To buy a flat vs invest?

[resjudicata]

@abim305 I would buy an apartment if I were you. The prices of real estate in Berlin will skyrocket as soon as the ECB reduces the interest rates.

Plus, the price of real estate in this city will very very likely go up, whereas ETFs can really go up, down or sideways in the upcoming years.

Also you can maybe rent it out for a while and then re-sell it for more money.

It gives you more cards to play.

Just my personal opinion.

 

[odarbty]

@resjudicata They skyrocketed before. Now they’re at all time highs with the current interest rate. There’s not much room to go up higher in the future. Everyone selling is basically holding their prices and hoping for the interest rates to drop so there are finally buyers in the market.

 

[esperanza20]

@resjudicata Why that certainty?

this data strongly contradicts your opinion:

 

[esperanza20]

@abim305 Stock should be better than property long term

https://gerd-kommer.de/wertsteigerungen-wohnimmobilien/

This is if we approach question rational. Irrationally people have cognitive dissonances, not often rational or persistent with their financial decisions, lacking also planing in terms of decades. Therefore bias may occur to buy a property.

Also theory and practice may be different. It is like an insurance. On average only an insurance company earns money with insurance, and insurance buyer loses it (otherwise this business would not exist). However this is very praxis comes to play. It is still wise to buy some insurances to protect from very improbable events, but which in turn can have catastrophic consequences.

And last point. Buying property and hoping that it continues to grow as fast as in the past is similar till certain extend in view with all in for a single stock or hot crypto and sitting on your investment and hoping there will be other people (dumb/smart money) who will buy it too

P.S.: one may try to trick the system and made tenants to pay off mortgage, use tax benefits in Germany, but it is a bit a different question.

 

[christtard]

@abim305 Buying in Berlin make sense imo if you intend to live there for 10 or more years, as the property prices steadily but slowly rise. Otherwise, it may not be worth it, unless you can pay most of the purchasing price cash. There is a lot of regulation re rent prices, tenant protection (eg if you buy a place thats rented out, the tenant has a right to stay in the apartment for 10 years), for renovations beyond the most basic maintenance you may need additional permits due to anti-gentrification laws, depending on the neighbourhood.

 

[alldayfaith]

@christtard The 10 year rule is only if the building was divided into condos while the current tenant lived there, other wise its just 3-12 months termination for eigenbedarf depending on how long you've lived there.

 

[abim305]

@christtard I would NEVER buy a place that is already rented out. The height of folly.

A headache I can live without!

I would be buying to live in it either alone or with a partner...if anyone will ever have me

 

[annamg]

@abim305 RemindMe!

 

[compassionate_rn]

@abim305 A flat would mean some stability but if you're not sure you'll want to stay there for the long run, I'm not sure keeping it for 5-7 years and then selling it is the greatest of plans (financially).

You don't know what the future will bring, if you're not looking to settle down yet or want to keep your options open, it would be better to invest and keep renting.

 

[abim305]

Thanks everyone for the thoughtful responses.

Unfortunately, I'm now more unsure than I was before hahahah

 

[korg]

@abim305 TBH I am not so optimistic about the real estate prices going up in Berlin for the next years. It is already congested and the prices, despite the slight downturn recently, have reached a good peak, other cities slowly will catch up (Dresden, Leipzig, cities in Brandenburg).

If you want to keep it longer than 5 years, rent it out, or share time and space between Berlin and another city, it might be a good idea, but I am afraid the buy-sell-swap saga in Berlin is gone.

 

[abim305]

@korg I'd be buying to live.

 

[korg]

@abim305 Did you buy the flat?

 

[abim305]

@korg no...the seller for whatever reason was not able to produce an Energy Efficiency Certificate for the bank and still is not able to so they've put the sale on hold for the time being. Weird German paperwork stuff.

 

[chosenremnant]

@abim305 Only you can make that decision , if it was me personally I would put the money in a good safe investment account and continue to keep renting because I am a cautious person .

 

[ashleyta]

@chosenremnant That's not how you make money

 

[ng1989]

@abim305 Assuming no family/kids in sight, I would probably invest. There's a higher return rate, plus the housing market seems to be at a peak right now in Western Europe. Take this with a grain of salt, I've no idea on the specifics of Berlin, and I'm sure you are also aware of the specific risks with investments. Nonetheless I would look at a long term portfolio, and include both state bonds and stock ETFs.

 

[jenniwrenn]

@ng1989 People are likely to keep wanting to live around large population centers like Berlin - it's a nice place

Regarding long term portfolios, as long as (/pun) OP is in an accumulation phase, I think they should optimize their portfolio for growth and not preservation.

Once at around 5y-7y to retirement they should start thinking about a glide path towards their retirement/preservation portfolio that would help them minimize the sequence of returns risk when they start withdrawing .

The sequence of returns risk while in an accumulation/growth stage now can be minimized by dollar cost averaging when buying stock (
... and/or if you're feeling adventurous or your first name starts with Warren and last name ends with Buffet, also by doing a 90/10 portfolio of stocks and ultra shorts with the intent to time-the-market and utilize the 10% as a war chest during next crisis opportunity ; .. or if you believe Bitcoin won't get banned by the government, maybe even 80/10/10 of stock + ultra short bonds + btc).

Here are some interesting charts for QQQ / Nasdaq 100 - there are some very nice accumulating ETFs, probably all OP needs for now:

https://www.lazyportfolioetf.com/etf/invesco-qqq-trust-qqq-rolling-returns

EQQX on XETRA is a nice fund imo.

 

[ng1989]

@jenniwrenn There are a lot of nice places where it's not a good idea to invest in property, so it takes someone to actually know how Berlin fares as an investment.

Regarding the accumulation phase, that advice would have been sensible a few years ago, when the returns on bonds were extremely low.

The market is now different and the 2year notes are at 4.7 and 10 years at 4.29, so they are at the level where it actually makes sense to have them as part of your accumulation portofolio (maybe 15-20 %).

He's also got 150k available right now, DCA-ing that would generate losses due to inflation, so he would need an as safe as possible lump investment.

 

[jenniwrenn]

@ng1989 Fixed income is also subject to interest rate risk and inflation risk.

If you're looking at 3% average inflation per year going forwards (example, good luck predicting what Ursula will do, and with no disrespect, I'm sure she'd like to know too), your effective yield from those bonds turns into 1%, whereas effective yield from an effective 13%-16% nasdaq turns into 10%-13%.

Bundling in more "fixed income" assets will always drag your long-term growth portfolio down, ...unless you time the market, or get lucky... . Odds of getting a double dip, another opportunity to buy stock at a discount like we had late last year beginning of this year are low, .. therefore odds of being able to profit from that fixed income drag are also low... maybe going 90/10 .. 80/20 in a couple of years, just so you get the optionality then, would be great, but I think it's too soon to prep for another market crash now.

Re inflation and interest rates themselves, I wouldn't expect ECB or Fed to flip from QT into QE so recklessly and so soon after M/M inflation falling to near 0 (it's been practically zero or negative for many components of CPI except for housing/rent and labor costs ... which are always laggy), but I'm skeptical of both further austerity measures or any long-term austerity or additional tax raises, simply because of political polarization that we're seeing in much of the developed world working against any long term investing. (I wish things were different, but even climate pledges which should be an easy sell are being played down, and defense spending is also being a hard sell, more austerity to fund those things is obviously a hard sell).