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A positive impact: Tailwinds are coming from a new, unsteady direction. But real estate can still prove itself to be attractive to investors
The days when the real estate sector benefited from the sheer lack of alternatives — from an investor’s point of view — seem to be over.
The yield advantage over prime bonds is melting away in light of the new interest rate environment. Until a few months ago, prime real estate yields in Germany in some cases, were below 3 percent. The currently rising bond market yields will lead to purchase price reductions in real estate, some of them substantial, in the near future.
In addition, negative market indicators predominate for the first time since 2009, particularly as a result of the sharp short-term rise in interest rates, steadily rising construction prices and interrupted supply chains. According to the German Federal Statistical Office, construction prices for residential and commercial real estate have risen by around 15 percent, year-on-year.
All these factors are now creating a new market reality: there are investment alternatives for professional in