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25 02 2016
Properties Particularly Attractive Due to Sustained Low Interest Rates

Due to the European Central Bank’s decision of January 21, 2016 which leaves the key interest rate at a record low level of 0.05 %, the interest level  will remain low until further notice. Therefore conventional investment models such as savings account or life insurance will merely not bring any profit in future, too. However, this financial policy provides Real Estate Purchasers with funding opportunities at extremely favourable conditions. According to the Financial Service Provider specialised in mortgage lending, Interhyp AG, interest rates for 10-year loans are mostly fixed at about 1.6 % per year. In the estimation of Interhyp, even lower interest rates could be achieved at present by using a higher rate of own funds and having a very good credit rating.

Investing In Real Estate Is Becoming More And More Popular

Besides institutional investors, private investors are of course also looking for alternatives. It is the sustained low-interest-rate policy which makes real estate more and more popular among German investors, this is the result of a current survey carried out by the Bundesverband Deutscher Banken (German association representing private banks). Although the classical savings account still ranks first on the ranking list of the preferred investment products, a reversal in trend can be clearly observed. 

The results of the study of the Bundesverband Deutscher Banken also show that capital investment in real estate has become increasingly popular. Real estate investments are considered to be a secure form of investing, especially in this current situation characterised by uncertainties on the financial markets and by the ECB’s monetary policy. Accordingly, 37 % of the German respondents may privilege investments in real estate if a financial framework, such as low interests, is available. In the survey, conventional and conservative forms of investment such as savings accounts or plans only ranked at third place. Over 1,000 households were interviewed by GfK Market Research Institute on behalf of the Bundesverband Deutscher Banken in December 2015

The Dream Of An Own Home Has Become More Tangible For Households

Financial experts point out that conditions for financing a property are currently more favourable than they have ever been over the past several decades, due to the low interest rates. Furthermore, demand for real estate is expected to rise not only because of missing investment alternatives but also because the number of long-term employed persons has been steadily increasing in the last years. Consequently, purchasing a property has become practicable and tangible for many households. Aggravated by the refugee crisis, the increased demand for residential properties will have a positive impact on all real estate owners. Although demand is rising, the number of newly built apartments is lagging behind and can hardly keep up with it. This leads to an increase in prices. Therefore value appreciations are expected to continue in the next few years. Indeed, the overall assessment shows that investing in properties is precisely now a worthwhile investment.