Lowest property prices in Europe

While property prices all across Europe have experienced strong growth in the last decade, doubling and even tripling in some cases, Germany property has seen its values in sharp decline, falling by up to 60% since 1994. As a result, prices of residential property in Germany – and in particular Berlin and East German cities - are considerably lower than in any other EU countries (including the new EU capitals in Central Eastern Europe and the accession states).

EU House price index	Change in German rents & prices vs. CPI

Economic recovery

After 10 years of economic stagnation the German economy is growing again. Solid GDP growth forecasts, falling unemployment (down to 10%), business confidence at a 16-year high (research institute Ifo) give strong reasons for optimism. Leading economists have adjusted their prediction for Germany’s GDP growth in 2006 a fantastic 2.9% thanks to a staggering 16% growth in exports as well as strong domestic consumption.  And consumers are really regaining confidence – consumption is now at the highest level in over 25 years (Gesellschaft für Konsumforschung).

Germany's Business climate (Ifo) index & GDP growth

Multi-billion euro investments

The positive economic development along with a strongly undervalued property market and high rental returns have, since 2004, attracted huge interest in German property. Institutional investors, property and pension funds from Europe and the US have been pouring billions of euros into Germany’s property market (and Berlin in particular).

Transaction volume in 2005 increased to a massive 51.4 billion euro, 62% of which came from foreign investors. Morgan Stanley, Cerberus/Goldman Sachs, Fortress, Lone Star, Terra Firma, Oaktree, Blackstone, Deutsche Annington, Soros are among the many investors believing Germany’s time has now come.

2006 has been an equally successful year for German property, with a 140% increase in transaction volumes. Around 15 billion euro have been invested in the Berlin property market alone.

These multi-billion euro acquisitions are already having an effect on Berlin’s property prices – good quality stock in favoured areas has seen an uplift in prices over the last year (apartment blocks) and competition from buyers, large and small, is very strong. A likely knock-on effect will be an increase in prices of individual apartments.

Most important residential acquisitions

The planned introduction of tax efficient REITs (real estate investment trusts) is expected to give a massive boost to the German property market. It’s estimated that up to 130 billion euro could be invested in German REITs in the next 3 years, causing a strong increase in property values. (At this stage the legislation for REITs has not yet been agreed; it is possible only commercial property will be included.)

Exceptional growth potential

Low construction rates (63% down on 1995 levels in Germany as a whole, with virtually no new home completions in the former East in recent years) coupled with increasing number of households and immigration, as well as economic recovery and stronger desire for home ownership are expected to lead to growing property prices in certain regions in coming years.

You will rarely have an opportunity to invest in the most favourable market, at the exact correct time – at its very turn. Germany is such a market… and the time is NOW. Don’t miss this historic window of opportunity.

It’s time to act!