The German housing market has proven itself to be one of the healthiest in Europe, as new figures reveal that prices are rising at a steady rate. Some commentators feared a property bubble would develop after prices reached their peak in September 2013, having increased by 11.2% from the previous year. However, the market has reassuringly cooled over the course of 2014: prices remain on the rise, but at a more measured pace. This is welcome news for buyers and sellers alike, who are likely to benefit from this stability – and the confidence that naturally comes with it.
Traditionally, Germany has been a nation of tenants rather than homeowners, but the availability of low interest loans and a nationwide rise in income has prompted a cultural shift towards people buying – rather than renting – their own homes. These factors can be attributed to Germany’s famously resilient economy, which is underpinning the property market’s prosperity throughout the country. House prices have flourished since the Eurozone crisis, owing to the fact that, as the financial stability of the PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) began to collapse, savvy investors chose to move their assets to the relative safety of Europe’s biggest economy.
Foreign interest has contributed significantly to the market’s robustness, especially in Berlin. Russian and Italian nationals have a particularly strong presence in the capital, compounding its property supply shortage of 2% and consequently pushing up the value of homes in the area.
Another notable factor in Berlin’s buoyancy is the increase in first-time buyers, who account for the 15% rise in home ownership. However, despite this emphasis on ownership, buy-to-let investments are still a worthwhile option. Since 2012, Berlin’s population has grown by a staggering 100,000, with many new residents opting to rent as there simply isn’t enough property available to buy.
As ever, apartments are the most lucrative class of investment property, with prices rising at a faster year-on-year rate than those of family homes. Although this is the case in the majority of Germany, the most notable example is in Hanover, where the value of apartments rose by nearly 12.5% this year, whilst the value of family homes grew by 2.1%. The only instance where this trend is reversed is in Stuttgart, where houses are outperforming apartments with a price rise of 5.7% in the past year compared to 4.4%.
If you are considering investing in property in Germany, Engel & Völkers is perfectly placed to offer assistance and advice at every stage of the process. With offices across the country, our real estate agents have in-depth experience of the local markets and access to the most exclusive properties in the most desirable neighbourhoods.