german property market proves robust against effects of downturn
News Posted On: 20 October 2009
UK 20 October 2009 - According to estate agency Knight Frank's research, Germany is the 8th best property market in the world based on its annual performance up to Q2 this year. This is because their research found that property prices in Germany had fallen just 1.3% in the 12 months ending Q2 of this year.
According to estate agency Knight Frank's research, Germany is the 8th best property market in the world based on its annual performance up to Q2 this year. This is because their research found that property prices in Germany had fallen just 1.3% in the 12 months ending Q2 of this year.
Germany has always been known for having an incredibly robust and stable property market, because of its very unique reality.
In Germany 46% of the population is renting their home. This is higher than most of the developed and some of the developing world. Because of this, the government is forced to restrict rents, and this in effect also restricts house price growth.
Germany was very popular with overseas investors for a number of years, but they always bought property based on its potential for residential rental. The price therefore determines the rental yield, which means sellers must keep their prices low to keep yields up.
Because prices never grew based on speculation there was no bubble and so the German property market has suffered no crash. The German banks have always been notably strict regarding mortgages, especially mortgages for foreigners and this too has kept the property market stable and means that the mortgage market in Germany has been almost unaffected.
This is good, because though foreigners have to jump through hoops to get a German mortgage, it is not impossible, and it is not that much different now to what it was during the boom. Another reason for foreign property investors to reconsider Germany is that it presents a window of opportunity to secure some really strong rental yields.
Prices haven't fallen by much but they have fallen. Couple that with the fact that the economy is currently seeing its first growth out of recession, which means landlords will be able to put rents up in the near future. When rents go up prices also go up, so now is the time to start the process of buying.
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