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German real estate market on the rise


In comparison to many other developed countries, the German real estate market is undervalued. It is characterized by a preference to rent of the German citizens, especially in big cities. The country’s homeownership rate ranks among the lowest in the developed world, and nearly dead last in Europe.

Table 1: Home ownership rate in OCED countries

Source: https://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate

After a decade of stagnation, German real estate price has finally started to gain momentum. In 2011, when the interest rate became historical low, the German started turning to real estate investment instead of letting their money lying idly in the bank. Also, due to the historic low interest rate, the German have become more willing to take a mortgage to buy or build their own home. Within the period 2011 – 2015, German real estate price has increased steadily 30%, more than that in many other popular markets such as the US, the UK, Canada and Singapore, etc.

Chart 1. Global housing price increase rate

Source: http://www.economist.com/blogs/dailychart/2011/11/global-house-prices

With real estate price still being one of the lowest in Europe, it is safe to say that there is no sign of a real estate price bubble in Germany yet. 

Table 2. Housing's unit price in OECD countries (survey in big cities)

Source: http://www.globalpropertyguide.com/Europe/germany/square-meter-prices

Furthermore, foreign investors, especially rich individuals from Asia, haven’t laid their eyes to German real estate market until very lately. The last decade has witnessed a gigantic capital flow from China, Arab world and Russia investing in real estate in English speaking countries such as the US, the UK, Canada or Australia. This has played a decisive role in overheating the real estate market in these countries. This hasn’t been the case in Germany so far.

However, amid the crisis in Europe, Germany has emerged as a star with a stable economy and low unemployment rate, which is almost immune to crisis. This has drawn attention from foreign investors. For example, Chinese investors have started shopping for German real estate. In 2014, many reports on German real estate market have confirmed: The Chinese are here!