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Germany – A Time to Invest?
August 11, 2008Article by Ray Withers
Various markets in Germany such as Berlin, Hamburg and Leipzig are being assessed by Property Frontiers’ Sourcing & Legal Diligence departments. We have found that Germany actually proves to be one of the most challenging countries for the real estate investor. With low ownership rates (only 15% own property in Berlin and around 40% nationally), low yields compressed to as little as 2.5% in some regions, and mortgage acquisition extremely difficult for non-resident foreign investors, the investment justification is not quite as transparent as one would hope.
Although the economy is now going through some extraordinary alterations due to the latest government, national confidence in acquiring mortgages and in owning real estate is very low and therefore produces an “exit strategy concern”.
With the general economy growing relatively slowly and low levels of foreign direct investment, wages are not increasing rapidly and therefore the ability for German nationals to pay higher rents or to take on mortgages in the future is also very questionable. With average tenancy contracts around 7 years, and rent rises capped at 20% every 3 years, yield compression is a further worry for the investor market.