The German property market has been very popular recently with investors piling in to cities such as Berlin, Munich, Hamburg and many others. Indeed, over the last 12 months Berlin has seen its busiest period for investors buying property since World War II. And 70% of the buyers were from overseas, including many British investors.
Rental streams are the driver
Key among the reasons investors have been so interested in German property is the fact that the country has a low proportion of owner-occupiers - only around 42% across the country. As such, the German property market offers attractive long-term rental streams from stable tenants with full-time employment.
This, coupled with the fact that German property price inflation has been low in the recent past (in real terms it has hardly grown at all since 1970), means that relatively low investment sums can buy attractive city-centre properties with sitting tenants and a robust financing model based on the reliable rental income. Indeed, if one compares the increase in home ownership in the UK in the 1990's from 50% to 74% and how that impacted on the price of property here one can see the German market has a lot of scope for property price inflation.
So where to go
There can be little doubt that many investors buying apartments in cities across Germany are banking on the country returning to economic success following the costs of reunification which held it back so much during the 1990's. However, be warned - there are still parts of many cities where property prices are low for a reason and are likely to stay low for some time. Careful due diligence and selection is required.
Berlin property has been particularly attracting the investors in 2006-2007 but many are now casting their nets much farther afield to cities such as Hamburg, Munich, Stuttgart and even the smaller ones such as Heidelberg or Mannheim. The former East German states are still being avoided for good reason but canny investors will keep a careful watch on these too - places such as Leipzig, Magdeburg and many others merit a place in the list of longer-term prospects.
Berlin will, however, remain popular for some time due to the fact that home ownership here has been considerably lower than even in the rest of Germany at only 13%.
What about outside Germany?
German cities are not the only ones with apartments that rent out well to locals and long-term business professionals. Paris, Madrid, Lisbon and Warsaw all offer worthwhile investment opportunities. The rental markets in these countries is not always as strong as the German one where the tax system for decades has made home ownership less attratctive than in, say, the UK. However, the right apartment in a good location tends to retain its appeal in any capital city (or a centre of commerce and finance such as Frankfurt).
See our knowledge base for more information on countries and regions, buying property abroad and much more. And download this property return on investment calculator to help you work out the financial aspects.
