Should you Invest?
Germany is a strong European market which could have the
potential to offer investors high returns on investments in
commercial and buy-to-let property, particularly in popular urban
locations such as Berlin and Munich. However, Germany is not
somewhere to invest for short term. Currently prices are generally
remaining stagnant, more so than across other European property
markets, and are looking to remain so for the rest of this year.
Over five years the value of apartments has dropped 6.55% in real
terms (according to the globalpropertyguide.com) whilst the prices
of terraced and detached houses have performed in a worse
manner.
Despite this negativity, investors can achieve yields at a
desirable rate in key areas and are unrestrained when it comes to
foreigners buying property.
- Although prices are on the decline in eastern Germany, Western
Germany is witnessing significant prices rises.
- Positive improvement as unemployment rate falls.
- High proportion of fixed rate loans make the residential
property market more stable.
- A high percentage of the population rent as opposed to owning
property creating huge potential for buy-to-let
investment
Price History
Germany's property market has been described as dry, with
property prices dropping by 7% between 2000 and 2006 and band
prices expected to stagnate this year. Contributing factors are
oversupply of property with not enough potential buyers and the
high rate of unemployment. It is known that Germans themselves
prefer to rent accommodation than to buy and with an unemployment
problem still evident it is unlikely that many will be able to
afford to buy in the near future. Real estate prices in prosperous
cities such as Frankfurt are higher and as the market here is
under-supplied, rents are going up.
Although the majority of Germans rent, it is claimed that this
will only prove to be a marginally cheaper option in the long run.
The German government is therefore trying to encourage German
residents to buy property instead of renting to take advantage of
the low property prices. It is also suggesting that buying as
opposed to renting could lead to income tax breaks under a private
pension programme known as the riester-rente.
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