“Residential buildings have stood for stability and secure growth of private assets in Europe for centuries“

Heiko Saeger


What is a Zinshaus? (Definition)

Zinshaus (Singular, Substantive; [ˈʦɪnsˌhaʊ̯s]; Plural: Zinshäuser, [ˈʦɪnsˌˈhɔɪ̯zɐ])

A Zinshaus is a multi-unit building that generates income through rental income. It belongs to an asset class within residential real estate that includes apartment buildings, detached and semi-detached houses as well as condominiums. Today, the term "Zinshaus" is used in the German-speaking real estate industry for multi-unit investment properties. Most are buildings with more than five residential units rented to individual tenants. The entire property – and not just individual rental units – belongs to an owner or a community of owners. The Zinshaus tenants pay for the lease of housing units a rent. This rent is the interest payment of the tenants for the transfer of the invested capital (e.g., purchase price or construction costs).

A house with several condominiums and different owners is in this sense no Zinshaus property, but a partitioned apartment building split among several owners.

Popular Investment Object

In Germany, Austria and Switzerland, the Zinshaus market is particularly interesting and popular with (mostly) European investors. Whether commercial or institutional buyers, foundations or even family businesses and wealthy private individuals: Whoever wants to secure their assets long term will invest in such properties with sometimes high returns. Apart from the yield possibilities, key for the value of an apartment building are location and size, intrinsic value and occupancy rate.

European "Rental Culture"

The European "rental culture" has a long tradition since the 17th century and is still "in vogue" today. It reflects the current Central European vision of life in terms of mobility, independence and security. Germany, Austria and Switzerland are even referred to as tenant nations. This is probably also in the population’s DNA: Most citizens in these countries are reluctant to borrow and they are critical of owner-occupied property like condominiums. In their eyes it creates immobility, especially when someone changes jobs and moves to another city. At the same time, many tenants know that because of the high price per square meter, such properties are generally not suitable as an investment or retirement object.

Even from an economic point of view, owner-occupied property is viewed critically due to the increasing of debt levels it engenders among the population. In the past, high mortgage burdens on broad segments of the population have even led to financial crises (subprime crisis and subsequent bankruptcy of the investment bank Lehman Brothers) and to "housing crises" ("Swiss real estate bubble" in the mid-1990s). The basis of these crises was always disproportionately attractive square meter prices for owner-occupied property in relation to rent increases, as well as high levels of external debt (up to 110 percent debt financing) for private households. High leasing rates in Germany, Austria and Switzerland as well as low debt levels and limited credit financing among households (debt/equity ratio) contribute significantly to the stability of these economies.

The Zinshaus concept has its very unique tradition

In Russia, Zinshaus properties were invented as early as the 18th century, when Empress Elisaveta Petrovna reigned. Dohodniy Dom – literally ‘Zinshaus’ or profit house – is a building with several residential units, built with the aim of making a profit through the renting of individual apartments. This "new investment model" then made its way to Central Europe in the 19th century, where it was taken up by the "new bourgeoisie" during the Wilhelminian period – especially in Germany and Austria. Today's landmarked and popular houses established themselves as a classic investment of the wealthy bourgeoisie. Back then, like today, a Zinshaus generates monthly rental income. One benefit of the asset class is still its positive performance when Zinshaus property is built in stable, popular locations.

One peculiarity of the classical, often landmarked real estate, however, is that the repair/maintenance costs cannot be ignored: Accessibility and energy efficiency standards do usually not match those of newer buildings.

If you want to buy classic Zinshaus property, you also have to deal with limited market supply. That drives up asking prices. Thus, newer Zinshaus properties offer better opportunities, as they are considered "new construction”. Apart from the often lower visual appeal of new apartment blocks, the achievable returns are generally higher than for Wilhelminian buildings – but with less maintenance costs.

Old vs. New Buildings

Many areas of the law make distinctions between old and new buildings, yet no clear-cut, universal definition exists. It is rather a differentiator that is rather housing market tax-related relevant. Depending on the nature of the regulation, the boundaries are different However, for the most part, ‘new’ buildings are those that were constructed after the Second World War.


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