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Comment by majidazimi | Hacker News Reader

I live and work in Munich and I have to pay half a million euros for a 25m^2 box. EU is cheaper than US is a fallacy.

That got me googling and I found this gem:

> Today, Munich is Germany’s most expensive city in which to buy property, with asking prices reaching €35,000 per square metre in some exclusive developments, according to Engel & Völkers. The average price per square metre in the city is €7,630, dwarfing the €2,993 in Germany as a whole. [0]

That's wild. In USD per square foot, that's $3,700/sqft, $800/sqft, and $316/sqft respectively. Meanwhile, San Francisco's median is $1,100/sqft, the metro area's is $500/sqft, and california's as a whole is $315/sqft, remarkably close to germany as a whole. America's is $123/sqft.

Thank god for SF salaries (apparently about 150% of munich salaries).

[0] https://www.ft.com/content/9ba4873a-60f3-11e9-9300-0becfc937...

Wow, really? 20000 EUR per square meter, for small apartment in Munich? That's... more than I expected.

Even if it's half cheaper, a family house of 80-100m^2 costs beyond 600K which is way beyond affordability range of a couple both working as software engineers let alone people with non-tech jobs.

With mortgages in the 1.5-2% range, a 600K house would cost you €750 - €1000 a month in mortgage payments, and that's not even taking into account tax benefits you may get. That's an absolute steal compared to what you would pay in rent in a place like Amsterdam or London.

little late, but not true. 600k equals to about 2000 a month in mortgage payment

Why is that? Like, on the US west coast, ballooning home prices makes sense because their cities are in valleys with a fixed amount of land, but munich looks like it has a bunch of farmland around it that could be converted into housing increasing supply and thus decreasing prices. This coming from someone in chicagoland which has 9.5 million people but housing isn't crazy because the metro area sprawls 30-40 miles out into what used to farmland.

Because Germany is mostly old money, inherited for generations, that is very risk adverse so instead of investing it in new SW companies or buying stocks, they park it in real estate in desirable areas and prop up this bubble since it's a sure bet for a return on investment. That's why they call it Beton Gold ("concrete gold").

That doesn't explain the lack of new building though. Is it NIMBYism?

Munich has very strict limits on vertical height so that cathedral spires aren't drowned out by the buildings. On the edge of the city you do see some taller office buildings but not in the core, and certainly not to the extent you would expect in a major city.

I think it has more to do with world wide's low interest rate which is pushing asset prices to sky rocket.

You now get a fast shrinking middle class and dismal living condition in lower class.

Of course, they could have combated this with more supply. Not sure if they have done so.

Low interest rates certainly allow you to afford a more expensive home, but inflation adjusted price per square foot isn't actually skyrocketing for most of the US outside of the west coast [0]. For example, Dallas/Fort worth and Houston metro populations, the 4th and 5th largest in the US have both grown a whopping 19% in the past decade and prices aren't skyrocketing there. But they have plenty of land surrounding their cities that can be developed to increase the housing supply.

It just seems weird to me. Why are people paying such high prices when there is farmland so close by that you could buy and use to build some condominiums, townhomes, duplexes or even single family homes.

[0]: https://www.supermoney.com/inflation-adjusted-home-prices/

If we keep plowing over farmland to build suburbs where will the farming get done?

Build taller. Skyscraper has been invented long time ago.

In areas not close to Munich?

600K for a house in Munich sounds really cheap considering that that's how much a small apartment costs in the city center there.

... you're using a single city anecdote to say something about two huge landmasses...?

Doesn't really make sense to buy at this price point though. Looks like one can rent an apartment of that size for 1200 EUR a month in Munich.

Yes, but renting doesn't give you that sense of security when you are thinking of having kids versus owning your own place. When you're renting the thought of the landlord kicking you out if the rental market should suddenly shift is a huge axe to child planning for most couples. Owning you own place offers a more secure feeling and belonging to a community.

This is pure make-belief. You should buy if a purchase is cheaper than renting. Guess what, it never is when interest rates are at zero.

Rent is determined by what people with jobs can pay, property prices are determined by what international investors with deep pockets and easy credit can pay. Which one are you? If you are the former, you will be paying down a mortgage that you can barely afford. You will be a slave to the property. What if you lose the ability to pay? How secure is your paycheck really?

Keep your cash, and invest it somewhere else. You can find a new place to rent. You can leave if your community turns to shit.

property prices are determined by what international investors with deep pockets and easy credit can pay.

The international investors with deep pockets own very, very, very few properties compared to regular people.

What if you lose the ability to pay? How secure is your paycheck really?

What if you lose the ability to pay rent? How does that make you any better off?

Keep your cash, and invest it somewhere else.

I have a mortgage with 75% of the principal left to pay, where the interest on the loan is somewhere between the third and the half of what I'd pay in rent for equivalent property. If I was renting instead of paying mortgage, I wouldn't have any cash to keep to invest elsewhere anyway.

You can find a new place to rent. You can leave if your community turns to shit.

You can also sell your house/condo and move somewhere else, at any time.

> The international investors with deep pockets own very, very, very few properties compared to regular people.

Doesn't matter, a rising tide raises every boat.

The point is that property prices have diverged from rental income, because low-interest credit from around the world is chasing properties, while stagnant wages imply stagnant rental income.

> What if you lose the ability to pay rent? How does that make you any better off?

I don't have to foreclose.

> I have a mortgage with 75% of the principal left to pay, where the interest on the loan is somewhere between the third and the half of what I'd pay in rent for equivalent property.

Between a third and a half? That sounds like a lot.

> If I was renting instead of paying mortgage, I wouldn't have any cash to keep to invest elsewhere anyway.

So you're saying your mortgage payment, taxes, insurance and upkeep is equal to rent? Where the hell do you live?

> You can also sell your house/condo and move somewhere else, at any time.

At any time? Yeah, good luck with that.

Not to mention, you'll still be paying those same mortgage payments (unless you refinance) a decade or two from now after the market has changed, and generally it goes up (even if it should only average going up by the amount of inflation).

I bought my house 6 years ago. Rent prices have gone up about 30% in that time. I used to think my payment was crazy compared to renting, not I know of people renting much worse locations that are paying more, and I'm about to drop the mandated PMI because I dropped below 80% of the principal left to pay, so my payment will go down be a couple hundred more.

From my experience there's plenty of 'sense of security' when renting, mostly coming from very strict pro-tennant laws: Limited rent hikes, no eviction unless the tenacity agreement is breached, etc. You can't just throw out of your home because someone wants to make a quick buck, you're protected as you should be.

Renters in Munich have very good protections. You effectively cannot be evicted without cause (and evidence), and most contracts are indefinite length (unless you are explicitly looking for <1 year).

Yours is a fallacy, as Munich is certainly not representative of the rest of Europe.

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