Hacker News Reader

Comment by roel_v | Hacker News Reader

At the same time, there is a 30m2 (323 sqft) Parisian apartment for sale for e1.2mm (USD 1.3mm). Not sure these things are quite compatible...

View on HN

I'm not sure why you are downvoted. House pricing clearly shows that the City of Paris is a gravity center, which leads to many of the current traffic and pollution problems. Maybe a decentralization of France's institutions, powers, businesses etc could help it?

> I'm not sure why you are downvoted.

Probably because parent is cherry-picking and has no source. The average flat in Paris is at €10k/m2, so 30m2 would be around €300k, not €1.2M.

At 1% interests rate, that's e12.000 a year, e1000 a month. Not bad.

Is it 1% interest rate over there?

Yes, in Eurozone countries, 10 year fixed mortgage are typically 0.99%.

It's amazingly cheap. Down from 3.5% ten years ago.

The downside of low rates is house prices correspondingly very high.

Except here in Ireland, unfortunately; absolute lowest mortgage available is 2.3%.

Repossession is especially difficult here, which raises the risk for the lender, and the banks unwisely gave out ECB trackers (as opposed to the EURIBOR trackers more common elsewhere) back in the day; some of these can be as low as 0.5%, so everyone else has to pay for that legacy.

Yes, in Germany for example. Some cities are experiencing drastically rising housing costs as a result. There was a bank in Denmark (not in the Eurozone) offering negative rate mortgages. In reality the bank tacked on fees so they weren’t paying people to take out a mortgage!

Check that math

I did. Could you explain where I am wrong? The apartment is that expensive because people can finance it. It's stupid, because an apartment is not magically worth more because people can finance more. Unfortunately that doesn't matter to people who need a place to live.

I don't know what to tell you, except that the monthly payment on a 1.2mm loan at 1% for 30 years (insert your loan terms here) is 3.86k, not 1k.

Edit: put another way, if you pay 1k/mo on a 1.2mm loan, you'll finish making payments in 530 years. The Jeanne Calment loan!

It's 3.86k if you want to own the property after 30 years. You don't have to. You might as well sell the house for 1.2mm after 30 years and just pay 12m per year on interests for 30 years.

I'm sorry, I should have noticed you were talking about not owning it. I agree with the point that low interest rates mean higher prices, of course.

That is not how interest works.

How else does it work?

25 year repayment mortgage on €1m loan will cost about €4.3k per month. Based on actual lending rate of c. 2.3%.

Interest only loan will have lower monthly payments, but you will need to make an additional monthly contribution to an investment product, such as an endowment policy, in the hope that the investment product will be worth at least the outstanding capital at loan maturity.

A 25 year repayment mortgage with 0% interest is 4% a year (1/25).

After 25 years, the apartment is not worth nothing. People who ignore the bubble expect to sell the apartment after 25 years for the same price, or refinance with another mortgage. With some luck, the apartment is even worth more.

Sure, that doesn't change the fact that you need 4% per year to buy it.

Reply on news.ycombinator.com