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Baino Estates LLC: Germany's ever-expanding realty market

·2 mins

In 2021, Germany witnessed a significant trend in real estate investments, where residential properties attracted more funding than commercial properties for the first time since 2013. Residential investments reached €65 billion, exceeding the €59.3 billion in commercial real estate.

The rise in purchase prices is not the only factor to consider. According to Baino Estates LLC, societal trends, which are expected to persist even during a pandemic, indicate a continuous growth in the number of households in Germany until at least 2030. It is estimated that by 2030, there will be a 3% increase in households, with the seven largest cities experiencing a 6% growth.

By 2040, the number of households in Germany could increase by two million to 19.3 million. The proportion of single households, currently at 42%, is expected to rise significantly in the coming years. Investors are advised to factor in this trend when making decisions.

Germany also faces a consistent shortage in the housing market. Despite some improvements, there is still a need for over 600,000 new apartments. High construction costs, increased regulatory demands, and the potential for a rent cap are slowing down solutions to this problem. However, the overall situation in the German housing market suggests continued value growth and moderate rent increases for existing properties.

Especially for institutional investors, the stability of housing rental prices, even when compared to office rents, is notable. Since 1990, rents have roughly doubled, and past crises, including the recent pandemic, have not negatively impacted this trend.

Housing rents in Germany have been stable for over 20 years, and future prospects look equally stable, largely due to societal changes. This means that rental income cash flow can be predicted for long-term investments. Furthermore, the ongoing policy of low interest rates supports the continued viability of investing in residential construction, despite high entry costs.(2010)

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