Real estate is a key pillar in any robust and profitable investment strategy as it brings benefits that no investor can ignore - especially in the current market environment.
Since interest rates are now regularly exceeded by the inflation rate, classic safe investments such as government bonds often achieve negative returns. In contrast, real estate – especially in countries like Germany – tends to be a safe and profitable source of investment:
- Inherent Value: Investing in real estate means investing in tangible assets. Compared to other forms of investment, these offer a much higher level of security.
- Real estate is timeless: With the global population expected to grow by 20-25% in the next 30 years alone1, the demand for residential real estate is likely to continue to rise for the foreseeable future.
- Double chance for profit: The high demand in Germany is expected to lead to continuous price increases for both residential property and rents - especially in urban areas where demand significantly exceeds supply.
- Real Estate Investing as an Antidote to Inflation: Investing in real estate projects has the potential for higher and increasing returns as rents can be adjusted to offset inflation.
While there are many advantages to investing in real estate, one key question remains: where to invest? Some countries offer significantly better opportunities than others, both in terms of profitability and investment security.
Everything looks to Germany
Historically, the UK has been a prime location for real estate investment. The successful Brexit with considerable political and economic uncertainties and difficulties brings the strengths of a certain European neighbor into focus:
Historically grown housing deficit
Germany is the fourth strongest economy in the world and also has a stable political environment. Nevertheless, the demand for real estate has been greater than the supply for almost a decade: in recent years, significantly fewer properties have been built than needed. Between 2011 and 2015 alone, the new construction deficit was 540,000 apartments - since then the undersupply has become even more serious.
Huge demand for real estate
3.2 million new residential units will therefore have to be built by 2030. With an estimated average price of 325,000 euros per residential unit, this corresponds to the investment requirement of 1 trillion euros on the German real estate market within the next 10 years.
Real estate prices are rising
Average residential property prices in Germany continue to rise sharply - cities such as Stuttgart, Frankfurt, Leipzig and Berlin have seen increases of between 42% and 66% between the first quarter of 2016 and the fourth quarter of 2019
Rents are becoming more expensive, but remain affordable
At the same time, the average rental price for apartments in Germany has been rising continuously for over 20 years, resulting in a very stable investment environment. Nevertheless, rents in Germany remain affordable, especially when compared to other European countries.
Germany: Politics supports real estate development
The urgent need for new living space in Germany has now become a political concern: Angela Merkel, Chancellor since 2005, underlined in 2018 that 1.5 million new apartments and private houses urgently need to be built within the next 4 years2.
In 2019, as part of the German Tenants' Day, she reiterated how important it is to achieve this goal and emphasized on the subject of affordable housing3:
The attractive market conditions and the long-term forecasts for the real estate market make Germany one of the best locations for real estate investments.
Turkey has been one of the Central Asian countries with the strongest growth since 2010. In recent years, investors from all over the world have discovered the above-average market conditions and are showing more and more interest. This results in a steadily increasing demand for real estate of all kinds.
The stable euro and the weak course of the Turkish currency (TL/Turkish lira) are attracting many small and large investors to buy real estate in Turkey.
The country’s euro-lira exchange rate has been falling continuously since 2017 – ideal conditions for savvy investors.
Real estate as an investment
A strong upswing in the real estate market is to be expected. The housing market has picked up significantly since 2020 and has experienced a relatively constant value trend since then. In Turkey, the price level is currently - compared to other European countries - still at a low level.
Anyone who is interested in real estate investment in Turkey in the near future can definitely count on lucrative returns.
The real estate market in Turkey has reacted to the increasing demand from abroad in recent years. The recent good changes in the law have made buying real estate significantly easier for prospective buyers from abroad. Naturally, this opening is particularly encouraged in the tourism industry.
Invest in new small and large construction projects in Istanbul, Izmir, Bodrum Antalya, Fethiye and other attractive cities in Turkey.
Turkey is very open to foreign investors. Turkey is trying to attract more investors with the help of a wide range of support measures. Basically, the following applies: the more extensive the commitment of foreign investors, the more attractive the support services. The Turkish government is trying to promote (foreign) investments in three main areas:
(1) investments in research and technology-intensive areas;
(2) job-creating investments;
(3) Investments in economically less developed regions.
In addition, subsidies are granted in strategic sectors that are important for Turkey.
Depending on the nature of the project, companies can benefit from several subsidies such as tax and duty reductions or exemptions, free land allocation, infrastructure subsidies, subsidies for qualified personnel and the assumption of employer contributions to employee social security. In addition, government subsidies for energy and credit costs can be claimed over a period of ten years.
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