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
P
pagoni202029 Sep 2020 08:26Nida35a schrieb:
It’s important to remember that today’s savings figures are just numbers on paper. In 1929, 1945, and 1989, those numbers became worthless overnight. Grandma’s house from 1910 still stands, and the 5000 marks from back then provided generations of rent-free living. That’s true—you can’t always imagine that things were or could be different. A university once tested analysts’ predictions against those of chimpanzees—guess what was more accurate... Unfortunately, I’ve forgotten the chimpanzees’ names, just in case I ever want to invest again.
Joking aside—based on my own experience, it was probably one of the best decisions my parents made to save up for a small, simple house back then and to forgo almost all luxuries. They benefited from this later in life, although the frugal years before that were definitely not easy for them!
It’s understandable that some people prefer to live “in the now” and don’t want to live so frugally. I believe there is a nice, modest lifestyle—it’s just different. Still, personally, I didn’t want to live with a huge monthly mortgage payment.
About 20 years ago, no one wanted our rural property, not even at a very low price, although it was a relatively modern house in very good technical condition.
Eighteen years later, it was practically taken off our hands without complaint, and we got a very good price for it—and everyone was happy with the deal.
No one knows what the future holds—I feel much more comfortable owning my own home.
So, it’s quite possible that one day you might own a formerly expensive property that no one wants or only at a loss; but it can also happen the other way around.
You live in the greater Munich area, where prices are even more extreme than elsewhere.
Maybe, to realize this possible wish, you’ll have to make a deeper, more significant decision about where to live; that’s also an option—though rarely chosen and often reluctantly—the idea of starting over somewhere else.
H
Hausbau202229 Sep 2020 13:37Why shouldn’t prices continue to rise?
The government wants inflation, which makes sense since it can borrow money cheaply. And the inflation in the ECB basket—well, take an ice cream cone as an example. Here, it costs everywhere between €1.20–€1.30 (about $1.30–$1.40). That is the best indicator.
Before the euro, I paid 50 pfennigs.
Owning property also means quality of life plus retirement security. A monthly payment of €1,800 ($1,950) corresponds to a current purchasing power of maybe €1,300 ($1,400) in 10 years… Rents will continue to rise, people want more space, and there is also population growth and immigration… Not everyone has to invest in real estate, but for yourself, you should own property, also to avoid these costs in old age.
I also find it somewhat amusing that when it comes to an apartment or house, people say €500,000 ($540,000) is way too expensive, but financing a car for €80,000 ($86,000) is done easily in Germany, even though the depreciation is huge and the value often drops close to zero after a few years. But that is a typical phenomenon in Germany…
The government wants inflation, which makes sense since it can borrow money cheaply. And the inflation in the ECB basket—well, take an ice cream cone as an example. Here, it costs everywhere between €1.20–€1.30 (about $1.30–$1.40). That is the best indicator.
Before the euro, I paid 50 pfennigs.
Owning property also means quality of life plus retirement security. A monthly payment of €1,800 ($1,950) corresponds to a current purchasing power of maybe €1,300 ($1,400) in 10 years… Rents will continue to rise, people want more space, and there is also population growth and immigration… Not everyone has to invest in real estate, but for yourself, you should own property, also to avoid these costs in old age.
I also find it somewhat amusing that when it comes to an apartment or house, people say €500,000 ($540,000) is way too expensive, but financing a car for €80,000 ($86,000) is done easily in Germany, even though the depreciation is huge and the value often drops close to zero after a few years. But that is a typical phenomenon in Germany…
Hausbau2022 schrieb:
Before the euro, I paid 50 pfennigs.I mostly agree with the rest of the post, but you probably last paid 50 pfennigs for an ice cream scoop in the early 1980s during the Deutsche Mark period. Before the euro was introduced, it already cost 1 DM (sometimes even more).
A
Alibert8730 Nov 2020 14:35There is now a possibility that we could buy a property in our desired location. The whole plot. Here are the details:
Unfortunately, it is only a mid-terrace house, which would still need to be renovated according to our wishes (it was occupied in recent years by an elderly lady) and costs about 400,000 euros (~400TE).
What is still a downside for us: no direct access to the garden, no garage attached to the house, and no parking space.
(I don’t have more details yet, as this is still quite new.)
A mid-terrace house was never an option for us before due to the tight space and poor lighting conditions; however, we recently looked at some “modern” mid-terrace houses that had floor-to-ceiling windows, very good layouts, etc., and this offer got us thinking.
In my opinion, the price/performance ratio for such “small” properties doesn’t add up. Or maybe we just don’t have the imagination when it comes to mid-terrace houses...
Thanks for your opinions :-)
Unfortunately, it is only a mid-terrace house, which would still need to be renovated according to our wishes (it was occupied in recent years by an elderly lady) and costs about 400,000 euros (~400TE).
What is still a downside for us: no direct access to the garden, no garage attached to the house, and no parking space.
(I don’t have more details yet, as this is still quite new.)
A mid-terrace house was never an option for us before due to the tight space and poor lighting conditions; however, we recently looked at some “modern” mid-terrace houses that had floor-to-ceiling windows, very good layouts, etc., and this offer got us thinking.
In my opinion, the price/performance ratio for such “small” properties doesn’t add up. Or maybe we just don’t have the imagination when it comes to mid-terrace houses...
Thanks for your opinions :-)
N
nordanney30 Nov 2020 14:56Alibert87 schrieb:
What is still a downside for us: no direct access to the garden, no garage attached to the house, no designated parking space Typical for houses in the city. I don’t see this as a real or major disadvantage. I don’t drive into the garden anyway ;-)
Alibert87 schrieb:
A mid-terrace house was never an option for us due to the narrowness and poor lighting conditions A mid-terrace house is not narrower than a detached single-family home. I agree with you about the lighting. Especially in older buildings, it’s often not ideal. But if you are planning to renovate extensively, you can usually solve this problem (it’s usually less critical on upper floors, more so in living/dining areas).
Alibert87 schrieb:
In my opinion, the price/performance ratio doesn’t work for such “small” properties. Or maybe we just don’t have the right imagination for a mid-terrace house ... If there had been suitable properties on the market for you so far, you wouldn’t still be searching. So the price/performance ratio (subjective) overall is not fitting.
Pros of a mid-terrace house:
- Your preferred location
- Generally more affordable due to smaller plot size (in some areas, having over 150 cm (5 feet) of garden is already a luxury if you can afford it)
- Good thermal performance because it is heated on both sides
- Almost any property can be adapted or improved
H
hampshire30 Nov 2020 15:46We lived for 18 years in a mid-terrace house. At the dining area on the ground floor in the middle, the light was often on. From the first floor upwards, with an east-west orientation, it was fine. The attic with three roof windows was also good. If the price is right, you won’t go wrong. You don’t have to live there forever if later you want more light and space and your budget allows you to move to your preferred location.