Despite the fact that Germany is the third largest in the world for its economic development and has a population larger than any other country in Europe, for many years it has been at the bottom of the list of destinations for buying homes abroad. However, now, according to investment analysts and real estate agents, the country has received a fulcrum for the development of the real estate market - the World Cup. “For more than 10 years after the unification of Germany, its real estate has remained undervalued, especially in the capital,” says Derek Doyle of German Property Investments. - For long-term investors who are willing to risk and stake on the recovery of the German economy, this situation is very promising. It has a fantastic infrastructure, while housing prices are really low. In Germany, there is no such rapid growth in property values, as, for example, in Budapest. However, rental income is high and there is no doubt that the country will emerge from the crisis. The investment made now is likely to grow over the next 10 years. People just have to come and see everything with their own eyes to believe it. " Strength lies in weakness So what makes Germany, and in particular its newly united capital, promising for investment? Paradoxically, the relatively weak economy of the country, which has not fully recovered after the unification of East and West Germany, is perceived as a positive factor for the real estate market. Back in 1997, the eloquent slogan “it can only get better” was put forward, and it is relevant to this day. Although the country still has such negative factors as high unemployment, Germany remains one of the largest exporting countries and has the highest per capita income in Europe. These are prerequisites for the country under the leadership of a new coalition government headed by Chancellor Angela Merkel, albeit slowly, but emerge from the recession. Proponents of investing in German real estate are betting on two factors - the strengthening of the labor market and the development of mortgage lending by local and foreign banks. The revival of the real estate market should lead to a slow but steady rise in home values. Some doubts in this regard are related to the need to change the stereotypes of behavior, since it is not easy to forget the experience of decades during which the Germans did not want or could not take out loans for the purchase of real estate. This process is not instantaneous, but, taking into account the world experience, it is inevitable. Now the German prices for 1 sq. m account for a quarter, and in some cases one-tenth of the prices for similar properties in comparable European cities. Indeed, while the cost of housing in most European countries was growing, in Germany it stood still and even fell. As a result, the ability to own property in Germany has increased more since 1980 than in any other developed country. Rental income guaranteed After the fall of the Berlin Wall, the city began to actively attract investment, and for some time the value of real estate grew. Since then, however, prices have dropped by a total of 40%, and now there is a strong belief that the path to the top is the only possible scenario. It is no coincidence that the volume of investment in real estate in Berlin is becoming more and more. Low prices and stable rental income attract foreign banks and private funds. In its latest market review, the German Hawk Group, a consulting company, reported several funds investing huge amounts in Berlin real estate. An example is the American investment groups Cerberus and Goldman Sachs, which in 2004 jointly bought 66,000 residential properties for a total of 2.1 billion euros. Morgan Stanley's appetite turned out to be somewhat more modest - only 48,000 properties in the same year, and a year later the Blackstone financial group acquired 31,000 properties for 952,000 pounds. Rental income from Berlin real estate looks attractive for private investors, because, as you know, Germans prefer to rent housing, not buy. Investment company Merrill Lynch estimates that about 45% of Germany's residents are homeowners, while in Berlin the figure is around 10-12%. William Telford of Berlin Invest believes that the small number of homeowners is due to a historic German aversion to borrowing: “The older generation has experienced the plummeting property values and skyrocketing interest rates on loans that were associated with the two world wars,” he says. “And the younger generation managed to burn themselves during the reunification of the country.” We buy only the best! Investors should shop in the best areas of Berlin in the hope of future price increases. At the same time, rental income here is approximately 5-6% of the value of real estate per year - this is less than in the outskirts, where this figure often reaches 10%. “Although rents on the outskirts of the city are high compared to the market value of real estate, I would not recommend such a purchase. These are mostly collectively owned houses of very low quality. The growth in their value is unlikely to be large, ”says William Telford. The specialists of Berlin Invest claim that apartments in the best corners of the central district of Mitte will cost 3000-5000 euros per 1 sq. m, while the rent will be about 13-18 euros per 1 sq. m per month. The cheapest apartments in this area will cost from 1,800 euros, the rent for them will be 4-9 euros per 1 sq. m per month. In other prestigious areas located further from the city center, for example in Wilmersdorf, the cost of 1 sq. m in new apartments is from 1400 euros. Berlin is not the only option for investing in German real estate, although prices in many West German cities are significantly higher than in the capital. For example, a two-bedroom apartment in Frankfurt's Bockenheim is selling for 250,000 euros, while a four-room apartment in a renovated historic building costs 310,000 euros. The seller is always right. Of course, one can dispute the fact that the Germans do not want to buy housing, but the fact that the technology of selling real estate in Germany works in favor of the seller is indisputable. Buyers have to pay for the services of real estate agents, which is 6%, add to this the property transfer tax of 3.5%, and other government duties, which will be at least 11-12% of the transaction value. Consider also the fact that since sellers are not required to pay for the services of agents, they tend to post their offer in several agencies at once. As a result, instead of actively selling, agencies expect potential buyers to come to them themselves. As a result, it can be difficult to determine what items are available on the market and through whom they are sold. But there are also positive aspects - long-term investments in German real estate are encouraged by law. 10 years after purchase, the owner selling their property will be exempt from home gains tax. Sports Interest Most real estate professionals have concentrated their attention on Berlin, but this is not the only city to see big football. The World Championship, which starts on June 9 and will last exactly one month, will be held in 12 German cities - Berlin, Hamburg, Hanover, Gelsenkirchen, Dortmund, Leipzig, Cologne, Frankfurt, Kaiserslautern, Nuremberg, Stuttgart and Munich. If you act quickly, you can obviously make a profit by joining a small but growing group of foreign investors buying real estate in Berlin to rent to tourists. It is less clear what effect the championship will have on the German economy as a whole, in fact being only a marketing tool to attract tourists and investments. Analysts at Jones Lang LaSalle, who have assessed the impact of the World Cup on real estate markets, believe that, as in the aftermath of the 2002 tournament, "the most significant and longest-term impact on the real estate market is the opportunity for urban infrastructure development." Berlin and possibly Leipzig can be expected to receive the biggest dividends from the tournament. Although if the number of cities hosting the championship were fewer, then the degree of impact on the urban infrastructure would be slightly higher.
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