I am foreigner in Germany, and I have noticed that my neighbours seemed to have no problems financing very expensive lifestyle, which I doubt can be afforded by salary alone.
My question is: Is there something fundamental about personal finance in Germany that I do not understand, and if so, I would appreciate help. My basic assumption is: a loan has to be paid out, eventually.
Here are a few cases:
A couple, my neighbor: the lady works ~2 days a month in elder care facility ("pflegefrau"). She has been working for 10 years. Her partner works on an individual contract basis, if and when work shows up. The couple rotate their individual cars every 3 years, purchasing new ones (~30K Eur each, minimum). On top of that, they recently bought a house worth 700K Euro recently. Based on a reasonable assumption that they would like to pay off the house in 35 years (i.e., until retirement), the monthly payments for the house alone works out (based on impossible 0% interest) to 1668 Eur per month. I have not accounted for the cars, vacations (about 3 times a year), and other expenses. The couple already took out ~80K Eur loan to renovate their current apartment, which they put on sale for 250K Euro, but has not been sold yet.
A local advertisement listed that an "augenoptiker" was looking for a house upto 750K Euro. This link tells me that the gross selary for an augenoptiker is around 3000 Eur a month (before taxes). I am lost as to how the augenoptiker would pay off for the house, keeping in mind that living expenses are not yet accounted for.
A local construction worker told me that he recently bought a house worth 500K Eur, and would have no problem spending another 100K Eur in renovating it. He is the only earning member of his family, which amounts to 1429 Eur per month of payments for 35 years, even at 0% interest.
The issue is that I am currently limiting myself to those properties (houses, or apartments to buy) for which I can pay off completely until retirement (another 30 years). I reserve money per month for living expenses, vacation, emergencies, etc., based on which I can afford to buy a house not exceeding 450K Euro. This limit puts me at a disadvantage in the current property market, where the demand far outstrips the supply -- leading to highly inflated list prices for current properties.
In the current context, and with the examples I listed, I am a bit lost in how people usually manage their expenses and stay financially afloat.
Any tips will be appreciated.