Like it short and on the spot?
6 Reasons for buying a property in Germany.
On the spot – buying a property in Germany can be the right decision. Reasons: Low prices in comparison to other cities in Europe. Too little numbers of newly build apartments according to the needed numbers.
Demographic change leads to a higher demand for apartments (more and more single or two-people households). Historical cheap interest make financing more lucrative. High tax deduction possible. The refugees coming to Europe and Germany narrow the market even more!
Our Conclusion is simple! If you find similar/better conditions somewhere in the world for your investment property strategy then buy in that market. And please let us know. Every family office, everyone who really wants to diversify his real estate portfolio and every institution looking for a solid conservative investment, should at least consider: Buying a property in Germany – NOW. There will never be a better time for your investment!
Valuable insights in the market
for buying a property in Germany
– Background –
The last two years have shown one clear fact
The takeover boom on the market for investment real estate was no bursting bubble at all. No wonder! The extremely low interest rate policy of the European Central Bank (ECB) has decreased mortgage rates by half over the last few years. It also attracts institutional investors to put their money in real estate rather than in fixed income securities. Finally, insurers and pension funds must not only invest as safe as possible, but also profitable.
Therefore they have to invest the amounts paid by their customers contributions. What could be more appropriate for foreign investors then investing in German real estate? The booming, largest economy in the euro zone and by far the healthiest. With so much cheaper property prices compared to other major cities in Europe like London, Paris, Madrid or Mailand.
German Cities begin to recapture top spots in all international rankings
The described situation has driven huge amounts of money spent in the German market. Over the past few years, the transaction volume in the entire German market has increased. Especially in the cities of Leipzig, Munich, Berlin, Hamburg, Frankfurt, Münster, Freiburg, Augsburg, (and many, many more) the price of investment properties only knows one direction – upwards.
To be honest the price in cities like Munich, Hamburg and Frankfurt has become quite competitive. But even in these cities we see prices for investment properties increase two-figures per year. What distinguishes the majority of other German real estate strongholds from these cities, is the fact that the local extreme high demand has clearly decoupled from the rental activity.
Solid financing with low mortgages. Big plus for buying real estate in Germany.
Financing in Germany is more lucrative than in nearly any other country in the world. With actual interests between 1.25% to 2.50% for classical rented apartments or houses. This means you pay less than you earn! This leads to a rapid increase number of people buying their own apartments as it becomes more affordable.
Foreigners buying a property in Germany, often get higher rental returns than the amount they have to pay for mortgage including redemption. This leads to higher deals, as the amount of money they have to spend on their own often comes down to the closing costs. (Or additional 10%) In the past foreigners buying a property in Germany often had to spend 20%-40% of the property price. Just to make it – a good Deal!
Demographic Change of Germany – Building too little numbers of new apartments
The last few years the construction of new apartments has increased. BUT – compared to the increased demand of new apartments, the numbers are as low as last, about twenty years ago. The number of apartments needed to be newly build in Germany outnumbered the real constructed number of apartments as high as 375.000 up to 450.000 apartments.
As in the past there were living 3-4 people in one apartment / household the demographic change leads so more and more 1 or two people per apartment. This let´s the demand explode. Especially in good city locations there is nearly no free-flow of rental apartments in these cities which lets the price rise and rise.
Source: statistisches Bundesamt
Note: German government allows high Tax deduction for investors buying a property in Germany. To get a good overview on property taxes and possibilities of tax deduction you can check our article: Property Taxes in Germany
Foreigners recognize buying a property in Germany is lucrative. The Asians are here – Americans and Russians either
According to all these facts it is no surprise, that more and more foreigners are looking for an opportunity to buy a property in Germany.
Especially from Asia and Russia huge sums of money flow to Germany. Back in the years 2006/2007 a lot of international investors were looking for more short term investments on different markets. Today a lot of these investors are looking for long-term success based on conservative analysis. Often lucrative properties or bundled properties in good location are their first choice today.
For example Samsung bought properties in Germany for 450 million euros last year. A Korean pension fund bought for 100´s of million euros real estates in the same year. If conservative Korean companies in search of stable returns invest in the german real estate market, others follow quickly. So called opportunistic investors who go into more risk – such as Blackstone invested EUR 350 million.
What to do next?
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Questions and Feedback
What are your questions after this article? What are your experiences buying a property in Germany? Please leave us a comment below – we appreciate it! Tell us what you liked or even what you would like us to add to this article or our site.
Looking forward to our exchange. If you just want to be inspired by some of our reference properties we sold in Germany feel free to take a look. Inspire Me!