Defying predictions of a property bubble forming in Germany, the latest analysis of the real estate market by Fitch Ratings suggests that values will continue to grow at a steady rate, without the market getting ‘overheated’. In a review that looked at national prices and forecasted trends, the report concluded that although price increases in metropolitan areas have been outpacing inflation, the German economy is strong enough to balance this out. Low unemployment rates and a steady increase in disposable income also help to confirm that the recent developments remain overwhelmingly positive.
The house price to income ratio for most German cities remains moderate, particularly when compared to the situation in many other world capitals. The Fitch Ratings report also noted that the relative impact of the country’s major cities on residential property price growth has fallen in the last year, with mid-size and smaller urban areas now responsible for the majority of growth. The data marks a significant departure from the trends of 2011, when the largest cities, including Berlin and Hamburg, recorded average price increases of almost 10%. However, this could reflect a greater ‘sharing of the wealth’ across the nation, with many smaller German cities offering career opportunities and sound property investments that rival those provided by the capital. The Fitch report goes on to forecast moderate growth in mortgage lending in 2014, driven by favourable economic and financial conditions, continuing a trend that started in 2009. Although historically Germany has been a country with a high percentage of renters, it seems that this may be beginning to change.
The data collected by Fitch Ratings is corroborated by Engel & Völkers’ own assessment of the market, as presented in our first ‘Market Report on Residential Property in Germany 2013/2014.’ With a strong presence throughout our home country, we were able to closely examine housing trends in 50 locations, covering major and smaller cities as well as the country’s finest holiday destinations. We found that many of these regions still have a great deal of potential to grow even further.
Domestic tourism has always been strong, and international tourism numbers have been rising year on year. Drawn by enchanting destinations like Sylt and the Chiemsee, many of these visitors could soon become investors with the purchase of a holiday home. Meanwhile, the strength of Germany’s economy has seen many business travellers recognise the importance of having a base in a leading German city. Prices for residential property in Berlin remain cheap by international standards, and as a result demand is expected to remain high among foreign investors from countries including the US and China, which will further increase prices.
Based on E&V’s market report, Board Member Kai Enders has sounded the all-clear: ‘Demand in many cities is still tremendously high and I can’t see why that should suddenly change. More and more people are moving from the countryside to towns and cities: Young people for work and older people for a better infrastructure. At the same time Germans want more and more living space.’
If you’ve been considering expanding your property portfolio in Germany, or perhaps purchasing your first overseas home, Engel & Völkers have the expertise and enthusiasm to help you find your ideal investment. Read our full E&V Market Report here.