German property investment has totalled 1.9 billion Euros so far this year according to a new report by Savills. The investment consultancy says that the money spent so far has been mostly by German Real Estate Investment Trusts, but that it expects the return of foreigners in 2010.
German property could do very well in the coming years, and if it does then it will have the credit crunch to thank.
Before the credit crunch, German property was constantly losing out to the emerging markets, and even to its neighbouring established markets, when it came to overseas property investment, because investors will primarily looking for exceptional capital gain.
Now that people have seen in no uncertain terms how quickly any capital gain can be lost, today's property investor is primarily looking for solid rental performance in their property of choice. For that type of investor Germany is perfect.
In Germany only 42% of the population owns their own home, and 44% rent at the market rate (according to recent figures from Eurostat).
This means that the government has to restrict rental rates, and landlords are only allowed to raise rents if the economy is growing. That is where the downside ends. In Germany tenants are very loyal, and when one tenant leaves it is relatively easy to find another. Typical yields are around the 4% mark, or around 6% in some areas.
Another reason why German property is perfect for today's investor is the abundant availability of properties with tenants already in place. Today's investor is researching their acquisitions to within an inch of their lives. Having the tenant in place with a rent figure set allows the potential investor to have exact figures on which to calculate the cash-flow from their German investment property.
It is also worth mentioning the fact that there are very few -- if any -- off plan property in Germany. Especially in Berlin it is almost all resale apartments in buildings built 40-100 years ago. This is also highly suited to today's risk averse property investor.
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