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Germany – The Property Market

DresdenSkylineresizedaAssetbase have been involved in the German property market for over 12 years, during which time it has performed very well. However, rather than trying to cover the entire German market, Assetbase specifically targeted the Berlin, Dresden and Leipzig markets as areas for significant growth. Within this geographical area, we specialise in residential apartment buildings, rather than commercial investments.

Residential tenancies tend to be longer in Germany than we are used to in Ireland or the UK. Indeed, it is not unusual for a lease to pass from one generation to the next. As a result, loan to value ratios tend to be higher on residential property than on commercial property. However, the lending bank will carry out its own due diligence on the property and the loan will be set at a level whereby the rents have the ability to pay back both interest and capital, typically over a 25 year period.

While prices have increased dramatically over the last 10 years, so have rents. Rents were typically controlled by what is known as the Mietspeigel or street average. Sitting tenants could not be asked to pay more than the rent indicated on the Mietspeigel for similar apartments. However, new tenants would be asked to pay market rents, which in popular areas could be significantly higher than the Mietspeigel. These new leases would, in turn, have an inflationary effect on existing leases, as the average would increase. As a result of significant increases in rents over the past years, a rental cap was introduced in Berlin during the summer of 2015. This limits the potential rents achievable on a new lease to 110% of the existing rental index. This cap was introduced to the 5 large cities. Therefore, it is not expected to be introduced to Dresden or Leipzig.

Assetbase are currently looking for properties to sell in the above mentioned areas. If you have a property to sell and require a free valuation, please call Des Quigley on +353 4293 78877 or email dq@assetbase.com