Is New Construction a Smart Investment?

What You Need to Know as an Investor

Real estate investments aren’t one-size-fits-all. Whether or not a property is a good investment depends heavily on factors like location and condition. Many investors are drawn to new-builds, but the core question remains: Is new construction actually worth it as an investment? There’s no universal answer, which is why we’re taking a deep dive into this topic.

Common Concerns About New Builds

Higher Costs

One of the main concerns is the higher purchase price and the larger financing requirement. Compared to existing apartments, new-builds typically cost between €4,000 and €5,000 per square meter. In high-demand cities like Berlin, Munich, or Hamburg, those prices can easily double.
Meanwhile, in up-and-coming cities like Leipzig, you can find existing properties for €2,000 to €3,000 per square meter, making them more accessible to first-time investors.

Buying Off-Plan Risks

Purchasing off-plan comes with certain risks, such as construction delays and quality issues. These delays can lead to unexpected financing costs—especially problematic if interest rates rise. Investors should be prepared for potential follow-up financing at less favorable terms.

Initial Rental Challenges

Another concern is potential rental delays. When multiple new units enter the market simultaneously, competition for tenants can slow down the rental process—depending on location.
Also, property management for new developments can sometimes be disorganized during the early stages.

Advantages of New Builds

Tenant Appeal

New properties tend to attract renters thanks to modern layouts, updated infrastructure, and high-quality materials. Lower utility costs due to energy-efficient systems also appeal to tenants and can justify higher base rents.
In prime locations like Berlin or Hamburg, initial rental prices can be particularly attractive, especially since rent control regulations often don’t apply to first-time rentals.

Lower Maintenance Costs

In the early years, new properties typically require little to no maintenance, as everything is still under warranty. This positively impacts cash flow projections.

Tax Advantages

Thanks to the “Wachstumschancengesetz” (Growth Opportunities Act), investors can now benefit from increased depreciation rates for new-builds:
Instead of the standard 2% annually, you can deduct 5% per year over six years, leading to significant tax savings and an improved return on investment.

Tips for Investors

• Secure Financing Carefully
  If you're buying off-plan, ensure your financing includes a buffer for potential cost overruns or delays.

• Vet the Developer Thoroughly
  Check reviews, references, and creditworthiness of the developer before signing anything.

• Use a Bank Guarantee or Completion Bond
  A bank guarantee or completion insurance can protect you in the event the developer goes bankrupt.

• Hire an Independent Construction Supervisor
  An independent expert can monitor and document the construction process, offering added peace of mind.

So, Is New Construction Worth It as an Investment?

New-build properties come with both risks and opportunities. While higher costs and possible delays are real concerns, strong tenant demand, low maintenance needs, and new tax advantages can make new construction a highly attractive investment.

With careful planning, financial safeguards, and smart location choices—particularly in well-positioned A- or B-tier cities—new-builds are becoming increasingly compelling for investors looking for long-term value and rental income.