German Property Quiet Boom Attractive To Investors

News Posted On: 04 July 2013 Germany’s status as a safe haven for investors is well documented. But the forces that have generated a housing boom in the Eurozone’s most prosperous economy go beyond interest from investors anxious to squirrel their money away safely. The boom in German property has come as a result of low unemployment, rising construction rates and robust growth in rents, according to UK-based Knight Knox international. Germany was recently voted Europe’s most attractive property market, in a survey held by property consultants CBRE. The result was backed up by statistics indicating that every sector of the German property market is flourishing. The rental sector alone is worth over £890 billion in a country where homeownership is low, at around 53%. German rental rates have grown by 15% over the last five years, while apartment prices have risen by 23% in the same period, according to BulweinGesa, Germany’s leading property indices. But the growth of the German housing market is underpinned, not by foreign investment or speculation, but by genuine economic growth. Germany’s unemployment rate is near to its 2012 record low, representing the deepest cut in the jobless rate since reunification. The 2.943m Germans out of work make up 6.8% of the population, as against unemployment of 7.8% in the UK. There’s more though: part of the German employment boom is in the construction industry, where residential construction rates grew by 2.5% in the third quarter of 2012. Rather than a speculator-led bubble, though, the German property market is participating in a nationwide economic upswing. And that’s being recognised by investors. Germany drew in over a fifth of the overall investment in Europe last year and international investors carried out 40% of 2012’s transaction volume. Investment in German real estate totalled €6.7bn in the first quarter of 2013, a 21% year-on-year increase, according to Savills. Berlin, once a stoutly industrial city and then the home of the Wall separating the two Germanies, is now the home of a rocketing population – up by over 100,000 since 2007 – and increasing rents, which have risen by a third in the same period. Apartment prices have seen a 41% increase, according to online broker Immobilienen Scout. Mitte, a city centre district of Berlin, has been a vital part of the city’s property boom, with apartment prices now nudging £6,700/m2 in the district. Comparable properties in Charlouttenburg-Wilmersdorf run to £4,700/m2, though the two districts are close; German property is governed by German perceptions of desirable neighbourhoods. Germany’s boom has seen prices rise so sharply in Berlin that both Germans and foreigners have begun to look further afield. The German provincial cities are increasingly sites of investment as well as purchase for habitation, showing much lower prices but comparable rental demand. And the German economy, still Europe’s healthiest and the Eurozone’s pricipal creditor, underpins this strong housing growth, indicating bright days ahead for investors in German property. Les Calvert – overseas property reporter Taylor Scott International