, the matter is over for the household. Since incomes do not increase, and not everyone inherits, more and more potential new and young buyers eventually drop out of the market over time. And over the years, larger age groups eventually disappear from the demographic “apple tree” since we haven’t had a “fir tree” situation for a long time.
Maybe this is good for young families whose founders are now 15 to 20 years old—the rest currently do not benefit much..

The fact is that there hasn’t been a significant downturn in the real estate market for a very long time. Whether the current situation can be considered a bubble is something I still doubt. Another fact is that nobody knows what will happen in 30 years, not even in 5. Possibly, just possibly, a new mindset regarding digitalization might emerge, and the days spent in offices continue to decrease. This might also lead to those “boom regions” no longer existing in the same way in the future.
Maybe things will play out differently. Maybe there will be a war in 10 years.
All these “maybes” should not heavily influence our actions today regarding owning property. If someone wants one and can afford it, then go ahead. Just don’t factor in any potential increase in value. No matter how likely it might seem.