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Why invest in Germany?

The German Property Investment Market

 

Germany is the largest economy in the European Community with a population in excess of 80 million. Due to the country’s reliance upon manufacturing based industries; the cost of integrating eastern Germany and certain demographic problems the economy has suffered badly over the last few years. This has resulted in a reduction in both tenant and investor demand within the commercial property market. Hence prices decreased significantly over the last few years and domestic institutional investors turned their attention away from Germany to other stronger foreign property markets in Europe and further a field.

The absence of domestic investors further weakened the property market with the resultant reduction in prices and this has allowed foreign investors particularly from the UK, Ireland and the USA to exploit relatively low historic prices.

 

 

Why Invest In Germany?

 

  • Large strong economy which is gradually implementing the structural changes to the economy which are necessary to ensure future growth.
  • Significant office, retail, industrial / logistic and residential property investment market.
  • Gross Yields of 7% to 10% (historically Gross Yields were 4% to 6%)
  • Purchase costs typically between 7.50% and 8.50%; to include: 3.50% for transfer tax (stamp duty), 1.0% for notary / legal fees and 3.0% / 4.0% for broker fees. You should note that all investment agency (seller and buyer) fees are paid by the Purchaser in Germany.
  • Choice of location as a result of former Federal System – a number of large and stable Cities to invest in to include: Berlin, Frankfurt, Munich, Hamburg, Dusseldorf, Cologne, Leipzig and Stuttgart.
  • The market is not as transparent as say the UK and property is quite often sold on a confidential basis.
  • Duncan Allison is able to advise clients on careful stock selection and through our contacts in Germany we can engineer quiet off-market purchases without competition.
  • Finance is available via UK and German Banks and the terms are substantially more attractive than those offered in the UK.
  • Favorable yield gap – borrowing rates including Bank margin are often below the property yield.
  • Domestic players are beginning to re-invest in Germany which is an indication of future growth acceleration.
  • Significant capital gains will be made as a result of downward yield-shift as the economy and property market continues to recover.