Investment Hotspots - Eastern Germany

This months investment hotspot is Eastern Germany, popular with many buyers for affordability and quality

2014 has seen huge expansion in the international property arena as investors look further afield or in relatively underexposed regions for the highest capital growth and rental yield potential.

Investor criteria has changed somewhat from the desire for an investment property in a coastal resort in Europe that doubles up as an occasional holiday home, to a strictly-for-profit purchase in an established rental market where property prices are relatively cheaper.

Property investors are also increasingly looking overseas as an affordable way of getting on the property ladder, with many purchasing their first homes in other countries to rent out on a permanent basis or renovate for resale.

Cross-border property investment is very much in trend and one market increasingly under investor focus can be found in East Germany.

East Germany has largely remained beneath the investor radar, despite having large and thriving rental and resale markets, buoyed further by the considerable US military presence in the country.

Buyers look for investments in strong domestic markets

James Fern of specialist German real estate company My German Property says he has seen an increase in enquiries from investors in Spain, France and Bulgaria as buyers look for investments in strong domestic markets:

"The German market finds itself in an excellent position to hedge against the issue of a weak domestic market. Whereas foreign property buyers in Spain for example, are mostly invested in coastal resort areas where resale is likely to be to another foreigner when the time comes, in Germany there is a distinct shift from the traditional 'rent for life' system to straightforward property purchase. The younger generation are keen to explore home ownership, increasing domestic consumption in the process."

Property in need of renovation is almost unbelievably cheap in Eastern Germany, with projects available for as little as £5,000. Once renovated, although rental is an option, the majority of the value is in resale, with significant capital growth available to investors in this market.

According to James, larger East German cities are where the value is to be found: "Germany has excellent 'out-of-the-box' potential for investment depending upon how much you can afford to invest. Cities such as Berlin are the safest bet where rental yields of around 10% can easily be achieved in this massively growing city although average property prices are higher."

"In contrast, a property renovated as student accommodation in a small university town can yield 20% with a capital gain of as much as 100% on completion, with a very healthy appreciation in capital of around 5% a year," he added.

My German Property has recently launched a Facebook page to auction properties in East Germany in an attempt to raise the profile of this little-known investment hotspot.

The buying process is relatively straight-forward and reasonably inexpensive and My German Property provide a hand-holding process from purchase to beyond completion, utilising their expert knowledge of the region.

Properties include Grade II listed buildings constructed mainly in timber, almost Tudor in style set in attractive locations with enormous potential. Renovation work to listed buildings is slightly less involved than it is in the UK, with German authorities more interested in preserving the facia of the building than the interior.

My German Property continuously update their Facebook page with auction properties, also providing information on the sale when an auction has closed, vital when considering investment in a country you may not be too familiar with.

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