Germany has the largest and most stable economy in the European Union. Official statistics show that the country’s GDP has risen 1.7% in 2015, continuing a six-year trend of growth. Germany has also been practically impervious to the effects of the previous financial crises that have made waves across Europe, having been able to recover quickly from any setbacks in employment rates or consumer spending. The country is currently experiencing an ideal situation for a great economy: an unemployment rate at its lowest point in over twenty years, steady job growth, and a population increase.
These conditions make investing in German real estate property development especially lucrative. For the bauträger, which means developer in German, the recent influx of migrants into the country means that building new residential properties is a must for the country to thrive. Rental properties, in particular, are necessary to house a large number of new people who don’t yet have the assets to own a home. Also, a constant demand for commercial properties in Germany’s major cities beckons developers to break more ground and meet the needs of future businesses as they create more jobs.
Germany at a Glance
Low unemployment, a population increase, and good interest rates are making a perfect storm for a property boom.
In light of the migrant situation, there is an overall shortage of housing. Even though there are projects underway to try to meet the need for places to live, figures project that even they will not be enough to satisfy the growing need for residences. This situation makes a strong need for more property developers and builders to construct more affordable housing. There is also an overall trend of rising property value and rents.
All this, combined with lower mortgage rates, makes Germany a landlord’s dream.
Commercial properties are also in high demand due to business expansion and job growth, especially in the country’s major metropolitan areas.
The Building and Development Sector
Overall, there is a great need for more property development and more affordable housing. According to Bloomberg.com, in 2015 Germany built about 270,000 new apartments. Yet, to meet the demand of their bursting population and refugee influx, they need to increase that figure to at least 430,000 new units. However, with rising land prices, building in urban areas will be a challenge. Current building regulations make affordable housing difficult to construct in the areas they are needed the most: Germany’s major cities. Thankfully, after a resounding outcry against the rising rents in the nation, the German government has proposed a budget increase for 2017 that is geared toward building more public housing. This budget proposal could also modify some of the stringent regulations that are inhibiting housing affordability.
The Residential and Commercial Sectors
Germans are showing a general preference for renting instead of buying. Because of this smaller demand for permanent housing, mortgage rates are falling, making this a great opportunity for foreign investors to snatch up residential properties. The refugee influx has also made a new source of demand for housing, which has caused both home prices and rents to increase. For example, Berlin’s average rent has increased by 14.5% in 2015 alone.
In the Commercial sector, according to Colliers International Mid-year report for Office Leasing and Investment, Germany’s capital Berlin is a great place for Commercial leasing. In this year alone, more than 370 new leases were signed, meaning a 3% growth compared to 2015. This reflects the city’s favorable unemployment rate of 9.7% . Berlin’s booming population of over 3.5 million and job growth also make it a great place to have a business. For this reason, there is a high demand for commercial space in the big cities and not much available space.
The Bauträger’s Strategy for Success
One approach builders can take to make their new constructions sell is to meet the greatest needs, which at this time is for affordable housing, rentals, and commercial spaces in metropolitan areas. Migrants are more likely to prefer bigger cities due to the higher chances of finding a job and diverse communities. Businesses also prefer big cities due to the amenities and wider customer base available. Builders would be wise to develop more properties in the most prominent cities in Germany like Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, and Munich.
Globally licensed agents can partake in Germany’s great opportunities.
Real estate agents who become globally licensed have the ability to represent investors find the perfect property in Germany, where the economy is thriving. Today’s trends indicate that there will not be a lack of demand for residential or commercial properties in the coming years and that development of more commercial and residential properties is imminent. Therefore, you can confidently guide your leads to investments that are very likely to retain and gain value over time.