3rd July 2017 - Versicherungswirtschaft 7/2017

A Question of Perspective

Many investors are asking themselves the question whether they should still invest in real estate or not. Up to what price factor would an investment be worthwhile? At what point is it best to buy?

The continuing demand for residential and commercial real estate in heavily urbanised areas seems to confirm to many investors that a high vacancy rate is not looming. But do the prices actually reflect current market situations accurately, and how will these developments progress in the long term? The predictions are as numerous as they are different […]

This article was originally published in German only. A summary in English is available.

Summary
John Amram begins this article by explaining the many different opinions investors are currently holding. He then confirms that restlessness on the market is growing and gives the declining initial net return, in some cities the rate is below 3.5 %, as a reason. He also points out the levelling off of the residential real estate market that has been predicted by Scope Analysis. Moving on he states that whether it is time for an exit or not depends on the type of investor you are; long-term orientated investors should hold on to their objects, but others could profit from exiting now. Further, Amram stresses the importance of the availability of profitable reinvestments, which should also decide whether the time for an exit is ripe. In the long term, an interest rate turnaround could cause cheap capital to get more expensive, which in turn lowers the number of potential investors leading to a lower demand and, consequently, lower prices. Finally, Amram concludes that those considering an exit should do it now and not wait for the end of the pricing plateau, because once the point of a price decline has been reached, most buyers will wait for better conditions and hold back on investing.
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