What’s Next in …Real Estate Germany?

By Claudia Gotz

Germany is currently one of the favorite real estate investment markets in Europe. Once derided for being too conservative and boring, the tables have now turned as Germany has maintained its economical stability through a series of economic crises that are flooring other major powers in Europe. 

Germany has established a powerful influence on European monetary systems, and this, as well as the country’s strong and growing economy has resulted in German real estate being seen as a safe haven for investment.

German growth in the past year has been followed by some experts predicting a slight downturn for 2012 and it is possible that the German economy will slow down into a moderate growth modus. But despite this, the historically low interest level and good macro-economic conditions – especially in comparison to other European countries – make investing in the country highly attractive.  Robust German industry and the high employment rates generated by a healthy labour market result in a stable GNP and this delivers reliable revenue, particularly in the retail sector.

The demand for residential also remains high – completion of construction projects in some areas is still behind the market demand that has come out of the growing number of households in our cities. The result: there may be a short hiatus period in ‘upgrowth’ in 2012 but it will not result in a downturn. The annual report “Frühjahrsgutachten der Immoblienweisen” confirms the German real estate economy is an anchor of stability. The report however, does acknowledge the risks to the real estate sector due to further regulation of loan allocations and funding conditions and regulatory policies like Basel III, Solvency II, AIFM and others make business decisions more difficult.

Nevertheless the demand for real estate in Germany is high and there would seem to be more than enough liquidity in the market. The biggest issue for investors in Germany might be the lack of core and core plus products, but smart investors could dig deeper and take a closer look, not just in Germany, but throughout Europe. There could be an opportunity here for those real estate specialists with good local market expertise to allocate their investments. In Germany the trends show a tendency towards alternative local markets and hidden champions.

The latest market report will be published by IVG this week taking a close look at over 70 German cities – a helpful guide for “Investing in entire Real Estate Germany”. Dr. Beyerle, Managing Director IVG and Head of CS & Research talks about the gap between the “German big 5 or 7” and over 70 other prospect communities:  “Real Estate Germany is still not as transparent as some foreign investors might wish, even though we made great progress in the last 10 years. Unfortunately whilst places like Stuttgart, Düsseldorf, Frankfurt, Berlin, Hamburg, Munich and Cologne are featured in respected databases, there are many more places that are not indicated in market research data at all. This is despite a growing interest in investing in areas and locations “outside” the well known Metropolises. IVG research has identified this issue and takes a closer look at those places. Our recently published Real Estate Germany ranking evaluates 74 cities in Germany.”

The attractive economic framework in Germany delivers interesting opportunities that smart investors cannot ignore. If you would like more insight and to meet leaders and experts from the German and European real estate industry, join us at the next annual ULI Germany conference: