German Housing Market in 2021 - Where is it going?

126 posts in this topic

8 hours ago, dmbartender said:

 Even so, I have been waiting 10 years for the bubble to burst, and it never has. I have given up waiting, as now the prices are twice what we could realistically afford, and I do not see them ever coming down. If they did, it would be coupled with higher interest, making the mortgage payments out of reach anyway. But, we shall see...

 

I arrived in 2012 and also thought at the time - the prices are too high, it has to burst, and then I'll buy. But by the end of 2018 I realized it would not happen. So I took the leap and bought a fixer-upper corner rowhouse in a good (for my town - most popular neighborhood) location for 290k! I would have preferred a detached single home, but the prices are insane for those. If you're brave it can be done.  Had to plop another 50k for renovations (a mix of contractors and doing some of it myself, like floors and walls). Luckily I got 24k in Baukindergeld and that covers the roof renovation after 20% KfW subsidy (insulation and new tiles) so it's a wash on that one. Still stuff do in the future, but I like to space out things and not have an empty bank account or too much debt.

 

I know people deep in it - 650k, 700k for new builds.. that's insane in my book. That's one thing you didn't cover in your video - the builders offering turn-key houses for like 300k, but that's without a basement, garage, car port, floors, walls painted, etc etc.. so by the time you're done, the price is jacked up to 600k+ ! A bit of a bait and switch.

  

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21 hours ago, dmbartender said:

I am surprised to hear that Würzburg hasn't risen in appreciation as much.

There are plenty of houses on offer below €500k within 30 km from Würzburg. And Würzburg has low unemployment and is a nice place to live (only downside for bicyclists are the hills surrounding it). Your monthly costs now are a lot lower than than they were in the 90ies.

https://www.immobilienscout24.de/Suche/radius/haus-kaufen?centerofsearchaddress=W%C3%BCrzburg;97070;;;;&numberofrooms=3.5-&price=-500000.0&livingspace=85.0-&exclusioncriteria=projectlisting,unbuilthome&geocoordinates=49.79423;9.93205;30.0&enteredFrom=result_list

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I was lucky in a way that I had lived in Ireland in the 2000s - a classic housing bubble. When I moved here in 2011, I still had savings as I'd been priced out of the market in Ireland and was able to put a deposit on a Reihenhaus. Only regret is I didn't push myself financially a bit more but hindsight is a wonderful thing.

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20 hours ago, mtbiking said:


I don’t think so, because Germany is not Japan. Munich is an awesome place to live in comparison to almost everywhere else in the world, statistically speaking, and even within Europe. This will only be more so in the future as coastal cities begin to suffer with the consequences of global warming and the world population increases anyway. People will want to move in and the German industrial hub if no one else will pressure the politicians to let them in.

 

Although I agree that people will want to move here, I'm not convinced that there are enough German employers willing to offer salaries high enough for a substantial number of their employees to afford houses. I think they'll be a surplus of houses that newcomers can't afford and not enough cheap apartments for the low skilled workers. 

 

Furthermore, I think the pandemic has highlighted which jobs can be effectively performed remotely and suspect many of these positions will be moved to lower cost locations. 

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18 minutes ago, engelchen said:

 

Although I agree that people will want to move here, I'm not convinced that there are enough German employers willing to offer salaries high enough for a substantial number of their employees to afford houses. I think they'll be a surplus of houses that newcomers can't afford and not enough cheap apartments for the low skilled workers. 

 

Furthermore, I think the pandemic has highlighted which jobs can be effectively performed remotely and suspect many of these positions will be moved to lower cost locations. 

 

Without knowing the future, I can tell you this: the highest earners (and higher than me..) that applied to live at my rental earlier this year were all foreigners, not German, and most newly arrived. Many from the EU but also at least a Russian couple, one Bielorussian, one Indian and one from Central America. Practically all working for the IT industry cluster in Munich - this was a huge change in comparison to 5 years ago, when I had only one applicant from Microsoft and another from Amazon, both German. I also don't think home office will determine the future of work, but that's a highly debatable thing.

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Another point is that the EV revolution will definitely change the house market. Many of these small towns living off a local factory of automotive components will lose people, who will go for larger cities to find job. On the other hand, overall jobs in automotive will drop significantly, therefore less jobs in major cities, like Munich.

MAN and BMW can go bust within 7 years. Definitely not all will survive and BMW is in worst position in Germany.

Doesn't mean all will close. BMW will just be bought up or merged with a chinese company. Or a German merge, perhaps with Mercedes. So some jobs and factories will be left (the EV factories).

 

And yet another issue: Covid was a huge wake up call for remote work and overall near-shore for IT. Portugal IT is booming incredibly, as an example. Why should German companies keep high paid employees, while they can do it cheaper AND BETTER and with less risks, with near-shore.

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When are we going to see the estate agent and notary cartels broken?  Fixed percentages to price for doing the same work seems almost illegal.

Makes absolutely no difference in work whether it's a 400.000 or 750.000 apartment, yet the costs are fixed to the price. Prices have skyrocketed and so have the size of hte notary and agent pockets.

 

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5 hours ago, mtbiking said:

BMW is sacrificing the peons to save the king (Munich).

Most likely outcome is they get in trouble by 2025-2027, are acquired by another company and, as you said, they will demand to keep jobs in Munich, while letting everything else burn.

It's sad, but at the same time it will wipe out that arrogant smile from BMW management. I know a few and most (but not all) are major arrogant assholes.

Some still in denial, others afraid.

Even if jobs numbers are kept, they know their expertise in mechanical engineer will become worthless.

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6 hours ago, MikeMelga said:

Another point is that the EV revolution will definitely change the house market. Many of these small towns living off a local factory of automotive components will lose people, who will go for larger cities to find job. On the other hand, overall jobs in automotive will drop significantly, therefore less jobs in major cities, like Munich.

MAN and BMW can go bust within 7 years. Definitely not all will survive and BMW is in worst position in Germany.

Doesn't mean all will close. BMW will just be bought up or merged with a chinese company. Or a German merge, perhaps with Mercedes. So some jobs and factories will be left (the EV factories).

 

And yet another issue: Covid was a huge wake up call for remote work and overall near-shore for IT. Portugal IT is booming incredibly, as an example. Why should German companies keep high paid employees, while they can do it cheaper AND BETTER and with less risks, with near-shore.

You go back 40 years and the British Gov't of the time run by BoJo's pinup effectively destroyed heavy industry in the UK. The motor industry was different, BL as it was was destroyed by the Unions but Ford UK and Vauxhall were foreign owned. The ship building industry, the steelworks and the coalmines were all starved of cash and investment and deliberately left to rot. All these areas of the country have not seen a mass migration of people to other towns and cities because the community spirit was too strong and so many stayed. In the place of the big factories came lots of smaller manufacturing units, industry had diversified. So while it will be an initial hit in Munich, it may not be so damaging in the long run. As an afterthought what has happened along the Ruhr after the loss of so many mines and steelmills?

 

Now as for mergers within the car industry Sergio Marchionne, the late head of FCA predicted in 30 years or so there will only be 5 motor manufacturers left. We've seen the start of that with the merger of FCA and PSA to form Stellantis

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On 29/11/2021, 00:51:15, wien4ever said:

 

I arrived in 2012 and also thought at the time - the prices are too high, it has to burst, and then I'll buy. But by the end of 2018 I realized it would not happen. So I took the leap and bought a fixer-upper corner rowhouse in a good (for my town - most popular neighborhood) location for 290k! I would have preferred a detached single home, but the prices are insane for those. If you're brave it can be done.  Had to plop another 50k for renovations (a mix of contractors and doing some of it myself, like floors and walls). Luckily I got 24k in Baukindergeld and that covers the roof renovation after 20% KfW subsidy (insulation and new tiles) so it's a wash on that one. Still stuff do in the future, but I like to space out things and not have an empty bank account or too much debt.

 

I know people deep in it - 650k, 700k for new builds.. that's insane in my book. That's one thing you didn't cover in your video - the builders offering turn-key houses for like 300k, but that's without a basement, garage, car port, floors, walls painted, etc etc.. so by the time you're done, the price is jacked up to 600k+ ! A bit of a bait and switch.

  

On 29/11/2021, 00:51:15, wien4ever said:

 

On 28/11/2021, 10:07:54, French bean said:

 

On 28/11/2021, 14:12:18, jeba said:

If you can't afford it now at current interest rates you would have been even less able to afford it 25 years ago when interest rates for 30 fixed mortgages were about 7%.

 

@wien4ever: I am glad it worked out for you. We have looked at a few RMH. The last one was a POS in our village with a starting bid of 525k, which needed a full renovation and was also very small. I would have placed the value closer to 300k. I think it ended up going for around 600k. Add the renovation, and you are talking about 700-800k. That is just too much for the piece of crap it was. Might I ask where you found your REH?

 

About the bait and switch...it's more like they don't include the cost of the building lot in their quotes, which runs another 300-500k. 

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15 hours ago, mtbiking said:

 

Without knowing the future, I can tell you this: the highest earners (and higher than me..) that applied to live at my rental earlier this year were all foreigners, not German, and most newly arrived. Many from the EU but also at least a Russian couple, one Bielorussian, one Indian and one from Central America. Practically all working for the IT industry cluster in Munich - this was a huge change in comparison to 5 years ago, when I had only one applicant from Microsoft and another from Amazon, both German. I also don't think home office will determine the future of work, but that's a highly debatable thing.

I don't think so either. I've worked remotely and worked in an office with people working remotely. It just doesn't work as well as sitting next to those people. It kind of works, but not as well. And introduce the slightest bit of "tech problems" into a meeting and it rapidly becomes extremely frustrating. I think a lot of people like the office banter as well and simply wouldn't want to work from home all the time. It's not for everyone.

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5 hours ago, murphaph said:

I don't think so either. I've worked remotely and worked in an office with people working remotely. It just doesn't work as well as sitting next to those people. It kind of works, but not as well. And introduce the slightest bit of "tech problems" into a meeting and it rapidly becomes extremely frustrating. I think a lot of people like the office banter as well and simply wouldn't want to work from home all the time. It's not for everyone.

 

Agreed.  Plus not all jobs can simply be moved to cheaper countries.  Depending on the line of business you might need communications to be extremely good, decent synergy in the team and to understand the local market or culture.

 

If it was as simple as that we wouldn't failed at outsourcing positions to India, Ukraine, Romania, Czech, etc.

 

Things in the technical side might improve in the future, like better implementation of e-whiteboards which is a big piece of the puzzle still missing.  But there is nothing that can replace fast face to face communications, been able to work in the same physical device at the same time, physically looking at the problem, etc.  

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Physically looking at the problem is a major thing. As soon as a kit of hardware is on the table it doesn’t matter anymore if most of your job consists of programming, you still need to interact with it and other experts personally. A lot of the easy to outsource jobs (call centers are an egregious example) have been outsourced a long time ago anyway.

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Arrgh, my german sister in law and her husband are fully serious in wanting to buy a specific house with their savings and a loan of over €700,000 which will leave them with €1700/month to live on after the house payments and fixed house costs, for a couple with a baby.  And that’s already counting with some parental aid from his side.
 

Isn’t that the very definition of house poor and an overall terrible idea?? I tried (very gently) to communicate that but to no avail. My wife tells me that my <monetary> expectations are too high, pff.

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11 minutes ago, mtbiking said:

Arrgh, my sister in law and her husband are fully serious in wanting to buy a specific house with their savings and a loan of over €700,000 which will leave them with €1700/month to live on after the house payments and fixed costs, for a couple with a baby. And that’s already counting with some parental aid from his side.
 

Isn’t that the definition of house poor?? I tried (very gently) to communicate that but to no avail. 

 

I think so. It's like someone winning £2m on the lottery and splashing it all out on buying the big house and cars.

 

With no thought to the ongoing yearly house maintenance costs or car service costs.

 

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11 minutes ago, mtbiking said:

I tried (very gently) to communicate that but to no avail. My wife tells me that my <monetary> expectations are probably too high, pff.

I remember seeing some US online calculators to help you decide between renting and buying, with details per state/county. I guess there is something similar for Germany?

 

It's always tricky what to choose. For example if I owned my current rented house, I would invest in a warm winter garden (20sqm), but as I am renting, it makes no sense. So it's not always about costs, it's also about owning something and wanting to do whatever you want. Still, I'm not buying in Munich.

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1 minute ago, Chelski said:

 

I think so. It's like someone winning £2m on the lottery and splashing it all out on buying the big house and cars.

 

With no thought to the ongoing yearly house maintenance costs or car service costs.

 


yep! The house is from 1982 and has never been substantially renovated. I started listing everything that can go wrong and my wife laughed it off as my pessimistic mindset. She’s usually a lot more careful but she wanted to support her sister. Pff, not my life.

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7 minutes ago, MikeMelga said:

I remember seeing some US online calculators to help you decide between renting and buying, with details per state/county. I guess there is something similar for Germany?

 

It's always tricky what to choose. For example if I owned my current rented house, I would invest in a warm winter garden (20sqm), but as I am renting, it makes no sense. So it's not always about costs, it's also about owning something and wanting to do whatever you want. Still, I'm not buying in Munich.


Yes there is, but the math is the same in Germany or Portugal and If you’re spending 60% of your income to live in a big house with garden I’d say you’re an idiot in both countries.
 

I’m just ranting, really. Outcome of a family lunch.

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You've also got a new Government coming that could reduce things like tax relief for married couples. 

 

I know a couple who bought a house and are seriously financially stretched now. They seem to rely on their parents quite a bit for financial support for unexpected expenses.

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