Question regarding the feasibility of financing

Hello Alex,

greetings from Upper Bavaria
With QM prices >1000, REH from 750K to 850K, semi-detached houses from 800K to 1 million, I can more than understand your questions and your pain.

"Who is supposed to pay for this? Or rather, who pays for it?"
"If 5-6K net is not enough, who can still afford that?"
I also ask myself these questions from time to time.

Your second question implies the assumption that one or two (very) good incomes are enough to build a home.
In some regions, especially here in Bavaria, the harsh answer is: No, that is not enough.
One could sociologically or politically discuss whether something fundamentally is wrong here, but that is another matter.

So who buys?
For plots of land -> property developers, project developers
For houses -> heirs, parents for their son/daughter or other people with high equity
Who builds (see buyers) or when a plot is already in family hands.
Demand clearly exceeds supply.
However, lately my impression is that not every price is paid anymore.

About the 1500 as a rate.
To determine your own potential rate, there are various rules of thumb.
For example, max 25-30% of net income for debt service, max 30-35% for debt service + additional costs.
In my view, this fits quite well for incomes in the range of 3000 - 4500 net.
The higher the net income, the more in my opinion this rule can be waived.
Exaggerating: with 10k net, of course, a rate of e.g. 6k or higher can be chosen.

Another approach would be to calculate with the banks' flat rates.
What else must be available besides the rate: for 1 person 1k, for an additional person +500, for a child +250, etc.

Why do you mostly see financing around 400 to 500k here in the forum? (-> median)
With 400k you don't get far in Upper Bavaria.

What alternatives are there: -> ETW, rent, etc.

Best regards
ghost

Do you know what I mean? And discussions often arise with the parents. And they still come from a generation where you bought a house with €50,000 gross per year, paid it off during your working life, and the mother was still a housewife. That would be unthinkable today even in small towns, unless you take an extreme risk of losing everything.

Just briefly on this aspect. My parents and the vast majority of their friends, acquaintances, and neighbors actually financed a house at the end of the 80s with significantly less income (adjusted for inflation) than what is considered normal or reasonable here in the forum. They also had to bear interest rates in the today unimaginable range of around 8% (repayment? What?).

However, they were willing to sacrifice a lot for it. No long-distance travel, only an old car, little consumption, little security in case of loss of income. That was the price, and they were willing to pay it.

In my estimation, the calculations here are always aimed at not having to restrict oneself because of the house. A completely understandable attitude – but it leads to the impression you questioned, that nowadays almost nobody can afford a house anymore.

Priorities.

What alternatives are there: -> ETW, rent, etc.

These are not real alternatives if you pay at least €1,500 cold rent for a 100sqm apartment in big cities or the semi-detached house is offered for €2,500. Comparable properties are mostly cheaper with financing than renting. Both are too expensive for the average in metropolises.

Just briefly on this aspect. My parents and the majority of their friends, acquaintances, and neighbors actually financed a house at the end of the 80s with significantly less income (adjusted for inflation) than what is considered normal or reasonable here in the forum. They also had to bear interest rates in today's unimaginable range around 8% (repayment? What?).

However, they were willing to sacrifice a lot for that. No long-distance trips, only an old car, little consumption, little security in case of loss of income. That was the price, and they were willing to pay it.

In my assessment, the calculations here are always aimed at not having to restrict oneself because of the house. A completely understandable attitude – but which leads to the impression you questioned, that nowadays almost no one can afford a house anymore.

Priorities.

Thanks for that. Good contribution!

And what many forget: If someone has already inherited a plot of land in this area or something similar, they can sell the property for sum x and their equity suddenly has a mid six-figure amount. The plots back then were not 250-500 sqm, but rather towards 1000 sqm and up. Nowadays the plot is halved and the typical single-family house is already paid off.
I have two good friends myself who have a construction volume of just under seven figures without the land. Estimated household income for their jobs is barely about 5k each, special payments already included.
However, the plots had been in the family’s possession for 50 years and went for a few marks back then. So shared or sold and the loan is only at 400k, if at all.

I have colleagues who are about to retire and were offered plots for 50 cents/sqm in 19**. With a crystal ball, they would have invested a half special payment and would be millionaires today. Who would have thought that prices would rise so sharply even outside the metropolitan areas?
In 50 years we might say maybe we should have invested 500€ per sqm.

Thanks for that. Good post!

And what many forget. If someone has already inherited a plot of land in this area or something like that, they can sell the piece for sum x and their equity suddenly has a mid-six-figure amount. The plots back then were not 250-500 sqm in size, but rather around 1000 or more. Today the plot is divided in half and the normal single-family house is already paid off.
I have two good friends myself who have a construction volume just under seven figures without land. Estimated household income from the jobs is barely about 5k each. Bonuses already taken into account.
But the plots had been in the family for 50 years and at the time went for a Mark fifty. So shared or sold and the loan is only 400k now, if that.

I have colleagues who are soon retiring and were offered plots for 50 cents/sqm in 19**. With the crystal ball, they would have invested half a bonus and would be millionaires today. Who would have thought that prices would rise so strongly even outside the metropolises?
In 50 years, we might say we should have invested 500€ per sqm.

Shoulda woulda coulda ...

We also paid "a little" more for land and house in Middle Franconia than the prices mentioned here. It really depends heavily on the region and local prices. In Bavaria, you are faced with completely different prices near the city than in Mecklenburg-Western Pomerania or Thuringia. It is important with affordable costs that you do not fool yourself or lie to yourself or sugarcoat things. That is probably why there are often rather negative responses here. In the end, something always gets omitted. I still occasionally read the financing threads here and often it turns out in the end that somewhere a small loan or something else is lowering the stated net income.