Holiday properties: A sustainable investment trend

Why wander far away when the good is so close? In 2020, many Germans spent their holidays in their own country. The trigger for the newfound love of home was the corona pandemic, which made travel to distant countries significantly more difficult or even impossible. Since hotels in Germany were only temporarily open and were also considered potential sources of infection, many German citizens spent the corona summer in “safe” holiday homes — which were in great demand for personal use or as a capital investment.

Accordingly, the market for holiday properties continued to gain in importance rapidly in 2020. Find out which factors play a role in the purchase decision — and how you can enjoy your holiday property in a relaxed and yield-optimized way.

Growing holiday property market: Holidays in your own country are booming

Even before the outbreak of the pandemic in 2019, Holiday apartments and holiday homes with 22.3% In Germany, this is the second most important type of accommodation after hotels (48.5%). On the popular beaches of the North Sea coast, around 60% of holidaymakers in rented vacation properties.

In Germany, a total of according to the Federal Statistical Office More than 48 million tourist nights were spent in holiday homes or apartments in 2019. This represents growth of around 13% compared to the same period of the previous year. In addition to the commercially recorded overnight stays, there are also a large number of unofficially registered overnight stays on the private holiday home market.

Compared to 2019, the number of holiday property owners rose last year according to a recent study by around 21%. According to this, around 1.26 million Germans owned a holiday home or holiday apartment in July 2020. In 2019, there were “only” 1.04 million holiday property owners. According to figures from the Federal Statistical Office, in 2020, a total of 11,328 commercial holiday homes and apartments opened in Germany.

According to a recent survey, Vacation in your own country also in 2021 At the top of the Germans' wish list: 63% would like to book a holiday home or apartment this year, 31% prefer a hotel and 3% would like to stay in special accommodation, such as a houseboat, on a campsite or in a camper.

Individual tourism and changing working environments offer great potential

But in addition to the consequences of the corona pandemic, there are also social macro trends that are accelerating the holiday real estate boom. For example, the desire for a sustainable, peaceful holiday in the countryside. So gave 58% of Germans When planning your vacation in 2019: “My vacation should be as socially responsible and/or environmentally friendly as possible.” These included criteria such as “avoid crowded places,” “choose a nearby destination,” and “book accommodation with a local operator.”

Structural change in the working world, which has picked up steam in the past year, plays another role: Many discovered the benefits of working from home. Because as long as there is a stable Internet connection, the office can of course also be temporarily located outside the city in the countryside. Or even in a popular holiday destination thanks to remote work. Since many companies will offer home offices or remote work models even after the pandemic, the demand for holiday properties as a secondary office and, as a result, their price levels could continue to rise.

Attractive tangible assets: Investing where others go on vacation

This is confirmed by the”Holiday property market report Germany 2020“by Engel & Völkers. According to Engel & Völkers, prices per square meter for holiday apartments in a good location in Norderney were between 12,000 and 15,000 euros. Holiday properties in popular Alpine foothills such as Garmisch-Partenkirchen reached 6,500 to 8,500 euros per square meter. Due to the high demand for holiday properties combined with the scarce supply, Engel & Völkers expects further price increases, which makes holiday properties even more attractive for owning and/or renting out.

Further impetus comes from the fact that banks are increasingly charging negative interest rates for savings, which increases the attractiveness of investments in tangible assets. But the low interest rate environment also has advantages: Holiday properties can currently be financed cheaply and are also considered a relatively crisis-resistant and stable investment. They represent a solid investment, particularly in high-demand holiday regions, due to their potentially good rentability and emotional value. Be it as an additional source of income, to close a potential pension gap or as a collector's property. However, there are a few criteria to consider before buying:

• Lage

Even in popular regions such as Lake Constance, the North Sea or the Baltic Sea, it depends on the exact location. What is the view of mountains, lakes or the sea? Are there good public transport connections? Are there restaurants, playgrounds or leisure facilities nearby? Is the holiday property in a quiet location?

• Purchase and additional costs

In addition to financing the purchase price for the property, there are significant ancillary purchase costs. These include real estate transfer tax (3-6%), brokerage commission (3-6%), court and notary fees (0.5% or around 1.5%) of the purchase price.

• Renting and marketing

Since holiday properties are usually only rented out for a short period of time, you shouldn't underestimate the marketing effort if you want to avoid expensive vacancy. This is because loans, additional costs, insurance and duties are incurred even if the property is not rented out. Owners must therefore always make an active effort to market the property via Internet portals or the tourist office, which involves a high, regular effort.

• maintenance costs

Maintenance costs are also increasing as a result of frequent tenant changes. Furniture, textiles, furnishings and floor coverings in holiday homes are subject to heavy wear and must be replaced regularly. Owners should also factor in costs for service providers such as gardeners or cleaning companies who take care of the property if the owner cannot or does not want to take over this himself.

Digital real estate investments: Leave the management to professionals

Despite the relatively high costs of acquiring and operating holiday properties, after a study by Fewo-Direkt achieve average net returns of 4.2% in Germany in recent years. The net return reflects the ratio of purchase price and ancillary costs such as real estate transfer tax and brokerage fee in relation to annual rental income minus property tax and operating and maintenance costs. However, rental income varies significantly due to location, equipment and property size, so that such averages are only of limited significance.

It is also impossible to calculate the risk of vacancy, which caused financial difficulties for many investors who depend on rental income from their holiday properties, especially in times of the corona pandemic. Maintenance and service costs can also be subject to severe fluctuations depending on the degree of utilization and can sometimes cost owners a lot of time, money and nerves.

If you want to benefit from a return without much effort, a possible variant of buying is Investing in real estate projects via digital shares. Investors can sit back and relax and let specialized platforms handle all the work: from property screening and financing to administration and yield optimization. Starting at just 500€, investors and owners benefit from rental income, the increase in value and potential sales revenue — without the uncertainties and stress factors that a holiday property normally entails.