The real estate market is characterized by uncertainty and change. Bank turmoil, rising interest rates, inflation and other factors raise questions and leave their mark. About 5 years ago, owning a property cost about 2.4 times less than it does today. So nowadays, you have to dig deeper into your pockets. Thanks to new models, especially in the sharing aspect, it is still worth investing in a premium vacation property now. As the founder of MYNE, I would like to explain in this article why premium vacation properties still offer a worthwhile investment opportunity.
Owning your own vacation property has always been the dream of many people. In recent years, numerous real estate seekers have realized this dream thanks to the ongoing low-interest policy, a stable economy and continuously rising property values. The favorable financing options offered by credit institutions were particularly attractive.
However, conditions have changed rapidly within the last 12-18 months. The Corona pandemic has led to supply delays and shortages, especially for building materials from Asia. This has led to significant price increases for materials such as lumber, steel and concrete. In addition, the ongoing Ukraine war is weighing on the global economy and stock markets. Since the beginning of the year, interest rates for construction loans have risen significantly, which has also had an impact on interest rates for real estate financing - by a total of 180% since the beginning of the year.
These changes in the market undoubtedly have an impact on potential homebuyers. The cost of building and purchasing a property has risen significantly, which can lead to some uncertainty. Nevertheless, it is worth taking a closer look and considering the long-term prospects.
Real estate continues to be a popular and secure capital investment, as past crises, for example the financial crisis of 2008, have shown. Especially in times of economic turmoil, homes offer enormous stability and permanence, which are further strengthened by rising market prices. Although the long-term impact of the current banking turmoil is not yet clear, it is clear that the real estate industry faces challenges. Nevertheless, with careful planning and consideration, there is still potential for growth and innovation.
One innovative approach that has already proven successful in the U.S. is the principle of co-ownership, which allows owners to share the costs of acquiring and maintaining a property. At MYNE, we have seen increased demand for our co-owned vacation properties over the past 12 months. The combination of the emotional component - the dream of owning vacation properties in the premium segment in Europe's most popular regions - and financial component of the cost-sharing principle with potential value appreciation is becoming increasingly popular. Customers are returning after adjusting to the new higher interest rates of 2023. They are either opting for the shared ownership option instead of the full ownership originally planned to share the cost of purchase and maintenance, or they are taking advantage of our service at MYNE that covers the professional purchase, management and maintenance of the property.
It is interesting to note that real estate prices increased by about 65% between 2010 and 2020. During the pandemic in 2021 and 2022, there was another price explosion, but now prices are declining again. In addition, banks are acting more cautiously and want to have more equity to minimize the risk in lending. Share purchases can help here, especially with possible financing options. At MYNE, we rely on direct cooperation with partner banks to simplify the process of acquiring ownership and remove hurdles, , including through our own KYC process. We are increasingly receiving requests for alternative financing options and more flexible models. Our strategic focus is clearly on further innovation to make the process and acquisition of a vacation property cost attractive and easier. Flexibility, no long-term commitments and customer-friendly processes are critical for us to continue to grow in key asset classes.
With more flexible models and greater flexibility, the appeal to a younger target group is also increasing. Currently, most MYNE co-owners are in the age group between 55 and 75. However, we expect the age spectrum to shift increasingly toward younger target groups in the future. This is not only due to our expansion into further markets that could be of interest to this target group, but also because the younger generation is increasingly keen to acquire real estate property. They are striving for independence, a secure investment in value, and more flexibility. In the U.S., for example, it is already a trend to keep the center of one's life in a rented apartment in expensive cities, due to work and infrastructure, while buying a property in these regions is often not feasible. Instead, many opt for the proportional purchase of a vacation property within the framework of co-ownership. Shared ownership allows for the purchase of real estate without the hassles associated with it, while still providing all the benefits of owning your own property. Additionally, exchange and upgrade options provide further flexibility and variety.