What does 2017 hold for the German property market?

We all know the many political and economic challenges facing Europe over the next 12 months. Historically London has led the European real estate market but in light of Brexit there is a new leader of the pack. A report by ULI and PwC highlights emerging trends in European real estate in 2017 and places Germany at the top of the pile. So, what does 2017 hold for the German property market?

Leading cities

The report into emerging trends in European real estate has highlighted Berlin, Hamburg, Frankfurt and Munich as potential “safe havens” of the future. These four German cities occupy positions one, two, three and five respectively in the list of more sought-after European property markets. Each of the local real estate markets offers an attractive mix of investment, development, prospects for rental growth and prospects for capital growth in the short to medium term.

The optimism surrounding these four German cities is replicated to a varied extent right across the country with the German economy posting a strong finish to 2016. We have already seen signs of growing demand for inner-city apartments across Germany’s leading employment lights in 2016 and this is set to continue

Safe haven status for German property market

Many of those who took part in the survey are suggesting that the German property market is now seen as a “safe haven” in light of dramatic changes in the UK political scene. We all know the challenges of Brexit going forward, trade agreements and foreign investment in real estate but it seems that Germany offers a backbone the UK/London is unable to offer at the moment.

This is interesting, because while the German economy has been fairly buoyant there are some economic challenges ahead. Indeed there is no guarantee that Angela Merkel will retain her position at the head of the German political scene with 2017 elections on the horizon. In many ways Angela Merkel has been the glue which has kept the European Union together although the withdrawal of a key strong partner in the shape of the UK has caused ripples of concern.

Does European real estate offer good value?

The European Union and the European economy have been in a state of panic and confusion for some years now in light of the 2008 worldwide economic collapse. However, there is no doubt that this worldwide economic earthquake has also exposed some of the frailties of the European Union and the weak links such as Greece. While Greece was not the only European Union member to require financial assistance it is by far the biggest casualty to date.

Against this background it is not a surprise to see European real estate prices under pressure especially with many banks forced to take on unwanted stock due to defaults. This overhang of stock is starting to dwindle down but there is still some way before it is totally cleared and markets can regain some kind of “normality”. If, as many lenders, investors and property experts believe, 2017 bodes well for the German real estate market, and Europe as a whole to a lesser extent, then buyers should emerge for this unwanted stock.

Conclusion

Alongside the UK Germany has been the powerhouse of Europe for some time and the withdrawal of the UK from the European Union is a bitter blow. It will be interesting to see if the so-called real estate safe haven status which London has enjoyed for many years does switch to Germany’s leading cities. Despite the political and economic challenges across Europe, and also within Germany, the German economy has held up better than most and there are reasons to be optimistic for the future.

Towards the latter part of 2016 there has been increased demand for inner-city apartments and other areas of the German real estate market. There is no reason to believe this trend will not continue into 2017.


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