One thing that England supporters attending the World Cup will have learned (apart from the confirmation that our penalty takers can’t hit a cow’s bottom with a banjo) is that Germany is an attractive country with a welcoming and hospitable people.
Surprisingly, though, despite its proximity and value for money, it barely features on the wish list of British buyers of holiday homes.
There are a number of reasons for this, but one of the most obvious is that Germany is not a major tourist draw for British holidaymakers or second home owners.
Most of us buy property abroad to let it out to other British holidaymakers or to live in communities of fellow expatriates.
Neither really applies to Germany, but the focus on the country during the World Cup could be about to change all that.
Savvy property investors are talking about Germany being the next big thing on the Continent. But on what grounds?
According to the European Housing Review 2006, it is the only European country where residential property prices dropped last year.
In its recent report, property analyst Merrill Lynch observed that the country ‘has conspicuously failed to join in the global housing boom of the past ten years’.
A number of factors have contributed towards this curious anomaly in an otherwise upward Continental trend.
Low levels of home ownership (42% compared with 70% in Britain), a culture of state subsidy for rental accommodation and a reluctance by German banks to lend money to buy property have combined to cause house prices to stagnate.
So, yes, Germany could be a good place to invest: you will be buying close to the bottom of a market which is expected to go up.
‘The German property market has underperformed for a long time,’ confirms Liam Bailey, head of residential research at Knight Frank. ‘But there’s been a lot of interest in Germany recently, led by major institutions and banks who can sniff a profit.
‘It’s one of the few markets where property investors can still pick up big chunks of stock very cheaply. The residential property market does offer value.’
Ilya Spitalnik, of German Property Investors, is more exuberant. ‘It’s a fantastic place to invest,’ he declares. ‘Eighteen months ago, the market had bottomed out. But it has now increased by at least 15% – in some areas, far more than that.’
If this rapid recovery suggests that new investors may have missed the boat, Mr Spitalnik thinks otherwise.
‘In practice, although German property prices are going up, it is still excellent value compared with other European countries,’ he says.
To find out what sort of value, take the capital Berlin, where the World Cup final will take place on Sunday.
Prices for a city centre apartment in one of Europe’s most dynamic cities – which has become a mecca for arty types priced out of London, Paris and Barcelona – are 50% to 60% cheaper than an equivalent flat in London.
A six-room apartment in the prosperous Friedenau district will put you back less than £200,000. For more ambitious investors, a fully refurbished city centre apartment block on Karl-Marx-Strasse with ten flats and three commercial units costs £600,000 – or roughly the cost of a four-bedroom terrace house in Chiswick, West London. So why is property so cheap?
‘You have to take the view that home ownership is structured much differently over there,’ says Spitalnik. ‘It’s very much skewed in favour of the tenant – to the extent that you rarely hear someone in Germany say: “I’ve found a great apartment to buy.” They’re much more likely to say: “I’ve found a great apartment to rent.”
‘There is little tradition of home ownership or of private individuals investing in residential property. ‘The historical curve of property values has followed a steady economic decline during the past ten years. The market is only now stabilising as the economy recovers.’
Prices in the former communist German Democratic Republic, in the east of the reunified country, are significantly lower than in the west – by as much as 15% to 20%. But this is unlikely to be the case for much longer. ‘The gap is closing,’ says Spitalnik. ‘But for the moment, cities such as Leipzig and Dresden are good places to buy.’
But don’t expect too much choice in the period property market anywhere in the country. Three quarters of homes in Germany have been built since 1945, so character properties come on to the market only infrequently.
They can still be found in winemaking rural areas, such as the Rhine and Mosel valleys, but prices are likely to be high. In the east, the properties for sale are more likely to be in state-built apartment blocks than attractive mansion blocks.
In the west, there are still altbau (old buildings) for sale in Berlin, Dusseldorf and Hanover. However Munich, Hamburg and Frankfurt are less likely to be fertile hunting ground for buyers seeking character. But if you really want to be king of the Schloss (castle), you can still buy one. After the fall of the Berlin Wall, the reunified country found it was the reluctant owner of hundreds of crumbling castles.
Many of them are for sale to any foreign investor willing and rich enough to take on a major refurbishment project. Grants of up to £175,000 are available for those prepared to wade into the uncertain waters of German bureaucracy.
The best advice is to get there before Kirstie and the rest of the TV gang. That way perhaps you could score a winner on Germany’s home turf.
What’s on the market
BERLIN
A fully refurbished, turn-of-the-century building on Karl-Marx-Strasse, one of the main shopping streets. Ten residential and three commercial units for £600,000, at a 6.25% gross yield. For more details, see germanproperty investors.com
Also in the capital, a turn-of-the-century, six-room, ground floor apartment with garden in the Friedenau district for £199,000. Fully renovated with wooden flooring throughout. See allgrund.com
DRESDEN
AN 18th-century castle in seven acres with a hunting lodge and several large barns in a small village 45 minutes from the city. It has been fully renovated outside, but requires extensive interior refurbishment. The purchase price and cost of refurbishment is estimated to be £2.06m. Visit poshjourneys.com
FRANKFURT
FOUR-BEDROOM, two-bathroom top floor apartment for £179,000. It is in the Bornheim area, close to East Park (the ‘Green Oasis’ of Frankfurt). Built in the early 1900s, it has been fully renovated with a new fitted kitchen and parquet flooring throughout.
Source: THISISMONEY.co.uk
Related Links:
