Where I live (southern Germany), you cannot find a house under 600,000 EUR. The average net household income in Germany is around 43,000 EUR. That means that house prices here are over 16 times the average household income. Yupp, it's bad.
My wife and I both have university degrees, we have good and secure jobs, and our net household income is above average. But we have generally accepted the fact that it is impossible for us to fully own a house before we are dead here, even with the national or state-wide support programs for families (we would not get much, if any, support because our income is too large). Our parents don't quite get this. When my parents were our age in the early 90ies, my mother was a homekeeper and my father worked as a carpenter at a small company with a completely average salary. Yet it was no problem for them to build a fairly large house in a very nice neighorbood, without any financial support from their families. I remember we didn't go on vacation for 2 years in the late 90ies "because we now have to pay off the mortgage", but that was it. Their house is today worth so much (> 1,000,000) that it would be impossible for us to find a bank willing to lend us the money to buy it.
We currently rent a 4 room apartment, but lived in a 2-room apartment with our daughter for 2 years before because we couldn't find an apartment in a 30 km radius around our home town. The problem was not money - there was simply nothing available. For our current apartment, we were one of around 500 families that were initially interested, and one of 50 families who made it through the various hoops and obstacles created by the estate agent to get that number down to something managable. This is completely standard here. We only got the apartment because we were lucky.
At the same time, we are now starting a legal battle with our local district for a kindergarten place for our 3 year old daughter, which she is very clearly entitled to by law and for which we applied years ago. But their are no free places anywhere, and nobody in our local town seems to care anymore. Our local mayor basically said "well, sue the district". The people in charge at our town hall also regularly quit. The previous person, who has now also left, told us she cannot bear parents in tears anymore who scream and yell at her because they have to both work full-time to pay of massive mortgages, and don't know what to do with their children. Again, this is something our parents cannot even remotely understand, because the situation was completely different 30 years ago, when it was absolutely standard for a child to enter kindergarten when it was 3 years old. You just went to the town, asked for a place, and one was assigned to you.
The situation for families here has become so bad that we are seriously considering leaving the country.
>Where I live (southern Germany), you cannot find a house under 600,000 EUR. The average net household income in Germany is around 43,000 EUR. That means that house prices here are over 16 times the average household income. Yupp, it's bad.
1.65 % for a 5 year fixed mortgage at sparda bank. While inflation is at 7.4% in germany...
Each year you don't pay any interest, you are paid 5.75% to have debt. They(mainly retirees) are giving you roughly $34,500 each year to buy a house. Mind you, they(mainly retirees) want to sell their homes. Hence the beneficial arrangement for you.
Even when inflation gets under control and they get back to ~2%. You'll still be earning some small stipend.
If you don't buy a house, your rent is literally equity that you lost. That's coming out of your retirement fund.
Moreover, that $600,000 isn't going to be paid in 5 years. You'll amortize it for ~25 years. In 15 years the remaining mortgage will feel like it's nothing. Your salary will be $100,000 or more and the remaining mortgage will be nothing.
In high inflation, low interest rate environments. Buying a house is a no brainer with only 1 exception. Are you betting the housing market will crash? That you'll be able to buy homes for much cheaper and possibly cheaper rates? That's the only bet you're playing right now.
Well… 100 km around Munich €600k brings one 3-4 room apartment with the size of ~100 square meters. No house under 1 million EUR and it gets more and more worse every year.
With rather average salaries and lots of borrowed money in the family we managed to get a mortgage from the bank for a super old house. Then a super surprise came in - there was no handyman or a company who wanted to work for less than 1000€ a day. Every free minute goes into renovation, even very promising side project was put on hold. I already mastered plastering. Thinking about getting electrician’s license, then I will make more than McKinsey consultants.
It's pretty much the same for anything around the city of hamburg in the north and most of the time it's less about the houses and more about the land they sit on.
Building got more expensive but land even more so. 1.000 EUR/m² of land for adjacent cities are becoming the norm.
Most of my friends graduated from university with either a bachelor or a masters degree and only those who stand to inherit a sizable sum of money or their parents home are going to have houses. A 50k salary simply won't cut it. Most have given up on the dream entirely since 30+ years of debt is not something they can justify.
As a quick back of the envelop calculation:
Let's say you had a household income of 86k for two people (43k+43k) which translates to about 4550 EUR per month after taxes, health insurance and pension fund. Their cost of living on average (not including rent) in the hamburg area would be somewhere around the 1900 EUR mark, leaving about 2650 EUR per month. Since people need to save at least a little money, or go on vacation once in a while or repair their car or maybe they have kids it's probably generous to assume they could use 2000 EUR per month to pay off a house.
Let's say you'd get a house for 600k all inclusive and you had to take on 500k of debt. With a current interest of about 2.76% fixed for 20 years and paying off 2000 EUR per month, then after 20 years you'd still be at about 224k of debt and you'd have paid 203k in interest. Assuming the same interest thereafter it would take a total of 30 years and 10 months to pay the house off entirely. During that time larger repairs or renovations are likely needed which would most likely forbid to pay off more than 2000 EUR per month.
Now one could argue that people could find places for half as much in rural areas but then again, lots of professions won't find any jobs there and those that do often get paid way less. Somehow the situation saddens me. My parents bought a semi-detached house 20 years ago for 200k (which would be 264k today adjusting for inflation). Two identical semis in the same street got sold last year, each for more than 500k, so pretty much double the inflation adjusted prices albeit being 20 years older houses now.
I don't disagree that the housing market in german cities is overheated, but isn't it pretty standard to take 30+ year mortgages? Keep in mind that 20+ years into paying this back your monthly payment will not increase to 2042 levels but remain in current 2022 levels.
When I talked to my parents they told me most of their peers would pay off their mortgage within 20 years but maybe times changed, I don't know the data on that. I am 30 now and I have trouble imagining being in debt for a time equivalent to my entire lifetime so far - just to live in a house. 15 years sounds so much more bearable emotionally but it's probably never gonna happen.
You are obviously right about 2042 payment levels probably being different but that also hinges on inflation being positive - but I would agree that that's more probable than deflation.
> I am 30 now and I have trouble imagining being in debt for a time equivalent to my entire lifetime so far - just to live in a house.
I can empathise. 10 years ago, I had friends in their early 20s "buying a house" (signing up to a debt of $1.2m+ dollars over 30-35 years for a $700k house), and could not see the value propositon for the emotional turmoil.
Looking back years later, they don't seem so stressed by it, but it's definitely affected their ability to make decisions around their job, relationships, social life, etc. But they've all made pretty strong profits (on paper, assuming they ever sell).
I bought a house for cash instead. The trade off of living further away is much better to me than feeling enslaved and not in control for decades.
Buy some land if you want - a small package in a small town 30 minutes past all the developments. You'll probably find once you've paid off the mortage in 5-10ish years, the area has built up and you're in a non rural position with a good block.
Yeah but you’ve had to live out in the boonies for 5-10 years in the meanwhile. It can be fine in some situations but not in others. My kids are going to school now & I want them to get into good schools now, not in 10 years.
I think you think that because buying (rather than renting) is not traditionally that common in German/Austrian cities. In other countries it's perfectly expected that you take a mortgage for 30+ years if you buy a house, it's the same* as paying rent for 30 years except you get to own the house at the end
* i know it's not exactly the same, e.g. you need a downpayment and you have to pay for maintaining the house but it's not like you wouldn't have had to pay rent the same 30+ years had you rented instead of bought.
I'd say same in Italy, even in small cities of 100k residents you cannot find a barely basic and nice home for less than 400k, which is over 10x the average household income.
My wife and I both have university degrees, we have good and secure jobs, and our net household income is above average. But we have generally accepted the fact that it is impossible for us to fully own a house before we are dead here, even with the national or state-wide support programs for families (we would not get much, if any, support because our income is too large). Our parents don't quite get this. When my parents were our age in the early 90ies, my mother was a homekeeper and my father worked as a carpenter at a small company with a completely average salary. Yet it was no problem for them to build a fairly large house in a very nice neighorbood, without any financial support from their families. I remember we didn't go on vacation for 2 years in the late 90ies "because we now have to pay off the mortgage", but that was it. Their house is today worth so much (> 1,000,000) that it would be impossible for us to find a bank willing to lend us the money to buy it.
We currently rent a 4 room apartment, but lived in a 2-room apartment with our daughter for 2 years before because we couldn't find an apartment in a 30 km radius around our home town. The problem was not money - there was simply nothing available. For our current apartment, we were one of around 500 families that were initially interested, and one of 50 families who made it through the various hoops and obstacles created by the estate agent to get that number down to something managable. This is completely standard here. We only got the apartment because we were lucky.
At the same time, we are now starting a legal battle with our local district for a kindergarten place for our 3 year old daughter, which she is very clearly entitled to by law and for which we applied years ago. But their are no free places anywhere, and nobody in our local town seems to care anymore. Our local mayor basically said "well, sue the district". The people in charge at our town hall also regularly quit. The previous person, who has now also left, told us she cannot bear parents in tears anymore who scream and yell at her because they have to both work full-time to pay of massive mortgages, and don't know what to do with their children. Again, this is something our parents cannot even remotely understand, because the situation was completely different 30 years ago, when it was absolutely standard for a child to enter kindergarten when it was 3 years old. You just went to the town, asked for a place, and one was assigned to you.
The situation for families here has become so bad that we are seriously considering leaving the country.