Real estate financing despite rising rates?

Advisor Special

Due to the current market situation, we are receiving many questions regarding the best financing strategy. Is buying real estate still worthwhile at all? How can I still afford my dream property - despite the rise in interest rates?

We asked our financing expert, Sören Mackeben, for answers and put them together for you in the following interview.

In addition, today's E&V Podcast has many exciting insights on these topics waiting for you. We look forward to your interest and are always available for an individual consultation.

The professional banker and economist with a master's degree in management has been working in financing consultancy for more than a decade. His credo: Only the people involved in the process should be exciting - not the financing! In any case, it is also fascinating that the former national water polo player is a multiple German champion and even an Olympic participant - congratulations!

Mr Mackeben, you have been advising people for over 12 years on what is perhaps their most important financial decision in life - buying a property. How do you experience the current market environment?

Well, it is indeed a completely new one. Uncertainties are there and will probably remain for a while. At the same time, however, I believe that the relevance of market events for individual decisions is overestimated. After all, the personal life situation is much more important for the purchase of a property. Am I in a good position professionally? Do I have equity capital? And above all: do I want this property? These are the questions people should ask themselves.

should not be a fundamental obstacle to investing in real estate?

It is clear that higher interest rates increase the loan instalments and the financing of the real estate purchase unfortunately becomes too expensive for some salary brackets. Purchases are cancelled. But this is not a new problem. Regarding inflation: With real estate as a tangible asset, I am protecting my equity capital against the loss of the purchase price. And the loan also inflates, so it loses value every year.

How do we explain to investors that it is still worthwhile to buy a rented flat in Berlin?

First of all, let's talk about Berlin. It is one of the most exciting metropolises of all! The other day I had a client from San Francisco on the phone, today a potential client from New York - they all want to come here. Berlin is "unfinished" and that alone makes it absolutely attractive. If you want to look at this scientifically, you should take a look at Richard Florida's "creative class". Two more important aspects: the real interest rate is even more negative than in previous years - borrowers and investors in real assets are profiting! And: I simply don't have an alternative to real estate.

What advice would you give to a family that wants to move into their own four walls? How do you assess their current possibilities?

As I said, it has been an issue for many years that unfortunately not all income groups can afford their own property. Interest rates are one factor, high purchase taxes and regulation another. The questions families ask are: How high is the alternative cold rent? What are our income prospects? And the following factor, which - unfortunately - is also not fairly distributed, also plays a role: Can the grandparents help? Here, the existing real estate property is often just as valuable as real money.
 
And now, hand on heart - what do you think the Berlin real estate market will look like in a year's time?

I'm actually not interested in that at all. I own flats in Berlin and will definitely buy more, because I am quite sure that prices in 2030, 2035 will be significantly higher than they are today. And that's still a short timeframe for this investment: you buy real estate with an investment horizon of decades, maybe even generations. In addition, the purchase prices in the new construction segment will rise in parallel, if only because of the ever-increasing construction costs. You know, it has always been better to buy real estate today than tomorrow.

Podcast recommendation: Financing despite inflation?

In our current episode, presenter Matthias Rutkowski meets Daniel Larisch, Head of Sales and financial expert at Engel & Völkers Finance. Together, the two discuss the current interest rate development in Germany:

How is the real estate market reacting to the current interest rate increases? Is buying currently still worthwhile at all? What does the topic mean for buyers and owners?

Look forward to the exciting insights in the new episode of Immobilien Insider.

Click here to listen to the podcast.