Short note on the Berlin Property Market

Hello and welcome to the Someplace Else Ireland blog.

As most of our readers will know, property prices are extremely low in Germany when compared to those of other European countries. Apartments in major cities can be bought from as little as €1,200-€1,700 per square metre. Why is this the case? If we cast our investment minds back to the Germany of 1980-1990, we might remember that it was one the best performing economies in the world with a very mature property market with comparatively high prices. In the aftermath of reunification however, Germany suffered years of economic decline and property price deflation. Today’s property prices are more or less the same as they were in 1997 and most experts will freely admit that they can’t predict exactly when prices will start to rise again.

Property can still be bought in the capital city of Berlin at emerging market prices, but Germany is no emerging market. It’s the third biggest economy in the world and the world’s biggest exporter. Most of those involved in the German property market, including Someplace Else Ireland, will predict that if the economy continues it’s long awaited revival under Angela Merkel, then long and sustainable property price increases won’t be far behind.

Those looking to make money and get out quickly won’t want to look at Germany, as it is a long term investment – we recommend 10 years. However, if any of our readers are happy to wait this long before selling, and are happy to take advantage of the local financing and exceptionally strong rental market available they may find this market to be one of the most hassle free and solid property investments in the world.

Over the long term, it is the capital cities that are most likely to provide the safest and most reliable return on investment, and it is for this reason that Someplace Else Ireland have put a number of guaranteed rent, maintenance and management schemes together to assist our clients in getting on the Berlin property ladder.

Consider our pros and cons of the German market:

Pros

- GDP Growth by 2.8% is the highest since 2000 (better than France or Italy)
- Shortage of skilled workers and low wage growth point to a sharp increase in migration to the city
- Growing housing demand in the right locations
- Hugely undervalued Capital city - and as the relatively new administrative centre of Germany matures we expect to see huge growth in housing demand
- Germany is still the 3rd largest economy in the world
- Stable inflation at 1.6%
- Declining unemployment as new labour laws make Germany more competitive on the world stage
- Government is cutting federal corporation tax from 25% to 15% from January 2008

Cons

- Tenancy laws and price regulation still favour the rental market.
- Foreign mortgages of just 60% are less favourable than other emerging markets
- Moderate (but stable) rental yields
- More economic improvements needed, and a large coalition government makes it difficult to initiate important legal, tax and employment reforms

If you'd like to learn more about Germany, please feel free to email me or visit our property listings.

Kind Regards

Colin Murphy
Director
Someplace Else Ireland