Germany: What is the future of residential investments in the next years?

German brokers are expecting foreign investors to come back to Germany because they need cash-flow in stable markets.  Office and retail properties gave a much better yield than residential investments, but their share is only 10% in the German market. These figures were given by Bulwien Gesa, a German market intelligence company. The opportunities to change for another type of property are relatively small and also the banks are only interested in financing stable investments, which in Germany is residential. Bulwien Gesa remarks that they see the residential market of 2010 like in 2004, with the potential of developing a new bubble. The prices might rise when foreign investors will sell what they bought in the last years with short term finance. Small and bigger portfolios that many investors are looking for will come back to the market.
There is again more construction activity, but this time with a slight inclination towards rental flats. Especially in Berlin where many thought that too many high-end condominiums were being constructed and indeed, a good portion of the flats had to be sold for less and with incentives. But Berlin is not a single case. Also in Düsseldorf, Cologne and Hamburg there are again more projects for rental flats being realized. The only exception is Munich where construction has always been too expensive to get good rental yields.





The reason for more rental flats is obvious: Germany is historically a country where people rent. In the last years the Germans started buying condominiums when they realized that the public pension fund might not take care of them by the time they retire. Of course only the upper crust of the population. But the economic crises slowed down this trend significantly. It is sometimes easier for investors to sell a flat in Berlin to a foreigner than to a German and especially not to a Berliner. The city is the poorest in the country, income is very low. Another reason for more rental flats lies in the search of closed funds to buy such properties.


Coming back to the initial question: the answer is that the future looks good for residential investment. Many investors are afraid of the German law that protects tenants much more than in any other country. But this law also regulates the tenant’s duties. If he does not meet the requirement stated in that very law that actually gives him more protection than in most other countries, he is out. For this reason it is very important to take an experienced administration company. Administration and asset management is not the same in Germany. If you have doubts on how to choose a good administrator and what to do with your asset management, feel free to ask: hello@fis24.net