Is there a real estate bubble?

We answer these and many other questions in our video blog editions.

Here is the transcript of episode 12 to read:

The question of a real estate bubble is not so easy to answer. There may be real estate bubbles in individual locations, but if you have the right locations, i.e. growing cities where the population of inhabitants is increasing, then you are more likely to find that we have a housing shortage. Because in recent years, we had an annual demand in Germany of about 400,000 apartments that should have been built.

But only under 300,000 were built per year. That means we have far too few properties. We have an incredible need for good housing. For now, that speaks against a real estate bubble. Nevertheless, one might think: "Prices have risen, after all. Don't we have a bubble in prices?". That's because of the differences in location.

Of course, in the big 7 cities - Munich, Frankfurt, Stuttgart, Cologne, Düsseldorf, Hamburg and Berlin - there is sometimes a bubble, and you can also regularly read in the Bundesbank's quarterly report that purchase prices are too high there. That's why it's important to find locations where not only the relationship between purchase price and yield is right, but also where the perspective on price development is right.

If you buy an investment property now, e.g. for 200.000 €, 300.000 € or 400.000 € and if it is a reasonable project, you will pay in the course of the years, in the course of your life for this rented property only about 1/5 personally. 4/5 is paid by the tenant and the tax office for you.

And if you stay with the example and the apartment costs 400,000 € and you pay only 1/5 of it yourself, then that's 80,000 € over the course of your life that the property has cost you until it is paid off.

So if you yourself only pay €80,000 for a top property in your lifetime, then you don't have to focus so much on the question of the real estate bubble. Even if real estate prices no longer rise dynamically, if they sometimes stay the same or remain constant for ten years or even decline slightly, what could be so bad about buying a quality property for €400,000 and paying only €80,000 yourself over the years?

Regardless of whether there is a real estate bubble or not, this will always be one of the best investments in your life, because you bought an investment and only paid 1/5 for it yourself.

Keywords:
Real estate bubble, housing shortage, purchase price and yield, investment property, tenant, tax office, top property