German residential property: Back in fashion – with good reason?

- 40 million dwellings in Germany. "Germany’s population of just under 82 million people live in approximately 40 million dwellings. Nearly half of these are single and two-family homes. At slightly over 42%, the home ownership ratio is still below the European average. In itself, this ratio represents neither a call for politicians to approve new incentives nor an implicit invitation for investors to tap into the market."
- Prices are unchanged on average. "Unlike in many other European countries, residential markets in Germany did not go on rollercoaster rides in the last ten years. Prices had neither soared up until 2007 nor did they drop in the course of the recession."
- Average fails to reflect major regional differences. "However, price trends also differed substantially between the attractive regions with high in-migration and the economically weak regions with high out-migration. While house prices in the weakest regions fell by more than 30% in the last ten years, they rose by up to 20% in the best regions."
- Slight price increases to be expected in the next few years. "The low number of completions, Germany's quick economic recovery, low interest rates and the fact that many investors are looking for low-risk investment products have led to a small boom in some subsegments of the residential property market. Prices are on the rise for prime inner-city locations especially in the major conurbations. But bargains can be found outside these few major conurbations as well. There are numerous attractive medium-sized towns and cities such as wellestablished university towns. On average, house prices in Germany look set to rise by roughly 1.5% p.a. over the next two years."
- Beware of the risks. "The positive outlook should not, however, render investors blind to the specific investment risks: real estate is always an investment in a particular region or area, making it vulnerable to changes in regional economic structures and the related demographic changes."

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