If real estate keeps getting more expensive, is it still worth buying? Is it better to wait a little longer? How can real estate provide financial security for private individuals despite the high initial investment? Is it better to move in yourself or rent it out? And what about renewable energy? Many people are asking these and similar questions right now. Find out why buying a newly built property is almost always a good investment and why now is exactly the right time to invest.
Why is real estate so expensive right now?
Whether you’re a renter or a buyer, real estate prices remain high. Many interrelated factors play a role here: the cost of raw materials has risen significantly. Energy, logistics, and labor costs have also increased, and the process of obtaining a building permit is lengthy. There are no signs of a change or a drop in construction costs.
That’s why now is the right time to buy a property: NOW. After all, buying a property is unlikely to become any more affordable in the future. Currently, real estate prices in Cologne average 4,718 €/m², and in Berlin they’re as high as 5,197 €/m²; for state-of-the-art condos in sought-after neighborhoods, prices can even be double that. And according to real estate experts, prices continue to rise rapidly.
Unabated high demand
Bureaucratic hurdles and lengthy approval processes make the process—from planning to completion—of new construction projects a drawn-out one. But once built, their value rises steadily: according to the Federal Statistical Office’s House Price Index, by an average of 5.5 percent annually.
This is because demand for real estate, especially in metropolitan areas such as Berlin or Cologne, remains consistently high. And new construction activity is nowhere near high enough to meet actual demand. According to a study by the RWI-Leibniz Institute for Economic Research, some 300,000 new apartments need to be built each year. However, construction activity and the number of successfully completed projects lag far behind demand.
The Right Time: Better Late Than Never
As with many investment opportunities, the question naturally arises: Wouldn’t the investment have been better or more profitable ten years ago? This isn’t limited to cryptocurrencies or tech stocks. Investing in your own home or an investment property is also better done sooner rather than later. The next best time to buy real estate is right now.
Cologne is a good example of the potential buyers can expect: Neighborhoods such as Deutz, Mülheim, Porz, and Ehrenfeld show high potential for appreciation. This is because urban living space, in particular, remains scarce and in high demand. But even outlying areas in the so-called “affluent suburbs” of major cities are experiencing high demand. This is because the population continues to grow, and with it, gross value added. According to experts, this is likely to lead to a further rise in real estate prices through 2030. The trend is clear: in the Cologne neighborhood of Deutz, for example, the price of apartments for sale has risen by 19% since 2017.
Sustainable Building and Living
While buildings that have not been renovated are expected to lose significant value, the social and political demand for energy-efficient, sustainable real estate and new forms of construction is on the rise. And with it, the potential for such buildings to appreciate in value. Many cities are investing large sums to become climate-neutral. Cologne, for example, has set a goal of achieving its climate protection targets by 2050—Berlin aims to become climate-neutral by 2045 and drastically reduce its CO2 emissions.
A key component of this effort is the implementation of renewable energy concepts, including in new construction and particularly in urban real estate. But even residential buildings today can hardly function without solar panels or electric vehicle charging stations. Project developers and real estate developers are key drivers of innovation in this area.
New heating concepts, such as heat recovery from wastewater—as seen, for example, in the “LÜCK” project—are completely redefining the future of housing and energy systems, making these investments all the more attractive. After all, modern, sustainable thermal insulation has long been a given in such new-construction apartments.
Use it yourself or rent it out
Investors also benefit from attractive depreciation options, such as the declining-balance method, and can look forward to positive projections regarding the expected increase in value: According to the Federal Statistical Office, houses and apartments have increased in value by 5.5 percent each year since 2010.
So there are plenty of reasons to invest in your own property. If you’d rather move in yourself instead of renting it out, a state-of-the-art, energy-efficient new construction can significantly help reduce your utility costs. And the following still holds true: Buying is often cheaper than renting. After all, the monthly cost of rent could also cover interest and mortgage payments. Why not calculate how much rent you pay each year? And see how quickly an investment in your own property could pay for itself.
