Construction costs are currently skyrocketing

A small example with numbers as they currently are with us approximately: Apartment 90sqm Rent 12€ / sqm Purchase price incl. additional 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 actually have 10% return on equity, but significantly higher tax burden, so the numbers don't really deteriorate that much in reality. So for "real" investors still a good investment. Of course, those who hope to make big money with real estate without equity contribution are now facing different times.

What unfortunately does not fit here is the purchase price/sqm. At least not in Cologne! That would be a purchase price without additional costs of approx. 310K€. For 90sqm that would be a purchase price of around 3,450€ per sqm of living space. This is a condominium from the late 80s, into which you still have to invest. The 12€ per sqm then roughly corresponds to the not-so-cool-but-nice neighborhoods. If you deduct future investments and non-transferable costs, it is not a good rental price! For houses, the situation looks even worse.

That is a very rational point of view, which I basically share. Only the house building project is associated with many emotions. How much do you do in your own home that actually doesn't pay off? Simply because you want to and it's your own?

Sure, living nicely is a value in itself. But let's take the example I mentioned. Rural hinterland in the western Lake Constance area, about 130 sqm, 70s, oil heating, 200 kWh/sqm, both bathrooms and the kitchen still original for about 400,000€ (we visited several of this kind). This is certainly not the wet dream of all wannabe homeowners. For that, you first sink 50k for incidental purchase costs. Then you renovate the house from the remaining equity: gas heating or pellets, new windows, bathrooms and kitchen. Maybe also insulate the cellar ceiling and the top floor ceiling. The facade is too expensive and is postponed. The roof is still the original one with 50-year-old concrete tiles. Now you pay 1,000€ per month to the bank for the 400k loan at 3% interest at the beginning, even though you have certainly invested well over 100k equity, 50k of which is irrevocably gone. For the 1,000€, you haven't paid off a cent and haven't built reserves for facade, roof, road repairs, everything that might still come. That is not just a little irrational. With 1% interest, however, it looked quite different. Then you could actually pay off some of the house.

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

Yes, and that’s exactly where no big projects are being launched anymore. On the contrary, a lot of previous owners are currently putting their rental properties on the market; you can imagine how the reality looks right now. They also know how to calculate. Buying to rent out at current peak prices is no longer worthwhile, building to rent out even less so, and building to sell is probably also less fun than before.
The calculation error in your presentation was indeed the ratio of purchase price to annual rent – 26 was pretty much in 2014 – 35, 40, 45 is more like what is currently being asked. And from this calculation, it quickly follows that it no longer pays off. The only ones left were consumer buyers (from rent vs. buy), who of course went to the edge in the FOMO bubble.

and I think exactly the opposite: no matter whether interest rates rise now: how else do people want to protect themselves or their money from inflation than through real estate?

If I am afraid of a "loss in value," do I then invest in an asset that is potentially overvalued by up to 40%? Asset inflation has been a topic for a while, but somehow no one wants to understand that these values can move in two directions and that the term itself hints at the inevitable deflation. What goes up, must come down...

While I am writing this, Windows 10 amusingly just shows Tesla and Amazon in deep red at the bottom, with quite drastic negative values. One day, 6-7% down. You can also look at gold and Bitcoin. But the 1970s-era place at the end of the real estate boom in Germany is supposed to now be stable in value?

Is the dreamed million-dollar sale price for the €500,000 house from 2015 still a reality or a wishful dream from different interest rate times? The mentioned WiWo article hits the nail on the head – even where there is still more than enough money in the market, not every price is paid anymore. Demand collapses, outlook is poor, interest rates are high. And more and more properties keep coming onto the market – keyword "inheritance generation." But the inherited real estate book values are unfortunately not liquid, and renovation obligations are increasingly becoming the focus... Rapid developments.

... here in the "village" we were in talks with the owners of various plots of land 8 months ago. They own plenty here. The plots only changed hands privately and at overpriced rates. 880 euros/sqm. The standard land value is lower. Steep. When asked about a plot, they waved it off. That one is not for sale, they don't know yet what they will do. Wow, for a few days now there's been a huge sign from a real estate agent. This is also happening right now with the existing single-family homes here. It seems some are slowly getting cold feet. You can also tell that the prices of single-family homes are slowly approaching more realistic levels.

... has anyone noticed that wood prices have dropped enormously?

The calculation error in your presentation was indeed the ratio of purchase price/rent per year – 26 is roughly 2014 – 35, 40, 45 is more like what is currently being asked. And from this calculation, one quickly comes to the conclusion that it’s no longer worthwhile... If I’m afraid of a "loss in value," do I then invest in a value that is potentially exaggerated by up to 40%?

There are strong regional differences. My numbers are current and based on the portals.

Region around Karlsruhe, just checked on the portal. In the suburban area and partly in the city, many purchase prices are between €3,900-4,100. Rents are around €11-14 for normal apartments, 1-2 room apartments are sometimes rented out for significantly more.

That gives a medium factor of about 26. For smaller apartments, you can quickly be well below that if you buy well.

If I were to assume your 40% overvaluation for this region, we would have factors of 15 here? Never...

If I quickly search online for the rent index and average purchase prices in Munich and compare: €9,000 / (€20 * 12) = 37.5. There it’s obviously different... The real estate price could well collapse by 30-40%, then the factor would fit again.

So there is short-time work in the automotive sector, but financially no one has had to suffer so far, keyword top-up. and I actually think the opposite: no matter whether interest rates are rising now: how else should people protect themselves or their money from inflation than through real estate?

In the supplier sector, there is no top-up