Investing as a foundation
Dr. Bauer, you are a board member of several foundations that invest in real estate. Do you still consider investment apartments to be a promising investment opportunity, even under the changed market conditions?
Absolutely. Although for the first time in many years, alternatives such as fixed-term deposits or bonds are once again generating significant returns, these are still below the rate of inflation. Real estate - at least in Austria‘s metropolitan areas - will continue to maintain its real investment value plus a certain return. Due to the rapid decline in new residential construction, demand for rental properties will rise sharply in the coming years, which will be of particular interest for new-build apartments that are not subject to rent restrictions. In my view, the acquisition of investment apartments is therefore still a sensible and secure investment opportunity in the long term.
In particular, however, foundations often have investment guidelines that are not met by the returns from investment apartments.
Real estate investments are measured by different standards than fixed-interest investments, for example. It would be wrong to focus solely on the calculated initial yield without considering the expected development in the value of the property. Since at least a real preservation of value and possibly also an increase in value can be expected, a lower nominal return can be accepted, as this should also increase continu- ously due to inflation as a result of the indexation of rents. Incidentally, investment apartments are at least as attractive as whole properties, even if the management is a little more complex for an investor. By buying individual apartments in different locations, a certain degree of risk diversification is achieved - and a later sale is also easier and quicker.
What is your assessment of the risks?
In addition to market risks, which everyone must of course assess for themselves, it is also important to pay attention to legal risks. Although an investor is protected by the Property Developer Contract Act (payments for properties not yet completed go first to a trustee) for properties that are still under construction, it is nevertheless advisable, especially in the current market situation, to seek comprehensive advice from real estate specialists who work with experienced and trustworthy developers. In addition, it is now perhaps even more import- ant than before to pay attention to legal details. For example, it is preferable from a legal point of view to have the condominium ownership entered in the land register upon payment of the purchase price and not only upon completion of the property. Security is anything but a subtlety.
Dr. Andreas Bauer
Lawyer, Partner at Brauneis Rechtsanwälte
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