Canny investors eye up German property

It's not only football fans who have their hopes pinned on Germany at present...

There are an increasing number of reports in the press at present of a 'buzz' around the German property market. This coincides neatly with the current football tournament being played there but is there any substance beyond this you may be asking yourself.

Because after all, the country's performance in the European property tables has been nothing to write home about for a long time. With low mortgage approvals and home ownership levels, German property prices have stagnated for over a decade. What's more, the recently published European Housing Review 2006 found, of those surveyed, that Germany was the only country where house prices had actually dropped.

But now major institutional investors such as Soros, Goldman Sachs and Blackstone are all jostling for position to snap up large swathes of German real estate. Do they know something we don't?

Changing fortunes

After some troubled times, the German economy is showing signs of gathering speed once again. The seasonally adjusted jobless rate in the country fell from 11.3 per cent to 11 per cent in April and market analysts such as JPMorgan Asset Management are highlighting the current healthy state of the finances of the country's companies and consumers.

The German construction sector has started to pick up and there are reports that the property market has now "bottomed out". If these prove to be true, then as one of the most affordable markets in Europe with tax levels and interest rates low, it's suddenly clear why canny investors are taking notice.

One for the hard-nosed investors

Unlike Spain, France and Italy, Germany has less appeal to the 'lifestyle investor' with less sunshine and beaches. But with strong rental yields of up to 10% in major cities such as Frankfurt and Berlin, it's certainly of interest to property buyers simply interested in pure investment goals.


Andrea Marie Portugal, marketing manager with investment agent Inmoinvest seems to think so. She told OPP magazine: "Germany will be the next big investment opportunity. With a sound economy and a tried and tested infrastructure Germany will produce significant capital appreciation over the next five years."

Talk of a German property boom is premature as yet. But with an increasing range of finance options, the advent of real estate investment trusts (REITs) and a strengthening German economy, it's certainly one to watch...