German real estate for rent can be an ideal investment to achieve higher returns with less risk. Below you will discover how, who, what, where, for how much and on what conditions.
German real estate offers opportunities for both small and large savings deposits. Find out more about the possible investment options in German real estate below.
Table of Contents
- 1 Why invest in Germany?
- 2 The German property situation
- 3 How to invest in German real estate?
- 4 Conclusion – German real estate as a savings alternative
- 5 Additional info about Germany
Why invest in Germany?
The German property market has been booming for several years, so we decided to investigate the situation and see if it was a good country to invest in.
It turns out that several German cities have become statistically the most favoured locations for real estate investment in Europe in recent years.
Investing in German real estate proves to be suitable for all types of investors (both institutional and private investors in German real estate [AVAILABLE SOON]) who are looking for well-performing and safe assets.
Berlin, Hamburg, Frankfurt and Munich represent four of the top five European markets for investment in real estate and property development. The fifth city in Europe is Dublin.
Recent data from Real Capital Analytics confirms that Germany has overtaken the UK in terms of investment volumes following the Brexit referendum.
Although London remains Europe’s most important market and magnet for global capital, the city has fallen in the rankings for favourable investment and development prospects.
Since the Brexit vote, there has been increased interest in Germany as an investment destination.
Meanwhile, property investment funds in Germany and Scandinavia have risen so much since the Brexit vote that investors are willing to step in at a premium.
In other words, one pays a price that is higher than what the value of the underlying asset justifies. This is a sign that investors feel their money is safer there.
With more than 80 million people, Germany is the most densely populated country in Europe. It has the strongest economy in Europe (fourth largest in the world) and employs about 42.8 million people.
In addition, Germany is one of the most productive economies in the world and has a thriving export market.
It is therefore quite understandable and logical that the German property market attracts large amounts of international capital.
The German property situation
While researching the German property market, some surprising facts and figures came to light.
Overview of the most interesting findings
Flat viewings often turn into massive events, with dozens of potential tenants showing up to apply.
Many of these prospective tenants bring with them well-founded files, including detailed information about their income, job, credit rating and family situation.
As a tenant, it can be insanely difficult to find a flat and you are still expected to make a deposit of 2 to 3 months’ rent.
Nevertheless, the broker’s fees are paid by the landlord, which is not the case in several other countries, for example.
It is also noteworthy that some of the rental flats do not have equipped kitchens. Tenants must install these themselves in certain cases.
In Hamburg, flat prices rose by 70 percent between 2010 and 2015.
They are expected to rise by another 50 per cent by 2030. A three-bedroom flat can cost around 400 000 euros in residential areas close to the city centre.
However, not all regions show the same rapid increase in property prices. Even in cities such as Berlin, Hamburg and Munich, high rents in the new-build segment are not necessarily matched by high rents in the existing rental sector.
Price increases were driven by population growth, the ongoing trend towards urbanisation and strong economic fundamentals, combined with historically low interest rates.
At the same time, the vacancy rate in the residential German rental sector fell to almost zero.
Low risk for lenders via low loan-to-value ratios
Finally, the Loan to Value ratios in Germany do not usually exceed 75 per cent, which underlines the financial solidity of the German market.
The Loan to Value (LTV) ratio is the ratio between the amount of the mortgage and the value of the investment property. In other words, it is a percentage expression of the amount of the mortgage in relation to the value of the buy-to-let property.
Since this usually does not exceed 75% in Germany, this means that, on average, 75% of the value of the property is borrowed and the other 25% is self-financed.
This reduces the risk for local lenders and creates a more stable market.
Let’s look at some of the big German cities and how they are doing.
An important rule of investing in real estate [AVAILABLE SOON] is that you should look at cities rather than countries in general, because the dynamics from city to city within the same country can be totally different.
Six German cities under the microscope
- Munich: Prices have risen sharply and are approaching the calibre of London. The locals find it very difficult to keep up with rents and it is still difficult to buy German real estate in this city (it is even more expensive). Rents have risen less rapidly than the prices of the property itself.
- Frankfurt: This is another city in full bloom. Benefiting from Brexit news and the promise of becoming the financial centre of Europe in the coming years. Promising hub with stable prospects.
- Berlin: City in full bloom at the moment. Has a rapidly growing population. More people are coming to live and work in this hip city as a result of development in sectors such as technology, software and e-commerce.
- Hamburg: Gentrification is underway in several areas of this city and this paves the way for further growth in the real estate market.
- Düsseldorf: The market for luxury real estate is becoming saturated in the capital of the booming North Rhine-Westphalia. But there is still a great demand for simple houses and flats for families to rent.
- Cologne: Demand exceeds supply in this city, so the outlook is good for investment in the coming years.
How to invest in German real estate?
German real estate offers opportunities for private investors with small and large budgets.
Below is an overview of the possibilities, from the point of view of available savings capital, to invest.
Smaller budgets can invest very easily and very quickly in German real estate, while bigger budgets are better off with a slightly more complex investment that requires a little more preparation time:
The easy way – German real estate perfect for smaller budgets
The investment volume raised by crowdfunding platforms for property development and redevelopment has doubled every year so far and there are no signs of saturation yet.
As a private investor, you can now also turn to an interesting crowdfunding platform in the niche of residential German real estate!
The platform is the market leader as a crowdfunding platform for investment properties in Germany. The platform is intuitively designed and all content is available in two languages: German and English.
The platform welcomes investors from all over Europe and creating an account is free and very easy.
The minimum investment is EUR 500 and the maximum amount is EUR 10 000 as a private investor. You can take a look at the website to see the current offers.
The platform offers two types of investment in the form of bonds or loans.
The returns can be as high as 7% per year, which is excellent if you take into account the low risk profile of the German market.
- At the end of the investment period, you receive the principal amount in your bank account (interest payments are made periodically throughout the year – specific arrangements are made for each offering).
- You will also receive a professional statement on the investment and the transaction that can be used to complete your annual tax return.
- It is a crowdfunding platform you can rely on if you are looking for a safe investment in German real estate
The harder way – German real estate for medium & large budgets
If you have a larger budget and are not looking for loans, bonds or shares, you can also acquire German real estate the traditional way.
Specifically, you can acquire full ownership of a flat or block of flats. Please note: Avoid leasehold or building rights (read all about it on How to avoid German junk property).
Below is an overview of some available investment opportunities in Germany, all for sale in full ownership (i.e. partly financed with a loan).
As the icing on the cake, as an investor you get a contractual rental guarantee on top, which means that vacancy, damage and non-payment have no effect on your monthly and annual rental income!
German flats for sale with rental guarantee
- German real estate as an investment in Gelsenkirchen for higher returns without additional risk through 3 unique guarantees. From EUR 41 000 own contribution
- Real estate in Germany as an investment with full care including stewardship and rental service + guaranteed rental income – From 33 000 Euros minimum own contribution
- Buy and let flat in Germany [AVAILABLE SOON] – Passive investment in physical German real estate with security in terms of rental income and operation and management
- Invest in real estate in Germany [AVAILABLE SOON] – Real estate investment with complete rental service and income and management guarantees
- German revenue properties with rental guarantee for sale in Gerolstein
- Buy German property [AVAILABLE SOON] as an investment with guaranteed rental income
- Buying a flat in Germany as an alternative to the classic savings account
German buildings for sale with rental guarantee
- Investment property in Germany for sale [AVAILABLE SOON] – With 4 flats for rent for which you enjoy a secure, contractually defined rental guarantee
- Purchase rental property in Hagen [AVAILABLE SOON] in North Rhine-Westphalia: 10 rental units with contractual guarantees for investors
- German apartment building for sale [AVAILABLE SOON] as an investment with guaranteed return – Attractive flat block for sale in Gelsenkirchen
- Flat block for sale in Germany with 12 rental units (10 residential, 2 commercial), a 4-year rental guarantee + attractive annual net yield in Waldbröl
Conclusion – German real estate as a savings alternative
As a private individual, you have numerous options for injecting savings into German real estate.
Smaller capital sums can be invested from as little as 500 euros via the crowdfunding platform.
Larger capitals have various options for investing from EUR 30 000 equity in German yield properties with rental guarantee and full service (including stewardship).
Additional info about Germany
- Invest in German property [AVAILABLE SOON]: An overview of the taxes and costs involved
- Buying property in Germany in North Rhine-Westphalia: Attractive investment location
- Building up your own retirement with real estate in Germany is safe thanks to 4 characteristics of some growth regions + German yielding real estate on offer
- Practical step-by-step plan and an overview of the purchasing procedure of German real estate [AVAILABLE SOON]
- German junk property – Absolutely to be avoided – Read this for tips and tricks to avoid scammers and fraudsters
- Benefits and frequently asked questions about German investment properties
- Investing in German real estate for capital protection and potential long-term added value
- Germany [AVAILABLE SOON] – Stable economy with tenants in the EU