Comment by jypepin | Hacker News Reader

Comment by jypepin | Hacker News Reader

Interesting to read this, it seems like there are already some rules that make renting a bit more difficult and less attractive.

I'd like to share a few points about what makes buying a house in Amsterdam (and the Netherlands in general) interesting:

- Amsterdam is growing and becoming the de fact European capital (english, tech jobs, etc) so it's growing a lot, and real estate prices are up - Interest rates are very low (~2% on 30years fixed, if interests go down we can refinance after 5 years). So no risk of going up, and no risk of missing out when going down. - 0 cash down necessary - low cost of buying. We bought a "first time buyer package" for ~3000 euros which included real estate agent, notary, building inspection and financial evaluation. Only other expense we had was 500 euro fee for our mortgage. - Practically no real estate tax (0.03789% of the official listed value) - Prices are ~200-300k for a nice 1bedroom, 300-500 for nice 2 bedrooms. Prices seem reasonable compared to salaries.

So, in most cases, going from renting to buying a similar property is definitely worth it. You'll pay about the same monthly (all included).

To note, the buying market is pretty competitive (similar to SF) where people often over-big 10-20% on the asking price. I've gone to multiple open house, and helped ~5 other friends buy a place, and most buyers you see are young professionals / young families, and doesn't look like the market is saturated by landlords / investors.

Now, we looked into moving and renting our place in case we decide not to sell it: - Can't rent on our mortgage - We need to take a commercial mortgage, ~doubling the interest rate to 5%. This increase makes the monthly cost above what we would rent the place for

Those 2 last points to me make it clear that it's already pretty hard to just exploit the cheapness of buying/investing in properties and renting them (I looked myself to buy more properties and rent).

So this rule surprises me a little because the current housing market is already pretty regulated against renting and very supportive to buying. We definitely see much more owners, and much younger, than what we've seen on average in other cities we've lives (SF, NYC, Paris, Montreal).

I guess you are in a high-income bubble. The average per-citizen income in Amsterdam is € 28,700. That gives you a max mortgage of 130k. I was able to find a 29 square meter studio for that amount, just outside the A10 ring.

So, an average income in Amsterdam gives you access to one single property currently on the market of 29 square meter.

I am indeed very high income compared to the average (dual income working for a US company) but I believe what you say here is true for most markets? If 2 average income citizen want to buy a house, that gives them access to 260k mortgage, which offer access to property.

But yes, Amsterdam indeed is an expensive market. The different with a lot of other places is that outside of the city is still very affordable and liveable (lots of public transport, safe, etc). Unlike most big cities.

So, in most cases, going from renting to buying a similar property is definitely worth it. You'll pay about the same monthly (all included).

As someone who owns in SF, this is definitely not the case here.

For a $1.5M home in SF, the total monthly outlay includes mortgage ($5,557 @ 3.75% with 20% down), property taxes ($1,454), property insurance ($2,250) for a grand total of $9,262 per month. You could rent the same house for $6,000 per month. And that doesn't even include expected maintenance ($625 per month) and opportunity cost of your $300,000 down payment ($1,250 @ 5%). So grand total, you're spending over $11,000 per month or $5,000 more than the cost of renting.

The reason for this is appreciation. If you're house goes up in value by 5% per year, that $75,000 that more than covers the extra $60,000 you're paying over renting. Question is - will it keep going up that much?

Edit: updated with actual numbers.

yeah I know. We are planning to come back to the bay area in the next few years, and real estate is definitely the #1 issue we have. More expensive to buy, much more expensive to maintain (taxes, etc)

Then why does anyone who owns property in SF rent it out rather than selling it?

Probably because a lot of those people bought the same house for $600,000 10 years ago. Their monthly cost is likely less than rent.

I know someone who bought a house 5 years ago and rented it out. She had to cough up $1,000 per month to pay all expenses. Rent has now caught up so she's breaking even.

In the rest of the US where housing prices aren’t as inflated, it can actually be cheaper to own.

It might possible that most of the people in SF who own property have owned it for a long time. So for someone buying a house now, they would be paying a ton of money. If you bought the house more than 10 years ago, when prices were much lower, your mortgage would be much more reasonable and the monthly costs you would be paying would be less than what people are renting for currently.

Hence complaints of NIMBYism. The lack of new development in SF drives housing and therefore rental prices upwards, and so if you owned property before the bubble, you can now charge rent at the modern, high rental costs while paying a mortgage based on the lower pre-housing crisis prices. You could easily be pulling in thousands of dollars a month this way with a single rental property. So lots of people are now have a big incentive to fight against new development.

It's often slightly cheaper to own than to rent in the Netherlands.

Your insurance numbers sound more like yearly numbers than monthly... Or are you really paying $25k per year for insurance?

I'm happy for you to have embarked on the journey of owning your home, but 0% downpayments and what sounds like an increasingly heating up market (people overbidding the asking price) should be a sign to be careful. Make sure to keep the 15-20% cash that is usual for downpayments in a liquid form in case there is a downturn. The people worst hit by real estate crises are those who take advantage of these "easy" ownership offers and then neglect to keep a cash buffer in case their mortgage goes into negative equity.

It’s typical for the Dutch market to overbid (as well as ridiculously.) it is the land of the Tulip Craze after all ;)

Negative equity is only relevant when one needs to sell the property.

Like when the economy crashes and you lose your job.

It’s amazing to me that only 11 years ago the world say one of the worst housing crashes in a century, yet people think “it’s different this time” and keep pouring money into an already overheated asset.

It’s going to be interesting!

I agree with you but it depends on the market I guess. Europe doesn't have a housing/mortgage that is as volatile and "extreme capitalist" as the US. Much more regulations around banking here.

Maybe you mean not any more? If I remember correctly, Ireland housing got absolutely hammered in a way that was at least as bad as the worst areas of the US (Miami, Las Vegas) back in 2008.

That's untrue and bad advice. The reality is that it depends (from country and bank), but often banks will have a margin call clause in the contract. In my experience they almost always have such a clause to cover their own ass. They'll not use it for relatively self contained cases, but when the shit hits the fan and there's a 2008 style downturn, they will, because they want to protect their balance sheets.

This clause will then hit you at the worst possible time, when the economic situation is just bad everywhere and you'll be expected to prop up your mortgage, only you can't if you have no cash and nobody will lend you because you are in negative equity.

not in europe afaik

If banks in your country do not have the ability to make margin calls while simultaneously making 0% down loans, you should probably think twice about putting your money there, because the moment they go belly up, your savings will be gone. Or, if your gov't guarantees savings, then expect massive inflation.

Or if you need/want to refinance.

0% downpayment has been normal in the Netherlands for decades.

Downturns in the Amsterdam housing market are incredibly rare. My wife and I bought my first (her second) house in 2008, and a month after we bought it, the news said that for the first time in ages, housing prices in Amsterdam were dropping.

Despite that, we never had any trouble. Even during the crisis, house prices didn't drop much, they just spent more time on the market. We had been careful enough to make sure that in a pinch, my wife would have been able to pay the mortgage on her own (my income would have been too small for that), but even if we would have had to sell our house, I doubt we'd have lost a crippling amount on it (and the house we'd have bought instead would probably have been cheaper too).

After the crisis, things quickly recovered and we sold out house with €100k profit in 2017. (Of course our new house was more expensive too.)

The main risk he have, is that part of our mortgage is not automatically getting paid off. So even after our mortgage runs out, we'll still have some debt left unless we pay extra. These mortgages are now illegal: all mortgages need to paid off in a predictable manner, to ensure houses don't go too far under water even when the market goes down.

We have always overbid (but never too much) for the houses we bought, and when we sold, buyers also always overbid. It's how the market works here, I guess.

What you say is all true, but nothing of what you said is enough to displace the investors walking in and paying 20% over asking price in cash. And there are plenty.

I’ve recently learned that a whole building next to North Line terminal was taken off the market and sold wholesale to investors.

The problem is not the petty burgeois pulling a little speculative profit (oh well, there’s also that, see Airbnb) but the mega funds buying off whole block at a time because they can

I don't know the data, but you are probably right. Although at the same time Amsterdam has very little large buildings, so I don't know how much those large building increasing prices would put a lot of stress on the market overall.

Again I don't know, so you are probably right.

> Amsterdam is growing and becoming the de fact European capital (english, tech jobs, etc)

I would argue this is more true for Berlin, since it has English, tech jobs and the government of the biggest European national economy.

Its also poorer than any size comparable city in Germany.

Catching up real fast, though.

It's a real "melting pot" and is very very desirable as a place to live. It's the center of youth and technology culture, lots of hacker spaces. There's huge youth communities, public garden projects, lots of alternative communities. I love visiting there and if I moved anywhere in Germany that would probably be the place. I have a lot of friends who moved there. Apparently one of the strongest start up cultures in Europe as well.

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