Germany entered the current worldwide recession in much better shape than other economies, and this has allowed it to begin its recovery more quickly than expected.
Unlike practically every other rich country you can think of, there was no property bubble in Germany between 1998-2008 and there has been no property or banking crisis. Germany presents a compelling case for international investors seeking well financed and managed property with a low risk profile.
Europe´s Economic Engine
Europe´s largest economy is also its best performing. Out of recession as of August 09, German economic growth in both Q1 & Q2 of 2010 was stellar and well ahead of market expectations. The Q2 2010 growth of 2.2% was the fastest in 20 years while the USA and UK lagged well behind with quarterly growth rates of 0.6% and 1.1% respectively.
Germany is the world’s second largest exporter (after China), and third largest economy with a population of 82 million. Germany saves a lot of money – in the first six months of 2010 their trade surplus was $93 billion! (In that same period, the USA had a trade deficit of $247 billion).
Germany’s unemployment rate is 6.9%, thanks in part to a solid working relationship between companies and Government which supports policies helping workers stay on part time rather than be made redundant. This has been very positive for economic stability.
The 2009-2010 Global Competitiveness Report of the World Economic Forum ranked Germany’s infrastructure number one in the world. This ranking includes high marks for the quality of roads and airports, the rail and port infrastructure, and the country’s outstanding communications and energy infrastructure.
Small & Medium Sized Enterprises (SMEs)
While Germany is known for world class brands such as Volkswagen, BMW, Siemens, Mercedes, SAP, Allianz & DHL, it is the smaller family owned businesses that make up the vast majority of its economy, accounting for 99.7% of all companies and 71% of all employees. This provides great diversity and flexibility (not to mention a huge pool of reliable commercial tenants).
With a legal environment known for its integrity, reliability, and transparency, both individuals and companies in Germany have the stability required for successful long-term investments. According to Ernst & Young, Germany receives excellent marks in terms of infrastructure, social climate, quality of life, and its qualified workforce, to name a few.
German Property Market
Germany is a safe haven for investors due to both its economic stability and its property price stability. The fact that there was no property “bubble” in recent year’s means there was no bust in 2008-2009.
Germany has consistently been Europe´s most undervalued property market with both residential and commercial prices up to 50% below their counterparts in other major European markets.
There is a strong banking sector with finance still available to investors at good rates, especially to those with existing relationships.
Strong Rental Market
German residential and commercial rents are up to 20% -50% lower than in other leading economies, but yields are comparable with other leading markets, so you get much more bang for your buck. There is an especially strong propensity to rent among the small and medium sized enterprises we target.
Coldwell Banker Richard Ellis (CBRE) report very positive trends in the German commercial property investment markets with transaction volumes in the first half of 2010 up 162% versus the previous year. This inflow of investor funds to Germany is influenced by the exceptional economic news and the fact that property values and rents have demonstrated a noteworthy resilience during the global economic turmoil of the past 3 years.
Hedging your bets
International investors see investment in Germany as a hedge in a number of ways:
• Germany should outperform other leading economies because of strong fundamentals
• If there is any crisis in the Euro , holding German Euros should be the best bet
• If there is Eurozone inflation, German rents should increase thereby increasing the value of German property investments.
For further information on the characteristics of our German investments, please click here.
For further information on our current property listings, please click here.