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Germans Walk Away From Home Rentals In Wake Of The Property Boom

News Posted On: 16 April 2014

Property in Berlin

The unstable economy across Europe is bringing the German property market to the front, with some analysts rating its investment potential far better than gold. Meanwhile, Germany has noticed a change in the light in which its rental homes are being seen in the recent past. This is especially true of its big cities such as Hamburg, Berlin and Munich where growing number of Germans are moving away from rental homes. They are no longer viewed as the safe haven where tenants shelled out small amounts for their dwelling and were favoured by laws, say experts.

Rental prices and investment volumes surge in Berlin

Rents are quickly shooting up in Berlin, at a pace nearly twice that of the rest of the nation. According to Engel & Volkers estate agents commercial branch head, Nikolas Jeissing, "the capital is soon expected to catch up although Berlin is predicted to have rentals that are more expensive than Munich. Despite the coalition government's plans to mitigate the rents in bigger cities, it can only check the pace of the trend and not put an end to it", says Mr. Jeissing.

Berlin's market may now be ranked in the third position among other European investment markets by analysts, following London and Roman markets. Mr. Jeissing says that the stake of foreigner investors in the increase in German retail investment at about 30 percent. Goldman Sachs and other Anglo-Saxon investor giants are however moving from investment opportunities in Berlin to those in Greece and Spain.

Natulis, CEO James Guerin agrees with this as he points out that foreign investors in Berlin are far less than their numbers were in the mid 90s. Although capital is flowing in from overseas investors from countries ridden by weak economies, it is merely affecting a few luxury projects in Berlin. The investors flying in from Greece, Spain and Italy are not drastically impacting the property market in Berlin, he explains.

Berlin's property market to not follow the same path as Paris and London

The home owner figures in Berlin were 16 percent during 2011, when compared to London's 50 percent. Young families are weighing the options of buying flats versus dealing with precarious rentals. A growing concern has been about the Berlin property market shaping up like those in Paris and London. Where, developers start revamping older properties to sell them profitably once all empty plots are sold out, to have the poorer population pushed to the city's suburbs.

The scenario cannot yet be compared to those of London properties, says Mr. James, as Germans are careful about making property investments. The properties are bought during the latter part of their lives and are held as properties in the long-term. They view properties as home first and then investment, he explains.

German banks typically require individuals to deposit about 20 percent, offering interest rates that are fixed for a 10 year period. This deters the chances of home buyers reselling their properties in a couple of years. Germany has many local associations which offer its tenants legal advice. The rights offered to tenants are far stronger than those offered to buyers, so individuals purchasing occupied flats are at a loss of making any use of their acquisitions.

Written by Les Calvert of - overseas property reporter

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