However we at Shelteroffshore have learned a great deal from investors with personal experience of buying property in Germany and this is our report on whether or not investing in Germany property makes sound financial sense. 

There are companies out there like Property Secrets.net who firmly believe that there is room for growth in the German property market.  For example Property Secrets’ current ‘Germany property investment summary verdict’ is: - 

“Excellent cash flow market. Potential for capital growth. Market has bottomed. Don’t buy less than 6% net yield.” 

Knight Frank‘s head of residential research, Liam Bailey is another staunch promoter of the German property market believing that the next two years will produce dramatically improving residential property prices. 
Both of these expert sources seem to perceive and suggest that increasing house prices in Germany will create potential for international real estate investors to tap into capital appreciation which they will then be able to realize in the medium term by reselling their Germany property assets… 

But who will investors sell to? 

Other investors? 

They won’t be selling in any great numbers to Germans because Germany consistently has the lowest percentages of homeownership in Europe.  Having lived in Germany for seven years two members of the ShelterOffshore team know from first hand experience that Germans prefer to rent their houses and lease their cars.  Furthermore Germany has been suffering from terminally high unemployment for a number of years which has dramatically reduced the amount of disposable income German citizens have to save towards a property.  The massive increase in the number of unemployed also means that there are fewer citizens in Germany able to raise finance to buy property and so the local demand for property for sale in Germany just does not exist and there is nothing currently to suggest that this situation will change. 

The German government has even scrapped payments known as Eigenheimzulage that it previously made to first time buyers in a bid to encourage them to become homeowners, so at the moment there is nothing to encourage a German to buy property in Germany. 

Property investors might consider selling their properties on to those in search of a holiday home in Germany then – just like investors are able to do in countries such as France, Spain and Cyprus. 

But Germany is a country with an incredibly low international profile in terms of its tourism potential and one doing seemingly nothing to improve its profile.  While it is undoubtedly a stunningly beautiful country in parts with castles, mountains, unspoiled coastlines and vast expanses of woodland and rolling countryside, Germany is not at all synonymous with the idea of a summer holiday, a weekend away, an adventure holiday, a stag or hen weekend or even a cultural or historic tourist experience. 

This means that investors won’t be able to sell to second or holiday home seekers in any great numbers because quite simply there aren’t any in Germany 

So, okay – let’s assume that property prices will rise - those who buy now will achieve good profit margins and enjoy capital appreciation – but don’t let’s assume that any investor will then be able to offload his property to anyone other than another investor who hasn’t done their research into the liquidity of the German property market. 

And what then anyway? 

So an investor finds a mug punter to sell his German property to - but what about the 15% speculation tax that Germany lumps onto those who attempt to resell real estate that they have owned for less than ten years and from which they’ve made a profit? 

That 15% speculation tax together with the Makler’s fees (estate agents fees) which the investor paid when he bought his German property in the first place and which amounted to up to ten percent of the purchase price as well as the 1% for the Notar’s fees (public notary’s fees), the transfer tax and the back handers the investor likely has to pay out to all and sundry related to the property purchase process in brown paper bags in the first place could quickly put those who have profited a little from real estate firmly into the red. 

And don’t think about buying off plan in Germany, having a property built or buying a brand new home and flipping it on for profit.  You pay a substantial premium for brand new Germany property that means it will take far longer to achieve profitable growth for those seeking capital appreciation from their real estate assets, furthermore the process of having property built in Germany brings with it even more expenses in the forms of taxation, fees and more back handers paid to the likes of architects who survey the property before a German mortgage company will release finance for example – yes, seriously. 

So, it possibly makes little sense to buy property in Germany if you’re expecting to easily profit from capital growth any time soon. 

You could however buy to rent to the German population which either has no desire to own property or no ability to afford to buy property.  In popular and major cities like Berlin and Munich this could be a profitable prospect if unemployment decreases and foreign investment, local wages and overall demand increase. But then again the German population is aging and shrinking and there are few signs that the German economy is going to bounce back to life dramatically any time soon so you’ll have a market that is not growing in terms of demand or affordability, you’ll own an asset you cannot resell for much profit in the long term and as a result we can think of a million far less reckless ways to invest your money. 

How about property in Zimbabwe for example where investors are considering hedging against 1,000 per cent inflation?  Or what about diversifying your portfolio and chucking the lot into an untried start up company?  After all, if you’re seriously considering investing in Germany property you can’t be risk averse! 
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Rhiannon Williamson writes about living abroad and investing in international real estate.  She also maintains www.shelteroffshore.com - Shelter Offshore Investment & Real Estate which is an online resource for expatriates, international investors and anyone planning a new life abroad.