Who doesn't dream of owning their own property or a further capital investment in another property, and then, of course, at a low cost and in a prime location. It is true that building interest rates have been trending down since mid-2024. In December 2024, interest rates were close to 3 per cent. But material and construction costs remain high.

But there are other ways to invest in property. For example, in property funds. But are property funds an alternative to the currently highly sought-after but perhaps now overheated technology ETFs or ETFs with Amazon and Co.?

You can invest in so-called open-ended and closed-ended real estate funds. First of all, it is important to clarify what the difference is. An open-ended fund is available to everyone at all times, while the units available for purchase in closed-ended funds are limited. Once all available shares have been sold and the marketing period has expired, no further shares can be subscribed. Open-ended funds are a portfolio of several real estate properties and thus represent a lower investment risk than closed-ended funds, which may contain one or a few properties. Closed-ended real estate funds are usually set up with the aim of raising capital to implement a specific real estate project.

Open-ended property funds are classic investment funds that tend to require a low minimum investment amount but do not give investors any voice or decision-making rights. Closed-ended property funds are not listed on the stock exchange, have a limited term and require a high minimum investment. However, the latter generally give investors a limited voice and decision-making rights.

The funds differ particularly in terms of expected returns and risk classification. Open-ended property funds are more broadly diversified and are therefore categorised in risk class 2 ‘Security and interest’ and therefore also have a significantly lower expected return (1.2 %) than closed-ended funds. Not every closed-end property fund is categorised as ‘speculative to highly speculative’ and thus assigned to risk class 7, but many are. A total loss is possible. In addition, such investments only pay off after a longer period of 5, 10 to 15 years. Then, when the risk turns out to be positive, with a high return. Investors are enticed by promises of up to 8% p.a. and a total distribution of 200%, but according to statistics, these often only leave disappointed investors in their wake.

For a long time, open-ended real estate funds were considered a solid and lucrative investment, but financial advisors are currently advising against buying and rather in favour of selling. In recent years, returns have shrunk significantly. The situation in the construction industry is tense. And not least since the high price loss of 17 per cent of its assets in one day at the end of June 2024, the ‘UniImmo’ fund, open-ended real estate funds have been in a downward spiral. Depending on the performance of the funds, the results in 2024 ranged into the slight negative range.

Closed-end property funds are speculative and only suitable for those who can easily absorb a total loss, even in the worst case.

We therefore concur with the relevant financial experts and advise against investing in property funds at present.