The first part of the post can be found here. The second part deals with topics such as investing in a second property at retirement age, the location of the second property and what role the ECB plays in possible serious changes in the market.
Real estate as a hedge for old age
Don't expect particularly high appreciation at first. However, it can still be profitable as an investment for retirement if you have a financing plan in place. If the house is not financed solely by equity but by a corresponding loan and then rented out, it is crucial that the monthly repayments for the loan are not greater than the rent earned by the property. "So you should rather invest in real estate if you want to plan for the long term," said the managing director of finum.Finance house AG sebastian-josef grabmaier.
The role of location in investing in the real estate market
The location in which the property is purchased is also important. Prices are growing significantly, especially in large cities and metropolitan areas. Over the past five years, real estate prices in major german cities have risen significantly more than in rural regions.
At the moment, the DIW economic institute is sounding the alarm about a possible overheating of real estate prices in germany's metropolises in a study they conducted. At the same time, the financial regulator bafin has also instructed banks to guarantee cash deposits in case the rush to the real estate market causes the market to explode and this leads to shortages in loans.
What role do interest rates play in the real estate market?
It is unclear, however, how long we can continue to count on low interest rates. Because it is not impossible that the ECB (european central bank) will soon initiate an interest rate turnaround. In the united states, its counterpart, the fed (federal reserve system), has already announced an increase in interest rates. This means that loans will cost significantly more from now on. This could become a real problem for many americans, as many construction loans in the U.S. Are arranged with variable interest rates. There, people could now be increasingly obliged to pay increased interest rates, fall into arrears and ultimately have to sell their property again. This would put more real estate on the open market, which could well contribute to a collapse in real estate prices in the U.S.
"This is rather unlikely in germany, as the majority of real estate financing is concluded with fixed interest rates," explains the chairman of the supervisory board of finum.Finance house AG ralph konrad. So banks can't raise interest rates just because the ECB raises its rates too. In any case, a default of debtors and a flooding of the real estate market with homes is rather unlikely here.
However, if the ECB were to raise interest rates in the next few years, future demand for real estate could weaken as loans become much more expensive in the future. However, in the country this would not cause a price drop. "In metropolitan areas, it could already lead to corresponding changes in prices. However, an optimal location in berlin will always be," said the chairman of the board of finum.Financial house AG ralph konrad.