Germany is among the most interesting of the emerging European property markets in which to invest. In spite of seeing only 0.5 per cent growth during 2006, property in Germany is being tipped by many experts as the next hot thing. Channel 4's A Place in the Sun has included Germany in their 'Top Twenty Places to Invest', while Knight Frank has named it as their favoured location to invest for 2007. Overall, all the signs indicate that the German property sector is set to emerge from a long period of flat performance to become an exciting opportunity for property speculators and those with money to invest.
 
All the signs point towards the German capital, Berlin as the place to invest. A report by property investment company Assetz indicated that foreign seeking to invest are already beginning to put their cash into the city, with UK and European businesses such as the Terra Firma bank being attracted to Berlin by low start-up costs and cheap commercial office space. These multi-million pound investors are blostering the Berlin property market, which has experienced a dip over the last few years. "The growth triggers that investors have been waiting for are starting to occur, with prices in Charlottenburg, Wilmersdorf and Shoneburg seeing small rises after years of declining or static prices," commented Stuart Law, chief executive of Assetz. "It is a unique situation to have property prices in a capital, as they are in Berlin, which are half those of the surrounding cities of Munich and Frankfurt. With economic conditions remaining favourable, it is inevitable that the Berlin market will catch up, as the UK-led phenomenon of buying your own home continues to spread rapidly through Europe."

Those planning to invest are comparing the future of Germany's Berlin property market with London's during the 1990s. "Berlin offers real potential and the type of growth the London property market experienced over the last ten–12 years," says Scott Huggins, CEO of Intrepid Investments. "It offers a sophisticated yet undervalued property market – the perfect place for anyone looking to invest at all levels."

One Brit who is taking advantage of the opportunities Berlin has to offer is Alan Jackson, a civil engineer who currently resides in Abu Dhabi. He was attracted to invest in the German property sector by the prospect of high rental yields and long-term capital return. "After studying various locations, we decided to invest in Germany, and particularly Berlin, as this seemed to have all the right ingredients to become one of the most successful markets in Europe," he says. "Germany has been renowned as having one of the lowest home ownership levels in Europe, with nearly 50 per cent of the population renting property rather then investing. However, times are changing, and with better financial packages available and a strong influx of foreign investors recently, the German property market now looks set to prosper."

In other areas of eastern Germany, property can be an equally good place in which to invest. Leipzig and Dresden both offer cheap property and increasing demand, which should have a positive impact on the market. Central and inner city areas are usually the best investments, with one-bedroom apartments available for as little as £40,000.  There are a number of factors which are contributing to the positive predictions regarding the German property market. Firstly, the country's economy, which has experienced a long period of stagnation, is finally beginning to recover. The Munich-based IFO institute has said that confidence among business leaders is at its highest point for 14 years, while the Esse-based RWI Economic Research Institute says the German economy will grow by 1.8 per cent this year. This will no doubt have a knock-on effect on house prices, which are currently amazingly low for a developed country.

The other factor influencing optimism about the German property market is the increased influx of foreign capital following a recent legislation change. The new law opened up the German market to real estate investment trusts, which has encouraged a huge amount of international investment, especially in the east of the country.

Buying property in Germany

Once you have discovered the property you wish to invest in, the first step is to engage a solicitor or a notary. A legal representative is required in Germany to carry out the legal work and contract obligations, as well as to check that no liabilities exist. Once the sale has been completed, it will be the notary's job to register the altered title deeds with the local land registry, enabling the title to transfer to the new owner.

It is advised that you take the privilege of choosing your own notary, and pick one who understands both German and British law and is able to speak English.

Interest rates on offer by German banks are currently low, and it is reasonably easy to get a mortgage. Most banks will loan up to 70 per cent of the purchase price, although they will usually expect a track record of regular monthly savings of up to six years before the loan is approved. Maximum mortgage terms are 30 years on a rate of fixed interest.

A valid contract must display the following information:
1. Whether the names and addresses of the parties and the details of the property are correctly noted. Error in this area could invalidate the contract.
2. The agreed upon purchase price and terms and conditions of payment.
3. Stipulations as to what happens in the event either party fails to live up to the terms of the contract. Once the contract has been completed and signed, the notary will implement the change in the land register, after which the vendor will receive payment for the property. While the notary is seeking approval, it is usual for the purchase money to be
safeguarded in an account belonging to the notary.

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Article published in July 2007