Overview: how was the
real estate market before the turnaround?


Demand for real estates is on the upswing
The euro is causing turbulences already now
Climbing a mountain one needs to secure oneself at the dangerous bluffs
Custom-made property
Why is an investment in the east attractive at this very moment?
Rearrange yourself: capital assets in properties instead of euro
The chief attraction: properties instead of debts
Inflation as a means of amortization


Demand for real estates is on the upswing

While in the past two years 1996 and 1997 the demand on the real estate market has been rather restrained, in spring 1998 a turnaround can already be felt. More and more citizens are investing money into asset values again; more and more assets going from one generation to the next thus get invested into real estates.

This has enough reasons:

The henceforth decided introduction of the common European currency is certainly a factor in causing this development. The discussion about the currency change and the political circumstances going along with this haven’t really strengthened the trust into the euro. Even though many welcome the common currency as an important step, the predominant opinion remains that the point in time to take this step is too early.

But the euro cannot be stopped anymore. We have already referred to this a year ago; at that time a lot of people were simply still waiting for what the future would bring.

Well, future brought what it had to bring, for that was the way it got decided: the euro, at any cost. Two terms of the Maastricht treaty started skidding at the curve of compromise during this hot race: first of all, two countries will participate whose indebtedness is 100% off the set norm, second of all, the political debacle around the seat of the top currency keeper is no indicator of solidarity and certainly not of a politically independent finance policy.

The euro is causing turbulences already now

… But if the bickering is already taking on such an extent at the beginning of the currency union one might easily ask oneself: how will it continue once the common currency is there?

To some degree the further development can be predicted:

Of course the euro will develop an own dynamic which might make it easier to get over conflicts of the past. Optimistically one could assume that it walks in the footsteps of the D-mark and will be just as successful and have the same ranking as erstwhile the good old D-mark.

Some points really militate in favour of this:

  1. the role and the influence of Germany within the EU (however it wasn’t enough lately in order to enforce an unlimited eight-years term of office for the president of the central bank)
  2. the economical strength of Germany (which, however has been suffering quite a bit in the past years and moves to the background against other European countries due to the high unemployment rate)
  3. the significance of the euro for the international field of finances as antipole to the US-dollar (in fact this has probably been the strongest argument for a strong euro; the real development remains to be seen here too, but the signals so far are positive)

What can we conclude from this?

Basically one should look into the future with the new European currency with trust. Because a large part of its development will be determined by the positive forces, which are emitted by the people and by their trust into the currency.

Climbing a mountain one needs to
secure oneself at the dangerous bluffs

More and more people have understood by now: the euro might be all right, it is comparable to climbing a mountain not yet conquered. A currency experiment like this has never been done before. So what should one be able to trust in?

First of all, as mentioned before, one should face the new currency with a positive feeling. At the same time however one should not disregard very important safeguarding measures – the climbing rope of the financial mountain climb.

Some of these are e.g.:

  1. building up a valuable capital of asset values
  2. non-European investments (dollar, Swiss franks etc)
  3. gold or gold mine shares

Just as a side note, especially gold is a very interesting additional investment alternative at the moment. The price of gold is at the bottom, so now is the right time to acquire some gold reserves!

Asset values beat money values:

This basic principle will be cited a lot more in future!

Custom-made property

But let us get back to our actual topic, namely the real estate property. What investment possibilities into properties would be best now?

The special depreciation

The year 1998 holds a great chance for all who want to get a lot of tax advantages for the next ten years: if one invests into an old building in need of refurbishment this year which is within the region of the five new federal states or in eastern Berlin one can write off the costs for the refurbishment in a time period of ten years.

Thus the allocation of the depreciation is very attractive: up to 40% of the refurbishment costs can be deducted within this year or within the first five years, just as one likes. You could also write off 20% in 1998 and 20% in 1999. The remaining 60% will be equally allocated to the remaining ten years. In this regard one has fantastic scopes of design. And additionally: the advertising costs can be deducted already in the year of the purchase.

In plain language this means: everybody can control his own taxes to a large degree in the coming years. And save a whole bunch of taxes ones again.

Control your taxes – the absolute requirement for this is a purchase in 1998!

Why is an investment in the
east attractive at this very moment?

The prices in the new federal states have consolidated to a pretty much real level. The current market in the new states already shows a price level corrected by 20% (downwards), compared to the years 1992-1995.

But you shouldn’t wait until the end of the year with such an investment – far from it. Since many still want to take advantage of this tax gift there will be a high demand around the end of 1998 which might boost the prices for a short moment.

To summarize it ones more: a refurbished old style building can be purchased for prices which are much cheaper than three years ago, but still with enormous tax advantages. The disadvantage i.e. the risk is: since a lot of houses have been built in the past years the vacancy rate in the eastern federal states is much higher than in the west. The unemployment rate partially is also much higher in the east than in the west. Of course this affects the rents too.

The result of this is: apartments with affordable, market-driven rents are to be preferred to exaggerated rents which are partially subsidized by rent guarantees.

See that rents are calculated with reason.

If you are interested to still partake in the tax gift of the century this year and in the following nine years than contact us immediately! As mentioned earlier, do not wait until the end of the year. The right point of time for the purchase is definitely before the summer break!!!

We currently offer good properties at good locations for you.

Rearrange yourself: capital assets
in properties instead of euro

If one doesn’t necessarily want to save taxes but wants to safely place it in real estate then the right thing to do would probably be to purchase a rented out residential building. We already referred to this in our last customer information letter.

We already have properties with high yields for you – ask us. In case you have already been searching and haven’t found the right one yet we will see that you get a property that suits your choice.

Safe for every one: the rented out freehold flat

The rented out freehold flat in the old federal states is the strong pillar on which one’s own funds are built, especially for those who only want to use a small amount of own funds or none at all. Since years the favourite locations are the areas of Rhine-Ruhr and Rhine-Main. Keep in mind: At Rhine and Ruhr one can still enter this business at price levels which one wouldn’t dare dream of in the area of Rhine-Main…

Still a solid capital investment: rented out residential space

On the other hand Rhine-Main is the location with the safest investments at all for those acquiring freehold flats for 250.000 DM or more. This region has quite some plus points; the whole European finance world concentrates more and more on the centre of trade and services – Rhine-Main. One can assume rightly that this location will be the location with one of the very most stable values in the future united Europe.

Also in this regard, check out our offers and compare them.

The chief attraction:
properties instead of debts

This might sound like a contradiction. Purchasing a property is connected to taking a loan in nearly all cases. Such a loan, then, means a debt to a bank or a savings bank. But is it really a “debt”?

At a second glance one quickly realizes: the countervalue to the loan is the property! And after several years of gaining value it usually surmounts the loan…

Get rid of your debts – by becoming owner of a real estate property!

And here is another interesting variety: purchasing a real property at a low price one also has the chance to pay off an existing loan or remaining debts elsewhere within the property financings. Such an arrangement even gets advised by the bank quite often. The monthly liquidity gain can be enormous; in a recent case the monthly credit expenses have been lessened by 500 DM through this – in exchange for owning a real property! Unbelievable? But true: after all the current loan interest rates for real estate credits are around 6%, while usual personal bank credits cost around 11% up to 16%.

So: if you have liabilities and want it to be checked out whether these can be lessened or eliminated through acquiring a rented out flat then ask us!


Inflation as a means of amortization

Another thing: let us suppose that the inflation rate in Europe will increase to four or more per cent again during the time of the Euro. What does that mean to your debts? Right: they automatically decrease by that very percentage of the inflation rate year after year – without you needing to pay back this amount! Even though mathematically there still is the same figure on the paper, in practice the loan – measured by the value of the money – has decreased by the rate of inflation! In the case of real estates the inflation always “amortizes” part of your debts! (Just like if inflation eats up part of your savings… which is nothing else but the reverse of this calculation.)


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