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Why's that? Saving 18k for 5 years would yield you 90k€, which would be an appropriate 20% down payment on the 450k€ house.
by dkyc 5y ago
Why's that? Saving 18k for 5 years would yield you 90k€, which would be an appropriate 20% down payment on the 450k€ house.
- ChuckNorris89 5y agoIn 5 years, that house might cost a bit more than 450k.
- adrianN 5y agoOr it might cost a bit less.
- wink 5y agoPrices have beeen going up steadily for the last 10-15 years. Maybe there was a single dip in 2008-2010.
- adrianN 5y agoPast performance of an asset is no guarantee for future performance.
- ChuckNorris89 5y agoI don't care about past performance, I'm only looking at the future and unless there will be a future building boom in the cities to increase supply(spoiler alert, it won't because a million reasons) and unless there will be a sharp drop in internal and external immigration to the cities with jobs, prices will keep rising.
- snidane 5y agoHave you exhausted all options for why prices will only increase? I can see a scenario in which inflation rises and increased mortgage rates deflate the current overvalued housing market.
- imtringued 5y agoIt's already rising in the US, if the central bank figures out how to meet the 2% goal year over year it will raise the interest rates in a few years. Probably not before 2024 though.
- marcosdumay 5y agoEspecially when the populational trends imply that demand for housing will go down on the distant future. Future performance is almost guaranteed to decouple from past performance at some point.
- wink 5y agoYour points are technically correct, the best kind of correct. I'm not looking at any undetermined future point in time, if I'm ranting about housing prices it might be not unrealistic that I'd like to buy one in the next few years - and I've seen absolutely zero indication that the prices would suddenly drop by 20-40% to the point where I'd call them reasonable, like 15 years ago.
- netrus 5y agoThis chart should be far more prominent than it is in most discussions about housing in Germany: https://www.interhyp.de/ratgeber/was-muss-ich-wissen/zinsen/zins-charts.html https://www.interhyp.de/ratgeber/was-muss-ich-wissen/zinsen/... The incredible increase in house prices tracks a dramatic decline in interest rates. Interest rates were at 1% last year, below inflation! I have no idea how interest rates will change in the next few years, but I do know they will not decline at the same rate as over the past 10 years. As soon as they go up, the prices will decline.
- marcosdumay 5y agoHuh? Things will be different on the far future. The exact point when it will change is a matter of speculation, and all the warnings about timing the market apply. You implied a high certainty that nothing will change, ever, and talked about 15 years things. There is a high likelihood that nothing will change in 5 years (even though COVID19 reduces those odds a lot, because a bunch of people just died). And there is very high likelihood that things will change a lot in 40 years. Time things at your own risk.
- fnord77 5y agonot everywhere. and there's some evidence that big corps are buying up houses and becoming mega-rentiers. always a chance these companies could collapse and then the market would be flooded with houses as they liquidate.
- imtringued 5y agoWell, assuming everything goes according to plan we are reaching the peak and housing will have to go down again. I don't know when this will happen, it could happen within 5 years, it could happen no earlier than 10 years.
- sdevonoes 5y agoLet's do some simple (and probably wrong, but hey) maths: - House price: 450K euro - In Europe you usually need around 30% of the house in cash (20% for down payment and 10% for paperwork and the like). This means you need 135K euro saved. Saving 18K euro/year => you need to save money for 7 years - Now you get a mortage for the 70% of the 450K euro (315K euro). Now depending on how much you want to pay every month, we get different outcomes. Let's say you are willing to pay 1500 euro/month of mortage: this means (roughly) you will be paying your house for around 17 years - This all implies you will be earning 60K euro (or more) per year over the next 24 years of your life. Let's say you are at this moment 25 years old, so you'll get your house paid when you are 50. This is the panorama for people who are supposed to be the top 10% tier in the society (in terms of gross income) in a country like Germany (but applies to any other western European country as well). Not bad, but not good either.
- erinnh 5y agoThats wrong. At least right now. 10% down payment is quite common currently in Germany for a house.
- deleted 5y ago[deleted]
- maaaaattttt 5y agoWell the money still needs to be paid at some point. If you go the 10% deposit route, you will get slightly worse interest rates and overall higher monthly payments. Payments that you need to maintain for ~20 years…
- erinnh 5y agoThe 10% is what is currently often done because it barely moves the interest rates. The interest rates are just so low that waiting to get a loan and buy a house is mostly money lost by not getting that stupidly low interest loan.
- jsdwarf 5y ago
- tdumitrescu 5y agoWhen I bought a 250K€ apartment in the Netherlands, my total cash outlay (down payment plus costs) was around 40K€. Anecdotal point supporting those pointing out that owning a 450K€ home in Europe is indeed still within reach for someone saving a modest amount each year.