German Property — it's a game of two halves
After years of stagnation in the years since reunification, Germany's economy finally appears to be on the brink of recovery. Business confidence is at its highest in 14 years, while the Essen-based RWI Economic Research Institute predicts the German economy will grow by 1.8% this year.
Couple the rosy forecasts with a strong and competitive export industry and a government committed to economic reforms, and the result should be the re-emergence of a sleeping giant. The German property sector, which has seen an influx of foreign investment in the past year, confirms the optimism.
The recent period of economic stagnation, especially in the east, ensured that property prices remained low. But some investors now see this as an opportunity. Prices in former East German cities such as Berlin and Dresden can offer the best deals, often selling for 30% lower than the rest of the country. Apartments in Berlin can be bought for a tenth of the price of similar properties in London and are even cheaper than several eastern European capitals.
Writing in the Sunday Express Jane Slade said: "Low property prices and historically low interest rates should enable investors to enter the market without feeling they are risking much".
Although renting is the preferred option in Germany - only 40% of Germans own their own properties - it is predicted that domestic demand, and prices too, are set to rise as the German government relaxes restrictions on the mortgage market.
Another difference with the UK market is that the prospective buyer will not usually see a "for sale" sign outside a house that is in fact for sale. An initial enquiry must be made to an estate agent (Immobilienmakler) who will provide a list of available properties. However, you should do your research carefully and look out for the nuances in property advertisements, whether in local papers or from the estate agent. And be sure to calculate in the additional administrative and legal fees, which can add 10%-12% to the purchase price. Also, you should not sign an exclusivity contract with a German estate agent, in order to pursue offers from a variety of agents. Commission payable is usually negotiable, so haggle hard.
Where do you start looking for some bargains? As we have noted, East Germany can often provide the best buys - Dresden and Leipzig in particular have a lot to offer. Check out some of these websites to get some ideas.
Property links:
www.germanpropertyinvestors.com
Dresden
Despite the fire bombing of Dresden during World War II, the beautiful city, known as the 'Florence on the Elbe', has since been rebuilt. The city and the surrounding area of the Elbe valley was declared a World Heritage Site in 2004. The flourishing cultural scene and healthy technological sector suggest a sustainable future for the Saxon capital.
Although there is plenty of affordable housing in Dresden, it has been suggested that the low-quality housing estates will be demolished in the next few years, helping to boost the values of more desirable properties.
With wages finally beginning to rise after a stagnant period after reunification, property values and demand is set to rise.
Leipzig
With a large student community of 40,000 and excellent research facilities for medicine and biology, Leipzig should attract more people to this city over time. 'Media city', a modern quarter development in the city, has created 30,000 jobs in television across the whole of Germany.
Berlin
The areas of Charlottenburg and Mitte, among the most exclusive in the city, are likely to see the biggest rises over the next five years. Expect to pay £110,000 for a two-bed apartment in Charlottenberg, and even less in the arty district of Prenzlauerberg in the former East Berlin where you can find two-bed apartments for as little as £70,000.
Think carefully before securing other debts against your home.
Your home may be repossessed if you do not keep up repayments on your mortgage.
The overall cost for comparison is 7.1% APR. The actual rate available will depend upon your circumstances. Ask for a personalised illustration. There may be a fee for the mortgage advice. The precise amount will depend on your circumstances, but we estimate it will be 1.5% of the loan amount with a minimum fee of £500 added on to the loan.
Mayfair Consulting Limited is an Appointed Representative of The Mortgage Times Group Limited, 279 Tottenham Court Road, London , W1T 7RJ , which is authorised and regulated by the Financial Services Authority no. 303007.
