The following story by Francine Carrel, international property reporter, OPP, is reposted with permission from OPP Connect.
Known as a nation of renters, only around 43 percent of those living in Germany own their property, but the number is slowly increasing.
The Institut der deutschen Wirtschaft Köln (IW) has conducted a five-year analysis of all 402 counties and cities in the country to find out where it’s worth it to buy property.
Residential property in Germany’s cities is overvalued around 25 percent, according to an index released Thursday by the VDP Association of German Pfanbrief Banks.
Prices are rising across the country, especially for new-built units.
IW concluded that buying a house or apartment made financial sense in only 27 percent of the regions examined.
The regions examined by IW (red = most desirable to buy). Source: Die Welt
However, they showed that more and more people are taking advantage of low interest rates in Germany, and forecast a continuing rise in homeownership.
Foreign buyers and renters also abound in the country. Over 7.6 million foreigners were registered as living in Germany at the end of 2013. Chinese buyers have contributed to the massive 18 percent house price rise in Frankfurt from 2011-2013, while Chinese, Scandinavian and Israeli investors are keen on Berlin. Rental yields are good and property can offer attractive capital returns for investors.
As financing a property purchase is currently so easy, and rents in Germany’s cities continue to rise, buying a property is becoming a more appealing option for many. VDP’s data showed rents for newly leased apartments climbing 4.3 percent year over year in the first quarter of 2014.
IW’s index showed that buying a property is far more likely to make sense in eastern Germany, while those in Bavaria are best off sticking to renting.