Germany experiences a property boom

Germany experiences a property boom

Compared with many of its European neighbours Germany has been known for its rather quiet property market. With over 50 percent of the population choosing to rent on a long-term basis rather than buy, exceptional fluctuations in the property market have been a rarity for some time – but it seems the current Eurozone crisis may have changed all that.

The ongoing political instability in several prominent Eurozone nations, the turbulence in common European property investment markets (in countries like Spain and Greece) and a notoriously volatile Euro hasn’t deterred a vast number of people from taking the plunge when it comes to German housing. Although the German property boom is significantly tamer then that experienced by other nations, and bank lending for mortgages has only increased slightly, there’s no denying the acceleration in average property prices.

For many expats living in the most indebted Eurozone nations, relocation dreams have become nightmares so Germany – with the largest and most stable economy in the EU – is becoming an increasingly attractive option. Interest in German housing has been particularly notable in Nordic nations as well as Spain and Italy.

Low interest rates have inspired so many German residents to take their first step on the property ladder that some experts fear the current fervour could lead to a housing bubble in the most popular areas.

Berlin, for example, has always been one of the lower priced German cities but according to figures compiled by Research Company F + B average sale prices in the capital have risen by 23 per cent since the beginning of the financial crisis in 2008. Meanwhile, property consultancy company Jones Lang LaSalle has recorded an even more dramatic hike, estimating a 37.5 per cent rise in the past three years with a 20 per cent increase in the 12 months to June of this year alone.

House prices in Munich and Hamburg have also risen exponentially in recent years.

In the wake of such financial uncertainty a large amount of Germany’s new home owners are wealthier individuals who consider property a safer investment then other riskier, but more lucrative, assets.

One property consultant with Aengevelt described the situation in the following way: ‘Security of investment is more important to [wealthier individuals] at the moment than the amount of return, so they are prepared to pay above-average prices for properties in established top locations.’

The lure of property as an investment has been strengthened by a drop in mortgage rates as well as a relative lack of sound alternatives. As banking analyst Stefan Mitropoulos asserts: ‘Since mortgage rates have also fallen drastically, buying residential property has become affordable for many households’.

Although some industry experts are urging caution others feel that the hearty job market and lower interest rates are sustaining the price rises so there’s no reason to think the situation could result in a general property bubble.

But with German house prices on the rise any expat’s looking with an eye to investing or setting down roots in the Eurozone juggernaut might want to act sooner rather than later.

The Expat Hub
This post was written by
If you’ve already moved abroad, if you’re in the process of moving abroad or if you’re only thinking about it, the Expat Hub is here for you. For expatriates looking for advice, support and information, we’re the number one online stop.