Germany Property Update 2016

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Germany Property Update 2016

February 08, 2016

 Are you looking to sell property in Germany in 2016? There is every reason to believe that 2016 is going to be a decent year for the German property market. Germany has established itself as one of biggest and most powerful economies in the world, and is literally the engine that drives Europe.

The euro crisis may have dampened other property markets in the region, and even as traditionally strong markets such as France lose steam, Germany goes from strength to strength. The job situation in Germany has never been better and unemployment is at a historic low. The country has, however taken in more than a million refugees in 2015 and this has created at least some imbalance in the economy.

 Even so, Germany is one of the most attractive property investment markets in Europe that offers excellent investment opportunities for all sorts of investors – domestic and international, big and small, private, institutional, hedge funds and fund of funds. However, only the most sophisticated investors can negotiate the complexities of the German real estate market.

One such complexity is the fact the biggest 6 or 7 cities in Germany, including Berlin, Stuttgart, Frankfurt, Munich, Hamburg operate at a different level than the rest of the country. Real estate in Germany’s biggest cities is quite expensive and most of the foreign investors with an interest in Germany buy properties here. Apartments in Berlin, for example, cost as much per square foot as those in the posh areas of London.

There are several less expensive investment opportunities to be had in the smaller cities of Germany or the B and C cities, as they are called. The rural areas of Germany are quite beautiful and have a laid back lifestyle that is completely different from that seen in cities, and are very affordable as well.

Germany has always been a nation of renters. Most people prefer to rent apartments in Germany than to buy a house because the rent increases have been capped at 10 percent in the country over the area average. So the rental market in Germany is completely dominant.

Despite having one of the highest standards of living in the world, Germany has one of the lowest levels of homeownership in the West. If the property market in Germany has to really take off, this has to change. Germany should become more than just a nation of renters and hopefully become a nation of homeowners.

But the government encourages renters over homeowners through its policies. For example, homeowners are not allowed to deduct mortgage-interest payments from their taxes unlike in the United States. In spite of this, a lot of people are taking to homeownership in Germany, largely because of the low interest rates in the country.

Home financing is available easily and this has encouraged more people to buy properties. Home values have risen by 5.2% in 2015, which is a positive development. East Germany is one region that has grown very fast over the last decade and a half. The rise in home prices in East Germany is much higher than the West, but that is largely because East Germany started from a much lower base.

2016 may be the year that stabilizes the property market in Germany further and makes it more attractive to foreign investors who may have an interest in relocating to Berlin or Munich.

However, what’s holding Germany back as a destination for international property hunters is that the regulatory environment here discourages foreign investment in the German property market. There are far too many bureaucratic red tapes to overcome. Even so Germany should be one of the top performing real estate markets in Europe in 2016 and beyond.