German Residential Real Estate Analysis - Trends for 2007 !

Implications: Low interest rates and quite reasonable market prices compared to almost all other Western European countries, thus excellent return of investment to be expected, makes residential and also commercial real estate investment in Germany especially in the main conurbation areas and even in b-locations, still a very interesting and attractive investment target for investors. After deals about 50 billion Euros in 2006 it is expected an increase up to over 60 billion Euros in 2007 (total residential and commercial real estate and means more than 20% of the all European real estate investment turnover expected for this year only in Germany, there from the part of transactions concerning foreign investors will probably be over 60%).

Analysis:

The main reason for that increase is the very reasonable price level in Germany compared to the European average and also still high starting yields to be expected. On the other hand and due to a much better economical situation in Germany than few years ago, it can be expected an increase of the rental and purchase demand, higher tenancy rates and thus cap rates too. Due to quite low purchase prices it can also be probable to get reliable return of investment by later sale of portfolios. Nevertheless concerning the residential area, the big deals (for example privatization of public property companies) will not anymore be the focus due to less target objects on the German market. But smaller packages may still be acquired and even reduce or stretch the remaining investment risk by a much better balanced acquisition strategy in different focused German areas and especially good locations around major cities in Hamburg, Munich, Frankfurt, Düsseldorf, Cologne, Stuttgart and of course the Capital city Berlin.

Investment in German real estate could be at the time one of the best investment strategy over all and the focus for this year will not only be the residential but also the commercial real estate market. That’s why investors should absolutely consider real estate in Germany in their investment strategy or plan for 2007!