Investing in Germany: main trends
Investment in Germany – this phrase for most people sounds extremely harmonious, because who, if not the Germans, is associated with a pedantic approach to everything, coupled with very real guarantees of the coming day.
In addition, Germany itself is a country of effective investments, among which real estate investments occupy a special place.
Germany was able to turn itself into a plus even a refugee problem that frightened several years ago: due to the influx of new people, the growth in trade, food, increased demand for housing, and in the service sector, the number of jobs increased by almost 500,000 people. In addition, the influx of foreign personnel smoothed out such a negative demographic factor as an aging population. Due to the fact that the country continues to successfully develop in any situation, the interest in investing its funds among many foreigners, among which Russians are a very active audience, does not decrease. Most often, these are entrepreneurs from Russia with a certain amount of available funds, but professional investors are also found, although there are still not so many of them.
The main problem faced by such people not only in Germany but also around the world is the lack of knowledge of the local market and language. For some reason, many Russian investors think that with the availability of funds to them in Germany, all roads are open, but this is not so. The Russians cannot gain access to most of the good facilities, in addition, many sellers will prefer the local investor to the Russian, and this has nothing to do with sanctions or attitudes. The only question is that it is easier for local residents to work in this way: the German investor will be more experienced, better versed, and he will also ask less ridiculous questions. Therefore, with the current demand for real estate in Germany, many sellers are looking for simpler ways, ignoring the requests of foreigners.
The most popular regions for buying German square meters are the cities of the “Big Seven” – Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Dusseldorf. However, there today a very low profitability is recorded – less than 3% – which is why investors are paying attention to other cities. Predicting development in specific new areas in this case is not easy, since every three months the situation changes, but we can definitely say that it makes sense to buy residential real estate in the first place. Although other options may also show themselves well in the future, depending on the development of a particular city and the situation in Germany and the world.
Apartment buildings – the most reliable type of investment
On the agenda today, investments in apartment buildings are now considered the most reliable type of investment, of course, with the right approach in the selection and purchase process. This type of real estate in Germany is very popular among foreign investors, since this area is considered the most reliable, liquid and stable type of investment. After all, the German residential real estate market is a tenant market: if throughout Germany this indicator is approximately 50%, then in large cities up to 90% of the population rents housing. The average length of stay in one apartment is 9 years, therefore, if the owner of this type of property finds a suitable tenant, then for almost ten years it will be possible to have guaranteed income from renting the house to the same person. In addition, apartment buildings have a long service life of up to 80 years, which is why German banks offer the most favorable conditions for financing this type of real estate. In the current 2018, the profitability of such an investment ranges from 2.5% to 6% and depends on the location and technical condition of the building.
The capitalization of tenement houses in certain regions can reach 30-50% over 5 years. Capital growth is carried out not only due to rental income, but also by increasing the value of the objects themselves. For example, those who invested in apartment buildings in Berlin ten years ago, during this time increased their assets at a cost of three times, and also sold objects at their peak, taking into account the tax benefit.
Redevelopment – an investment for professionals
No less popular type of investment in Germany is redevelopment – the acquisition of promising retail real estate objects that are sold at a reduced price. After the purchase, there is a comprehensive improvement in the format of real estate, the development and expansion of space through the use of illiquid areas, which can increase the attractiveness of objects for tenants and significantly increase the value of real estate. Then, the process of renewal of the lease for the long term is carried out. Accordingly, income from investments is formed by increasing the total value of the asset and regular rental income.