Construction costs are currently skyrocketing

One thing I don't get. Why are "dilapidated shacks" supposed to become cheaper now?

Unpredictable material prices, expensive loans. Renovating existing buildings is a bottomless pit if you are not a professional.

A small example with numbers as they currently are with us approximately:

Apartment 90 sqm
Rent €12 / sqm
Purchase price incl. ancillary costs approx. €350,000
Equity = €100,000
Interest = 3%
Repayment = 2%
Annual annuity = €12,500
Annual rental income = €12,960

Surplus after interest approx. €5,000 in the first year. That would be 5% return on equity in the first year. In the same example with 1% interest and 4% repayment, you would indeed have 10% equity return, but with a significantly higher tax burden, so the numbers have not really deteriorated that much in reality. For "real" capital investors still a good investment. Of course, those who hope to make big money in real estate without equity are now facing different times.

You’re basically calculating the repayment portion from the annuity? I wouldn’t sign off on everything except interest counting as return for real estate? Or is it really calculated like that in the financial world? After all, upkeep costs and possibly depreciation of the property come against that as it gets older, don’t they?

Are you basically calculating the repayment portion out of the annuity?
I wouldn’t necessarily agree that everything except interest counts towards the return in real estate? Or is it really calculated that way in the financial world?
But there are maintenance costs and possibly also depreciation of the property when it gets older, right?

My example is highly simplified and kept brief.

Effects from maintenance, non-allocable ancillary costs, etc. are present in all scenarios and largely independent of the interest rate. Depreciation is only relevant with really old buildings; with young buildings in good condition, depreciation effects are positive for taxes, and even a value increase that only corresponds to the rate of inflation would already cause the equity return to explode.

I just want to point out that the world for capital investors is different from that of private owner-occupiers.

In my view, the question is particularly interesting with single-family homes. These are mostly built and lived in privately.

From WiWo:

"A Munich real estate agent observes a break in the real estate market. Owners are now trapped. Many wanted to sell at the peak and realized that they may have already missed it."

Who (which industries) should go into short-time work when and why? :rolleyes:

My wife is on short-time work at Audi (does not work on the assembly line).

I don’t get one thing. Why are "shabby houses" supposed to become cheaper now? Yes, loans are getting more expensive. But probably less is being built due to higher prices. So at least the "shabby houses" should maintain their current price. In my opinion, normal houses will increase in price.

The shabby houses were only bought at that price because quite a few people still got cheap money. For example the faction - new wallpaper and that’s it. No energy renovation, etc. - the budget wouldn’t have been enough for that. They might already be under pressure due to rising energy and living costs. This group certainly won’t buy at top prices with high interest rates anymore.

Normal houses will also not increase in value - maybe in the sellers' imagination & in top locations. But the reality is more that even high earners reach their limit. Take a "normal" 160m² house, 5-10 years old, paint and that’s it. Elevated standard, but nothing extravagant (like we often have here in the forum). For €750,000 - would have certainly sold a year ago. Plus your €500,000 loan and the equity to cover the rest plus realtor and purchase incidental costs. At 3% repayment and 3% interest, that’s a substantial monthly amount. €2400 monthly just for the loan. 2% repayment would be far too little in my opinion, and then it would already be €2000. They have to manage that first.