This assessment is of course understandable, but not correct under all circumstances. Inflation also means higher interest rates and therefore lower present values of discounted rental income. That’s why buying an apartment for a few hundred thousand euros with a high level of borrowed capital could quickly turn into a risky loss-making transaction, especially if the rental income cannot be increased continuously with the inflation rates. In order for real estate to work as a protection against inflation, it probably takes three points. First: The rental income must be able to be increased. Secondly, the proportion of outside capital should be comparatively low. And finally, the property should be in an attractive region and ideally be able to be bought for less than the market value.
Such an investment will hardly be found on the Immobilienscout platform. On the stock exchange, on the other hand, it is. The share of German living can score with all building blocks. The company has most of its real estate in Berlin. At EUR 7.34 per square meter, the average rent is well below the market rent. This means that the company should succeed in enforcing a rent increase at least in the amount of the inflation adjustment. The second point is funding. In the most recent quarterly report, the company reported a ratio of debt to property value of 28 percent. As all real estate experts confirm, the ratio is very low and extremely conservative. Above all, the price is convincing. If an investor wanted all of the group’s properties in one go, he would have to pay more than 50 euros per share. However, the share certificates are currently being traded at less than half the value of the properties. Inflation can go on there.
Our columnist Jrg Lang has been dealing with the topic of equities since 1988.
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