FiveRocks Development SE
Wealthy people shift their money into residential real estate
The stock markets are slowly leveling off after having plummeted significantly since the "Covid-19 Crash" - a reason to lock in profits.
According to a report by #Reuters, the major bank #UBS stated that its wealthy clients will increasingly reallocate the profits they have made into #residential real estate, #private equity and corporate deals. During the #crisis, numerous super-rich had increasingly taken out #loans, which they then invested in shares. In doing so, they achieved higher returns than hedge funds and the overall market.
There are signs of a flattening of price gains on the stock market, which can be interpreted as a trigger for a shift into other #asset classes.
Germany is one of the safest and most solid #residential markets in Europe and especially the metropolitan areas benefit from a continuous price increase, thanks to increased urbanization and constant influx. The "#Colliers Residential Investment Report 2019/2020" reports that especially secondary locations in the metropolitan areas show the strongest increase in money volume. One reason, among others, is the increased attractiveness for investors to make investments away from so-called core properties. "#Core" refers to a risk class in the #real estate industry that has the lowest risk level in a comparison of risk classes. Core real estate is primarily the focus of risk-averse investors. Characteristics of core real estate are prime locations, quality of tenants and leases with a high occupancy rate. The expected return on rental income is usually between 4-6%. The #leverage, i.e. the proportion of debt capital to the purchase price, is usually 40-60%.
UBS's recent "Global Family Office Report" found that 39% of investment decisions are made on the basis of #ESG criteria (ESG = Environment, Social and Governance). The importance of sustainable #investment opportunities continues to grow strongly. Especially in the real estate sector, meeting these criteria can create sustainable and affordable housing. The state is increasingly willing to promote projects with ESG compliance.