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Why invest in German property?

Germany is the largest property market in Europe - and, after sluggish performance over for the best part of decade, it is finally showing some signs of kicking into life.

Reports indicate that large residential property portfolios have risen by 30 per cent in some instances - and traditional mortgage companies are being challenged by innovative new market entrants. Traditionally, lenders wouldn't consider giving a 25-year-old, with no credit problems and a steady job, a mortgage unless they could manage to raise a 30 per cent deposit - but innovative finance companies, many of who offer 100 per cent funding, are now beginning to enter the market.

The recent introduction of tax-efficient real estate investment trusts (REITs) should give the market added impetus. Huge amounts of money are set to be invested in REITs - or G-REITs as they are known in Germany - with some lobbyists forecasting investment to reach as much as €127 billion. This in turn will provide a huge boost to property prices in Germany.

Furthermore, the country's economy is recovering after years of stagnation. Confidence among business leaders is returning and the economy is growing at a decent rate, thanks to a strong and competitive export industry.

Because of its mortgage practices and static economy, property prices have remained low in recent times - especially in eastern cities such as Berlin and Dresden, where costs can be up to 30 per cent lower than the rest of the country and below those found in some eastern European countries.

Interest rates are traditionally kept low in Germany - and because it is such an established economy, investors should feel secure if choosing to plough funds into its property market.

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