Germany could present some lucrative investment opportunities for people looking to expand their portfolio of real estate assets in Europe. The country's economy is generally considered to be one of the most stable in the eurozone and some market commentators can see the potential for growth in the sector.
One such expert is James Kirkman, property consultant at ProVenture Property - which focuses specifically on Germany via its website German-property-for-sale.com - who explained why the nation could be a good choice. He highlighted that not only is the nation's economy in a strong position, but that its gross domestic product is also at its highest level since reunification in 1989 - and these factors have helped to get the attention of investors. In particular, there are opportunities in residential housing, he stated. "Germany itself has a predominantly rented market, therefore a very low owner-occupier rate," Mr Kirkman noted, which has the knock-on effect of keeping property values low.
The German real estate expert also revealed that the three best-performing cities in terms of yields are currently Leipzig, Bremerhaven and Chemnitz. Yields in these locations are between nine and 13 per cent at present, he said, adding that they are the areas where "you are going to get the best return on investment". Mr Kirkman went on to point out that investors can also reasonably expect some capital growth in places that deliver a high yield.
Meanwhile, research released this week by Savills indicates that Berlin's residential property sector is also attracting investor attention. The organisation noted that there was a 53 per cent increase in the number of deals carried out across residential portfolios nationwide in the first half of this year compared to the same period in 2010, of which one-third of transactions related to assets in the capital. Karsten Nemecek, managing director of corporate finance and valuation at the company's German arm, commented that the data "reflects the growing interest" among both domestic and international investors in the country's housing market.
Head of research at Savills Germany Matthias Pink explained that Berlin in particular appeals to investors because it "still offers good value for money in comparison to Germany's other major cities". He also stressed that there are opportunities for all kinds of investor - whether they are looking for a low-risk asset or are keen to take advantage of favourable conditions in a more opportunistic way.
But it isn't just Germany's residential property markets that are performing well. In fact, a Savills report published earlier this month showed that it is retail assets that are dominating investments. Seven out of ten of the largest deals carried out in the country's property market in the first six months of this year were in this sector, with a total investment volume of 3.69 billion euros (3.26 billion GBP) in single asset transactions completed in retail alone.
The office market was the next strongest sector, with Munich leading the way during the second quarter of the year. Across the board, demand for office space increased, Savills revealed, with take up registering a 13.3 per cent jump in the first half of 2011 compared to the same period 12 months earlier. Munich saw a year-on-year rise of 44 per cent in this respect, which resulted in prime rents climbing, the firm added. Managing director of office agency at the organisation Robert Kellershohn highlighted that "investors in all markets are increasingly willing to approach speculative developments", despite the fact that high vacancy rates are not expected to fall by the end of 2011.
Mr Kirkman offered some advice to anyone considering entering the German property market, stressing that it is important to find locations that will deliver "a strong yield", while also considering the available financing options and ensuring that these are "suitable". Finally, he stated that sectors where investor confidence is high are a good place to begin looking for opportunities.
- Friday 29 July 2011