Real Estate

Germany: property prices are on the rise, rents are stable

By Dr. Reinhard Nacke, FPS Rechtsanwälte & Notare

Unlike other European countries, property prices are on the rise again in both Western and Eastern Germany. From March 2007 to August 2012 the price for new residential properties rose by nearly 25% whilst rents only increased moderately. In some cities the rise over the last couple of months could be described as dramatic. Some analysts are convinced that in this regard the German bubble may yet burst.

The reason for the dramatic development is easily explained: people are insecure about investing in equities and funds which have proven loss-making and returns on interest generated through conservative investments such as instant access savings accounts have decreased steadily. For many, the acquisition of property seems to be a good choice of investment again. Indeed, buying properties to let may be profitable as rents in Germany are relatively stable. Therefore it is often the case some people opt to rent a flat rather than to acquire property.

However, in order for investors to make the right investment choices they should be aware that whilst property prices are on the rise throughout the whole of Germany there is a difference between the Western and Eastern regions of the country. Property prices are higher in Western Germany than they are in Eastern Germany which is due to the tendency to move to the West. Nevertheless, there are exceptions; the cities of Leipzig and Dresden are growing and therefore offer profitable investments. In the western part of the country residential property prices are especially high in Southern Germany (Bavaria, Baden-Wuerttemberg) and in the large cities (i.e. Munich, Düsseldorf).

When considering investing in non-residential properties in Germany, investors should take note that fluctuations in prices and demand are more common place than in residential properties. It should be borne in mind that for investment purposes it is advisable to acquire non-residential properties in the larger cities where rents are higher than in middle-sized towns. Of course the actual purchase price plays a major role here. It should also be noted that these prices are not rising like those of residential properties.


 

Dr.-Reinhard-NackeDr. Reinhard Nacke, Partner
FPS Rechtsanwälte & Notare, Dusseldorf, Germany
T: +49 211 302 01 50
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FPS Rechtsanwälte und Notare is one of the largest fully independent German law firm with offices in Berlin, Dusseldorf, Frankfurt a. M. and Hamburg. FPS currently employs over 110 lawyers and notaries. One of the firm's core areas of expertise is the entire range of Real Estate Law.

Dr. Reinhard Nacke is World Chairman of the GGI Practice Group Real Estate and is working as partner of FPS in Dusseldorf. His practice areas are mainly Corporate, M&A, Real Estate and Tax Law, very often with an international background. Among his clients are several global players from different continents.

 

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