German housing remains a stable investment Baino Estates LLC experts say. This short article will prove it with the most important criteria used
In 2021, for the first time since 2013, investments in residential real estate in Germany exceeded the volume of transactions in commercial real estate. Investments in housing amounted to €65 billion compared to €59.3 billion in the commercial real estate.
A simple look at rising purchase prices ignores the fact that there are long-term trends in society that will continue even amid a pandemic. First of all, the number of households in Germany will continue to grow until at least 2030, which will lead to an increase in the need for housing, experts at Baino Estates LLC said. By 2030, the number of households is expected to increase by about 3%. The seven largest cities are expected to grow by 6%.
By 2040, the number of households in Germany could rise by two million to 19.3 million. The share of single households in the German market is already 42% and will increase markedly in the next few years. Investors should take this trend into account when making investment decisions.
Germany also suffers from a constant shortage on the housing market. It has eased in recent years, but Germany still lacks more than 600,000 new apartments to meet the demand for living space. High construction costs, increased regulatory requirements, and a possible cap on the rent cap are the factors that are currently slowing down the solution to the problem. The general situation in the German housing market means that we can expect further value growth and moderate rent growth for existing properties.
Especially for institutional investors, our experts note the extremely high stability of the dynamics of housing rental prices, including in comparison with office rent. Compared to 1990, first-time and re-letting rents have now roughly doubled. Crises over the past decades, including the latest crisis due to the pandemic, have not had a negative impact on the overall trend.
Housing rents in Germany have not been volatile for over 20 years and the outlook for the future is extremely stable thanks to social changes. Thus, the cash flow from rental income, at least at the current level, can be calculated for a long-term investment period. In addition, there is no end in sight to the policy of low interest rates. These are all reasons why investment in residential construction continues to pay off despite the often high entry level.
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