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What is the current market situation and what are the most attractive places for buying houses?

The demand of foreign investors is remarkably increasing due to prices having hit their unsurmountable top in other parts of the world, and still being at an attractive lower level in germany. Large companies and firms are buying property in germany at multi-million volumes. On the smaller scale, the individual investors are looking for high yield offers at a range between 1 and 10 Million EUR investment sum. Yield between 7 and 10% are much asked for, and are sometimes attainable, but quality of the property offered plays a big role in this. And good quality high yield offers are not long on the market.

In general, german economy is recovering since mid 2006 now at a very good rate. First time since over a decade the unemployment rate has come down under 4 Million and is no longer above 10%. It came down from 12.2 in February 2006 to 9.6% in November, which is indicating a remarkable improvement now on the german economy. This shows up already in rents for office space reverting upwards and at the same time more demand on the residential market. The year 2007 is expected to become even better, and house prices may well go up because in the past ten years very little new construction has taken place - which means there is a shortage of houses.

But still that means that as investor one has to strictly concentrate on cities and areas which are most wanted for renting. But rents that were paid two or three years ago in many cases will not easily be obtained again. In the past, many companies rented dozens of apartments to have them available for short-time staff or high-class apartments available for their directors and higher management level staffs.

Looking at specific cities, the most attractive and those with the highest rental level are as ever: Frankfurt, Munich, Stuttgart, Duesseldorf, Hamburg, Koeln (Cologne). Those are the key metropolitan areas which will also keep their importance in the economical development. Berlin is much sought-after by foreign investors but still is more a risk investment than other major cities, even than Dresden and Leipzig. The price decline seems halted and in better areas shows even a slight increase. The slump is also attributable to the fact that in the whole of Eastern Germany, in the 90s, Real Estate investments were heavily supported by tax advantages, this to a point where we now have thousands of flats in eastern germany empty – and not rentable for yet a while, or only for a much smaller rent than calculated.

On the other side, Cities like Frankfurt, Munich, Stuttgart and the others named are pretty stable in rent, especially in the very good city areas. With the perspective in view that the number of new houses built per year has been decreasing over the past seven years and is now on an all-time historical low, this could mean a rise in rent in those areas where there are too few apartments on the market.

Refurbishing old buildings and either keeping them as rental income property or selling them apartment by apartment as condos might be very worthwile, in view of the situation that too few new houses are being built.

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