Germany - A Euro Property Powerhouse?

Interest in the Germany  from visitors to TheMoveChannel.com has soared over the last month, with the sleeping giant of Europe's property market breaking into the top five of our Top of the Props chart for the first time in over a year. 

After an arguably lacklustre 2007, the German economy got off to a flier in 2008.  Indeed, figures from Germany's Federal Statistics Office (FSO) showed the economy grew at its fastest pace in more than 10 years during the first three months of 2008.

GDP grew 1.5% in the quarter, almost double the figure that analysts had forecast, and up from 0.3% in the final three months of 2007.

Commenting on the growth of the economy, Commerzbank economist Matthias Rubisch enthused: "Germany's growth - its fastest pace since 1996 - is sensational. The forecasts for this full year will have to be revised upwards after this strong start.

"The government had forecast that 2008 growth would be 1.7% but this could now be above 2%, compared with 2.5% growth in 2007. These figures show that the economy is robust despite wider economic problems".

Investor friendly mortgages

The proof of Germany's future prosperity is twofold; firstly there is the fact that many private equity funds have invested billions into the German property market. This is a strong indication that the market will rise significantly in the coming years.

Secondly, German banks have now started to introduce investor friendly mortgages which will undoubtedly help shift the percentages on owner occupation and rental.

The position that Germany now finds itself in is not dissimilar to the UK market of the 1990's, when the UK experienced a surge of investors buying up cheaply priced properties in order to re present them to the rental market.

The UK market flourished as a result, and with Germany following the same pattern, it is undoubtedly one of the number one European countries to watch during the remainder of 2008.

Property powerhouse?

According to Mark Bingham Managing Director of Owner Invest, Germany is set to become the ‘property powerhouse' of Europe.

He explained: "Germany has long been admired, especially in light of its 1990 reunification which many thought would be the undoing of this sleeping giant.

"If anything, the complete opposite was true and we saw a united Germany battle the odds to become a major European player.

"However such was the success of its financial turn around that many predicted that the property market was destined for great things some years ago.

"This was not meant to be and Germany has had to bide its time. Now, unaffected by the credit crunch and enjoying financial stability it is angling for pole position in the European arena.

Topping the charts

And pole position could come sooner than anyone thinks if a recent survey by the Urban Land Institute and PricewaterhouseCoopers is anything to go by.

In their recent report ‘Emerging Trends in Real Estate Europe 2008', four German cities made the top 10 list. These cities were:

- Hamburg (3rd)

- Munich (4th)

- Frankfurt (7th)

- Berlin (9th)

Germany also dominated the annual worldwide quality of living rankings compiled by Mercer's, with three Dusseldorf, Munich and Frankfurt making the top 10.

The results are a mild surprise considering that Germany is not really renowned for high capital growth.  Indeed, the Global Property Guide recently reported that Germany offers merely "moderate" rental yields.

Having said that, Berlin actually has some of the cheapest housing of any major European city, and this is attracting a wave of foreign buyers to the German capital, something that promises a new property boom after a false start after the fall of the Berlin Wall nearly 20 years ago.

And according to the German Federation of Estate Agents (GFEA), buyers from Britain, Scandinavia, Ireland and the United States are leading the rush to snap up flats in the once-divided city, making the 12 months up to November last year the busiest on the property market since World War II.

A spokesperson for GFEA, noted: "In Berlin, the price per square metre is one of the cheapest of any major city in Europe, including those in Eastern Europe.

"The return for investors is comparatively favourable at between seven and eight percent. And even if the rents are moderate the purchase prices are always low enough to guarantee a good rate".

Other risers and fallers

It was a great month for France which regained top spot from Italy, with the Mediterranean hotspot slipping down 3 places to number 4 in the chart.  In a major surprise, Spain slipped 5 places to 9th in the chart - its lowest position since we started compiling figures!

To view opportunities in the German property market, please visit: http://germany.themovechannel.com/

Full Top of the Props chart - June 2008

Print Features Archive Show Full Table