German Real Estate Offers Strong Value For Investors

Written by: Property Wire

Claiming the biggest share of the European residential market, the risk-ratio return of German real estate continues to compare favorably to other investment options. Keep in mind, though, demand for new construction in urban centers is outpacing lack-luster interest in older properties. Housing prices and values have yet to fully stabilize, however, often leading buyers to insist on special conditions for sales. See the following article from Property Wire, for more on this.
Hamburg, Germany

Newer property in top German locations such as Hamburg, Munich or Frankfurt represents a good real estate investment, according to a new report.

Although there is some turmoil and instability in the market in terms of transactions and prices and banks are still reluctant to lend, overall Germany has an exceptionally attractive chance-risk profile, says the report from Jones Lang LaSalle.

Low levels of liquidity in the real estate market and transaction levels are down and there is often a lack of clarity as to pricing levels, but certain property will always do well, the report points out.

‘Strong demand will still be observable for properties built in 1995 or later in top locations such as Hamburg, Munich or Frankfurt. In this market segment, regardless of the economic environment, only few or no price changes can be noted,’ it says.

However there is less demand for non-modernized property that dates from the 1950s and 1960s, located in structurally-weak regions and with a considerable maintenance backlog.

‘These properties will not become more attractive to investors in the future,’ it adds.

The report explains that real estate was generated by the financing culture at the time which led to an extreme rise in property prices.

‘The financial crisis has triggered a painful recovery process in which real estate is once again coming to the fore.

Regardless, the German residential property market, the largest housing market in Europe, continues to be of interest for both national and international investors,’ it says.

‘Compared to competing investments (fixed-interest securities, stocks or commodities) the residential property in Germany represents an opportunity with an exceptionally attractive chance-risk profile.’

But it also points out that currently many transactions that are occurring involve vendors who are more compelled to sell, or purchasers who will only buy at discounted prices. In addition, prices agreed during negotiations are frequently reduced prior to exchange of contracts as purchasers bring to bear their greater negotiating position and ability to complete transactions in the current uncertain market.

‘In this environment, prices and values are going through a period of heightened volatility whilst the market absorbs the various issues and reaches its conclusions.

As a result, there is less certainty with regard to valuations with the result that market values can change rapidly in the current market conditions,’ it concludes.