What impact will the interest rate cut have on property prices? And what do large property companies know that private homebuyers often fail to consider?
Joachim Reuter, managing director of home4you, explains why you should buy a property in the Cologne-Düsseldorf and Aachen conurbations now, instead of waiting any longer.
“The Rhineland, known for its unique natural environment, vibrant cities and flourishing property market, has always been an attractive place to live and invest. In recent years in particular, it has become a real hotspot for investors from all over the world. Experts predict that this trend will continue.
Despite the situation in recent months with comparatively high interest rates, it makes sense to invest in a property now rather than waiting for further interest rate reductions.
The reasons for this are easy to explain:
There is a shortage of living space in Germany, and a lot of it. It is not only the experts who agree on this. In addition, there is the challenge of creating this living space in a climate-friendly and sustainable way.
North Rhine-Westphalia is one of the most attractive and economically powerful metropolitan regions in Europe, with great appeal for investors. Nine of the 30 Dax companies and one in four global market leaders are based here, including Bayer, Bertelsmann, Deutsche Post DHL, Deutsche Telekom, E.ON, Henkel, Metro, Rewe and Thyssenkrupp. These companies and a strong SME sector are the engine of innovation, prosperity and growth in North Rhine-Westphalia. In 2016, the approximately 18 million inhabitants generated around 670 billion euros and thus about one fifth of the total German gross domestic product.
But NRW is not only a strong economic centre, it is also the most important real estate market in Germany. Ten of the 20 largest German cities are located here, and their populations are growing dynamically.
The growing demand for living space, combined with a lack of new construction, is driving up purchase and rental prices in popular cities such as Düsseldorf, Cologne, Bonn and Aachen. Demand for real estate in this region remains consistently high, as owner-occupiers and investors appreciate the quality of life and the many opportunities offered by living close to nature, yet not far from the urban centres.
However, the long-term increase in the value of real estate in this region plays a decisive role.
This, combined with the recent interest rate cut, offers a unique opportunity to protect yourself against inflation and currency devaluation, to help preserve and increase your wealth over the long term.
Waiting for interest rates to fall has been shown not to pay off: in 1971, the interest rate for a mortgage was well over 7 per cent, and the first interest rate cut did not come until 1993.
So, if you had been waiting for the ‘perfect time’ to buy, you would have had to wait 22 years. However, over this period, the real value of property has almost quadrupled.
The European Central Bank is still planning to cut interest rates this year, albeit later than expected. If it comes to that, this will have an immediate impact on the regional property market: falling interest rates make mortgages cheaper and thus increase the purchasing power of prospective buyers. This should immediately increase demand for property. Most prospective buyers of properties in the low to medium price range, who have only limited financial resources, are just waiting for interest rates to fall. Thus, lower interest rates should lead to a rapid increase in sales and, consequently, to a price increase.
Falling interest rates should also encourage homeowners to refinance their existing mortgages in order to purchase a larger or better property with the funds thus freed up, which also boosts demand and prices.
The large and experienced investors are leading the way: never in the last 30 years have we had such a high proportion of property buyers in the high-priced segment. These buyers are not being deterred by the current interest rate situation because they can see where property prices are headed.
You can find the current property listings at www.home4you.info.