24 Jun Why German’s Think the Property Market Will Crash?
In this blog post I talk explain why Germans think the property will crash and why this is wrong
The Psychology of Money Making and the German Property Market I realize that the title of this article is somewhat awkward. The Psychology of Money Making and the German Property Market. My oh my any SEO person or blogger might be thinking, “man, that’s strange title if you’re trying to get traffic”. But the thing is psychology and biases matter greatly in investing. If you’ve ever met with a Financial Planner (Vermögensberater in German) they, will at some point, talk about the various biases and how they affect your investment decisions. To be honest it’s not the most exciting of topics. It’s also one, that when you bring it up with clients, their eyes tend to glaze over. It’s not just that it’s a boring subject but it’s hard to quantify in real life.
This is where the rubber hits the road.
Now, where this gets really interesting is when we look at how our own history affects our thinking. If you moved to Germany in the late 90s to early 2000s the German real estate went sideways and, when, accounting for inflation actually lost money. If you moved to Germany, and, especially Berlin in the last 8 years you have a totally different view of the market.
Take a look at the following graph as being representative of the German Real Estate Market
Red or Blue, what line represents your view of the market here?
As Morgan Housel talks about in his excellent article Anchored To Your Own History Bias
If you were born in 1970 the stock market went up 10-fold adjusted for inflation in your teens and 20s – your young impressionable years
when you were learning baseline knowledge about how investing and the economy work. If you were born in 1950, the same market went exactly nowhere in your teens and 20s:
There are so many ways to view this. A person who moved to Germany during the market slump has a very different view than someone who’s had to outbid 20 other people to get a property. This coming of age really affects your view. Even people who work in the industry are really struggling with the idea of a booming property market.
This is how I view the German real estate market
we are here the red arrow
Now unfortunately a huge side effect of this is a massive lack of inventory. Everyone is telling me that they have cash buyers lined up but can’t find anything unless it’s at the high end of the market. This is especially true if you’ve tried to buy property in Berlin or Frankfurt. The lack of inventory is pushing prices through the roof. The other problem is that most German real estate agents (Maklers) deal only in their very local market. So even if you contact them they probably can’t help you.
Next Week Are We in a Bubble?
The good news is that I have built connections throughout the property market and can help you.
So the question for you is
Do You Want to Profit from the German real estate boom. If so Drop me a line!