In recent years there has been widespread commentary that the German real estate market is booming.
Property prices are widely regarded as affordable compared to other major cities around the world. For investors looking to generate a consistent and strong cash flow on their investment, Germany is one of the most lucrative locations globally with strong investment returns.
For the combination of geopolitical events and repricing of global assets allows higher visibility on cross-border investments into Germany, and here is why:
- The German economy has strongest and most dynamic economy in Europe and is the fourth largest economy in the world. There is a highly skilled workforce in Germany and currently has the lowest unemployment rate since the country’s reunification. Germany is home to some of the world’s largest companies and is an industrial powerhouse and innovation hub of Europe. There is a Fundamental shortage of housing in Germany, which creates a great opportunity for property investment.
- Germany is well renowned for its great infrastructure and engineering, and ‘Made in Germany’ is synonymous with quality.
- Germany belongs to the interest rate policies of the European Central Bank, and gives you access to low interest rates fixed for 5, 10 or 15 years.
- No restriction or discrimination for the nationality of overseas investors into Germany. A lot of other countries have implemented quotas and various tax codes directed at overseas investors, whereas there are very low restrictions on foreign property owners in Germany.
- German property holders own the freehold title after purchase of property. Unlike property owners in places such as United Kingdom, Hong Kong and China, where homeowners are subject to a fixed term of ownership, overseas buyers will have ownership of the property forever in Germany.
- Germany has the lowest home ownership in Europe, below 50% of the property market, meaning property owners are able to readily generate rental income. Unlike other markets, where there are often regular vacancy periods, the average rental lifecycle is 11 years in Germany which offers stability to the property owner with rental income.
- There is a fundamental shortage of housing in Germany – demand far exceeds supply and population growth far exceeds new building approvals. As such the price of housing is increasing across Germany and generating strong returns on real estate investments.
- The German real estate market generally attracts long term investors due to the tax system and the upfront costs. This leads to a more sustainable growth trajectory and lowers the chances of a major sell off in housing. In Germany, property Investors are exempt from capital gains tax if they hold the property for more than 10 years.