Almost ten years after the financial crisis that began with the bankruptcy of Lehman Brothers in September 2008, savers are still experiencing its effects. After all, saving is impossible in view of the current low interest rate policy of the European Central Bank (ECB). This is a sensitive issue, especially in Germany, the land of savers. Thus, in view of the lack of interest income, many plans for old-age provision are at risk. As a result, other strategies, such as building a house as an investment opportunity, are increasingly coming into focus. After all, the flip side of interest-free times is that construction money is cheaper than ever!
the essentials in brief
- In times of low interest rates, saving is no longer worthwhile.
- On the other hand, building is cheaper than ever, as low interest rates make it possible to obtain an extremely favorable building loan.
- Since houses are subject to good appreciation and the rental market is also exceedingly stable, house construction offers a good form of investment.
Saving in interest-free times
Saving, whether with overnight money, fixed-term deposits or savings books, is not very worthwhile today. This also applies to private pension plans and life insurance policies. And the low interest rate policy of the European Central Bank (ECB) is not expected to change in the coming years. The current interest rate situation has therefore been giving savers a headache for some time now – old habits are starting to falter and people are asking themselves: How can the desired return be achieved in an alternative way?
Riester pension, shares, existing real estate or gold as an alternative strategy for old-age provision?
The state-subsidized Riester pension, which was introduced in 2002 as a result of the reform of the statutory pension insurance system, supports savers in making private retirement provisions with allowances and tax benefits. However, with the current low interest rates, the Riester pension is losing its efficiency. Such an interest rate situation was simply not considered possible when it was introduced. As a result, acceptance of this model has fallen to a low level. The glaring decline in graduations in recent years is increasingly calling the model into question.
Investment in equities is still rather hesitant in this country. First of all, it takes some background knowledge to be successful in the stock market. Or you put the responsibility in someone else’s hands. But this is precisely a highly sensitive issue in terms of retirement planning. Moreover, there seems to be a question of mentality here. The “traditional saver” does not want to accept the risks of the fast-moving stock market.
The seemingly ever-flourishing existing property business is another option. It does not always have the best reputation, but lures with high returns. But here, too, there is nothing for free: it is necessary to deal with the market fervently. In addition, the market is already saturated in many places.
In times when the general low interest rate and the uncertain financial market are in the headlines every day, you also hear about gold buying again and again. Contrary to the temporary attention, however, it is not possible to achieve a good return on investment with gold. Rather, gold is seen as a material security in the event of a total currency crash.
Building in interest-free times: House building as a capital investment
Despite all this, to this day, it is a less commonly discussed strategy to engage in home construction for capital investment. Building a house is an excellent investment opportunity, especially in times of low interest rates. What makes saving impossible just makes building all the more possible: Construction money is cheaper than ever.
Houses are subject to good appreciation and the rental market is also extremely stable. Thus, the property can be easily rented both in the city and in the countryside. With the rental payments collected, the developer services the monthly repayments of the construction loan and builds up reserves for ongoing costs. Once the loan has been paid off, the rental income serves as a secure retirement provision, for example. It should also be remembered that the house can be sold tax-free after only ten years.
Nevertheless, building a house remains not only a capital investment, but also an extraordinary challenge that must be met, and not only financially. Strong nerves are also demanded of the building owner. After all, any home construction is a detailed project that presents the builder with many questions. Thus one brings the building of houses also much too fast with incalculable risks in connection. But that does not have to be the case. For all your questions, read our home building checklist!