Finance and buy or continue renting in the Stuttgart area?

Hello everyone,

my first post: So first of all, hello to the group. My name is Marc and I have been reading here for about a year now and have already learned an incredible amount - so thanks for that in advance.

I want to briefly describe my situation and the thoughts I currently have. I come from the Stuttgart area and prices are correspondingly high, both for rent and for buying property.

I am now 34 years old, currently still living in my student shared flat with a friend of mine. Regardless of whether buying or renting, I will move in the near future, as the situation with home office has greatly increased my desire for something of my own in the last 1.5 years. I work in a very secure job, almost comparable to civil servant status. I want to stay in the surrounding area and my goal is to buy a property within the next 5 years (whether a semi-detached house, a detached house, or an apartment depends on the budget ;-)). I have a partner (30 years old) and we have pretty much the same goals - she also has a secure job.

Yesterday I had a viewing of a new-build apartment with a garden share (currently still under construction), which I really liked. Regarding the details: 4 rooms, 93 m², terrace + garden, ground floor. Purchase price approx. 465,000 plus ancillary costs (approx. 35k) + underground parking space (23.5k). The floor of the apartment must be laid by yourself (or ordered). I roughly estimate the total sum including kitchen and a few special requests at around 550,000 euros.

A comparable apartment in this location would presumably start somewhere between 1,200 and 1,500 euros cold rent. In the long run, the apartment might be too small for me with a family (at least if we had 2 children).

Basically, the question for me is: stay renting until everything is more stable and foreseeable or finance this apartment alone for now and possibly sell it again if it becomes too small over time. What really unsettles me here are the factors of rising interest rates and rising construction costs - however, I do not want to buy out of fear of "missing out." Therefore, I would like to discuss the topic with you and make a rational (if possible :) ) decision.

General information about you:

[*
Who are you? M (34), F (30)
[*]How old are you? M (34), F (30)
[*]Are there children? No
[*]Are children planned? Yes: 1-2
[*]What do you do professionally? (M) Team leader in project management, (F) clerk at OEM
[*]How many hours do you work? (M) approx. 45 hours per week; (F) 40h/w


Income and asset situation:


[*]What are your incomes (gross/net)? (M) currently approx. 105k gross/year, (F) approx. 90k; salary increases are realistic for both
[*]How much child benefit do you receive? 0
[*]Other transfer payments such as parental allowance, sickness benefit, etc...? 0
[*]How much equity do you have? (M) approx. 100k (rest invested in capital markets)
[*]How much equity do you want to put into the house project? approx. 80 - 100k



Housing costs:


[*]current cold rent --> I'll sum it up: currently I pay roughly 450 euros for housing (including all additional costs + internet + Sky + Netflix etc.).
[*]Mobile phone contract: 40 euros monthly


Mobility costs:


[*]Monthly ticket for bus and train (also for children!): (M) 70 euros monthly
[*]Car: I have a company car with 1% rule, currently a 50k vehicle -> changes every 6 months, smaller vehicle class not possible. Mostly vehicle between 45k and 50k


Insurance costs:


[*]Liability insurance (also for animals): 65 euros annually; otherwise no insurances (I might be a bit underinsured by German standards :) )


Living costs:


[*]I don’t keep a household budget but I do not have an extravagant lifestyle. It’s always a matter of perspective, but you can deduce living costs well from the savings in the next point. :)


Savings:


[*]Current savings:
[LIST]
[*]450 euros monthly ETF
[*]100 euros monthly bank savings plan (with 40 euros capital-forming benefits)
[*]Wohnriester 160 euros/month (what am I doing with that?!)
[*]1,300 euros/month savings rate on daily money account
[*]All bonuses, premiums, Christmas bonus, holiday pay I have so far also put into the daily money account: approx. 10k per year
[*]Total savings per year approx. 34k
[*]Otherwise, during Corona I had a surplus which I occasionally put aside or spend (I ride a racing bike... Anyone familiar with the hobby knows you can always spend money in this area. :rolleyes:)

Other expenses:

[*]No other expenses

Income and expense totals:

[*]Total income
[*]Total expenses
[*]Balance
[*]Of this, sum of cold rent and dispensable savings (e.g. savings rate for house): cold rent 260 euros, 1,300 euros savings rate + 10,000 euros annual special payments (approx. 800 euros monthly)

General information about the property:

[*]How large is the plot? Apartment
[*]What are the dimensions? 93 m²
[*]What is the floor value? no idea
[*]New build, old building (year built), house type? New build
[*]Garages? underground parking space
[*]How big is the house? (living area / usable area) 93 m² living area, 15 m² usable area
[*]What market value do the land and house have after completion? no idea. I explained costs above

Cost breakdown:

[*]Total costs approx. 550,000
[*]Deductible equity 80-100k
[*]Financing amount 450k - 470k

What would you advise me? The 450k loan is of course a big deal with my salary and quite high. But for me, it’s more about what would make the most sense in my situation right now. I also had an eye on an apartment for about 370k new build (70 sqm, 3 rooms with garden), but unfortunately it was already gone.

PS: If this gets too small for us, we would of course finance the house together. Current rough prices: 140 sqm new build approx. 700k plus ancillary costs.

Looking forward to a good discussion. If you have any questions, I will of course be happy to provide more information.

Best regards Marc

What would you advise me? The 450 thousand loan is of course a big deal and very high compared to my salary.

You have about €55k net per year – the loan is not very high in relation to the income, but moderate. You might just not be used to these numbers. That's only a payment of €1,500 with reasonable amortization (it can also be cheaper). The apartment will definitely not fail because of income – if you cannot manage with €3,000 for living expenses and additional costs for one person, you have a problem. On top of that, there is also the income of your partner, who can and will contribute to living expenses. Buying a house together for €700k? A) I don’t believe you will get much for that in the Stuttgart region, and B) it will be easy for you to pay. We rarely see such good creditworthiness here, and banks will welcome you with open arms. Spending even a million on a house (together) would be well manageable, as long as neither you nor she remains a sole earner in the long run. Whether an apartment makes sense now? Nobody can answer that for you. Personally, I think a property is a utility item like any other. If I want a condo, I buy it. If I need a house five years later (e.g., family growth or the apartment with neighbors is too "tight"), then I just buy a house. If I don’t make a profit from the sale, then so be it. But no one can ever take away the five happy years living in the apartment. But in my opinion, we are still very far from strongly falling real estate prices.

+- 4,700 € net, 2,000 € saving means 2,700 € consumption. With +- 600 € ongoing costs, maybe you should consider keeping a budget book?

You have about T€ 55 net per year – the loan is not very high in relation to income, but moderate. You might just not be used to these numbers. That is only a payment of €1,500 with reasonable repayment (can also be cheaper).
The apartment definitely does not fail because of income – if you cannot get by with €3,000 for living expenses and incidental costs for one person, you have a problem. In addition, there is also the income of the partner, who can and will contribute to living.

Buying a house together for T€ 700? A) I don’t think you’ll get much for that in the Stuttgart region, and B) it will be easy for you to pay. We rarely see such good credit ratings here, and banks will welcome you with open arms. Spending even a million on the house (together) would be manageable, as long as neither you nor she remain sole earners permanently.

Is an apartment sensible now? Nobody can answer that for you. Personally, I think a property is a consumer good like any other. If I want to have a condominium, then I buy it. If I need a house 5 years later (e.g., family growth or the apartment with neighbors is too “tight”), then I just buy a house. If I don’t make a profit on the sale, then that is just how it is. But no one can ever take away the 5 years of happy living in the apartment. But in my opinion we are still far from strongly falling property prices.

Hello nordanney,

thank you for your helpful post. My goal is not to make a profit with the apartment. If I break even, I would be very satisfied. But it is also clear: if I continue renting, I would not rent 93 sqm and the garden would be dispensable for me in the rental apartment. However, I would perceive it emotionally as a limitation (a garden would have been worth gold during Corona times :) ). So you actually hit the point: Is it worth it for me to accept possible losses due to falling/stagnant prices as a risk in exchange for 5–10 years of happy living (without perceived restrictions).

I also consider the monthly loan burden manageable, although it would be an adjustment for me not to see the €1,300 per month going into the daily allowance account – but yes, it’s a matter of mindset.

+- €4,700 net, €2,000 savings make €2,700 consumption.
With +- €600 ongoing costs, maybe you should think about a household budget book?

Hello Tamstar,

I think you did not quite read my post, but I have saved about 34k annually in the last 2 years: which means on average about €2,800 monthly. So I consume about €1,300 monthly on average (without rent) (but vacations are also included). Whether that is a lot or not, I do not want to judge.

Best regards
Marc

Where can I apply for the administrative clerk position 40h week at OEM for 90k per year?? :D

Did I understand that correctly: You earn around 200k gross per year together?

You don't have to worry at all with about 500k financing sum :)

whereas for me it would still be an adjustment not to see the 1300 euros monthly go into the overnight money account anymore

The savings rate can go to the "repayment account" = bank loan. The savings rate would then be identical to the bonus of the higher living value. I always calculate with the interest burden as a comparison to rent. So, €450,000 with 1.5% interest is €562.5 = similar to the cold rent. Additional costs for a condominium are, however, somewhat higher (administration, etc.). In that respect, you can take a look at what you can rent for that price in Stuttgart (I have a friend in Waiblingen – so I know the prices quite well).