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Germany outpaces Great Britain

Issue 1/2019

The BREXIT-chaos and global insecurities cause the German property market to flying high. While even apartment prices in Great Britain descend continuously, property owners in Germany celebrate an increase of the value of properties.

Currently there are many factors of uncertainty with respect to the global economy: the chaotic exit of Great Britain from the EU caused uncertainty, but also Italy’s debt crisis and China’s poor economic data. Nonetheless, there are also winners: the stable German market benefits immensely from this situation.

It is not secret that above all banks and the financial industry increased their office surfaces in Frankfurt, and it is also common knowledge that funds which include British industry properties cause a headache to their owners. However, Germany also flies high due to its market for residential properties.

Currently all German major cities including B-cities are a favorite target of international capital.

Apartment prices increase while in Great Britain they are at the lowest level in six years and the number of transactions has decreased notably so that experts assume a further poor demand. In addition to this, the weak pound hampers market activities and reduces investments. In Germany this is quite different: Economists expect interest rates to remain low. As investors prefer government bonds and Pfandbriefe, interest rates of mortgage loans drop.

Two years ago, 6B47 Real Estate Investors has put a special focus on the German market and initiated projects in the residential and the industry segment in the greater Munich area, in Berlin and in Düsseldorf. However, it is still surprising that this trend has been so clear and significant. Suddenly Germany is a global player.

Of course, this also implies that property developers are challenged by a fierce competition. Construction prices increase as property prices do.

Transactions are realized quicker, hence, easily accessible equity capital is a leading edge.

An increased number of investors will join a project in the framework of forward deals at an earlier stage, but they will also have to be prepared to pay higher prices. The relatively small difference in yield between hotels, apartments, offices, student residences, etc. causes that all asset segments have become interesting - the most important point, however, is that investors are in the safe haven of Germany.

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Sebastian Nitsch, Member oft the Management Board of 6B47, offers regular insight in topics of current importance within the real estate industry and within 6B47 and how we assess them.


Sebastian Nitsch

6B47 Real Estate Investors AG