Poised for Success

Real Estate Investment in Germany

Why Real estate?

Real estate is an important cornerstone in each robust and profitable investment strategy, as it comes with benefits no investor can afford to ignore – particularly in the current market environment.

With interest rates now getting constantly outstripped by inflation, classic safe investments like government bonds often produce negative yields. In contrast to this, investing in real estate – especially in countries like Germany – generally makes for both a secure and profitable investment:

Inherent Value: Investing into real estate is investing into tangible assets. This provides much greater security compared to other investment types.
Real estate is timeless: As the world population is projected to grow by 20-25% in the next 30 years alone¹, the demand for residential property is likely to see a further increase in the foreseeable future.
Double chance for profit: High demand in Germany is expected to result in continuous price increases for both residential property and rent levels – especially in urban areas where demand vastly outstrips supply.
A potent inflation counter: Injecting capital into real estate projects comes with the potential of higher and growing yields as rents can be adjusted to offset inflation.

Contact

Consus Real Estate AG

Leibnizstraße 49
10629 Berlin
Germany

Germany: Stability meets prime market conditions

While there are many benefits to investing in real estate, one key question remains: where to invest? Some countries offer significantly better opportunities than others in terms of both profitability and investment security.

All eyes on Germany

Great Britain has been a prime location for real estate investment in the past. However, the prospect of the impending Brexit brings considerable political and economic insecurities into the equation, bringing the strengths of one particular European neighbor into focus:

Historically grown undersupply

Germany is the fourth strongest economy in the world with a stable political environment but despite these facts, demand for real estate that has been exceeding supply for nearly a decade: Within the last few years, considerably less property has been built than required. Between 2011 and 2015 alone, the shortfall accounted for 540,000 apartments – since then, the undersupply has only become more severe.

High demand for residential property

As a result, 3.2 million housing units need to be constructed until 2030. Based on an estimated average price per housing unit of € 325,000 this equals to a potential GDV of € 1 trillion on the German real estate market within the next 10 Years.

The UK, and London in particular, was a natural hub for real estate investment. There is a question mark now over the London economy and therefore the natural strongest economy to go for and invest in real estate is Germany.

Benjamin Lee, CFO of Consus

Real estate prices are on the rise

Not only are the average prices in Germany for residential property soaring – cities like Stuttgart, Frankfurt, Leipzig and Berlin have seen increases from 42% to 61% in the period between the first quarter of 2016 and fourth quarter of 2019.

Rents increase, but remain affordable

Additionally, the average rental price for housing in Germany has been continuously rising for over 20 years, which has provided a very stable environment for investing. At the same time, rent affordability still remains healthy, especially in comparison to other European countries.

Germany: Politics to support real estate investment

The urgent need for new residential property in Germany by now has become a matter of political concern: Angela Merkel, chancellor of Germany since 2005, established in 2018 the imperative that 1.5 million new apartments and private homes need to be built within the next 4 years².

In 2019, she reaffirmed the importance of achieving this goal at the “Deutscher Mietertag”, and regarding the topic of affordable housing stressed³:

Suitable framework conditions for private investors need to be established.

Angela Merkel, Federal Chancellor

Still, one particular development is – at first glance – a cause for concern for potential investors: In the federal state of Berlin the governing parties have agreed on effectively freezing rents for five years, starting in the 1^st quarter of 2020. Only a mild increase of 1.3% p.a. (linked to inflation) will be allowed from 2022 onwards. Additionally, tenants can apply for a rent decrease if the net rent exceeds 30% of the household income.

Also, it is likely that the German Federal Government will extend the rent limitation “Mietpreisbremse” until 2025 in select German areas. When re-letting real estate, rent is only allowed to exceed the local guidance rent (“Mietspiegel”) by 10%.

However, the aforementioned regulatory measures only apply to portfolio property. All buildings constructed after 2014 are exempt from the Berlin rent freeze; likewise, all newly constructed buildings are exempt from the “Mietpreisbremse”. Thus, investing in new buildings in Berlin will avoid these issues – a key additional support to Consus’ developments in this city.

The acknowledged need for politics to further facilitate real estate development for private investors, the attractive market conditions and the long-term projections for the real estate market make Germany one of the best locations for real estate investment.

Booming cities, profitable investment scenarios

In addition to the usual demographic demand for housing space, Germany’s strong economy provides for a constant influx of highly skilled workers from various branches like pharma, finance and automotive, which increases the need for real estate development in Germany even further.

This is one important factor for specific locations providing the best real estate investment opportunities in the whole country. Moreover, thanks to Germany’s inviting culture it is a particularly appealing destination for young people from across the globe for extended stays – be it for educational purposes or just to experience the European way of life.

Real estate: Germany’s most attractive cities

Living in Germany is without a doubt attractive to many people. One reason is the high living standard: According to the renowned Mercer Quality of Living City Ranking, five of the 20 best cities to live in are located in Germany⁴. We at Consus are developing residential property in each of these – as well as in other booming locales.

The world’s most livable cities

1.	Vienna	Austria
2.	Zurich	Switzerland
3.	Vancouver	Canada
4.	Munich	Germany
5.	Auckland	New Zealand
6.	Dusseldorf	Germany
7.	Frankfurt	Germany
8.	Copenhagen	Denmark
9.	Geneva	Switzerland
10.	Basel	Switzerland

Germany’s top 9 cities

Berlin

Germany’s capital is one of the most popular cities of the country for Germans and foreigners alike. Once divided by the Berlin Wall, the city has transformed into a cosmopolitan metropolis. The lively startup scene has made Berlin an even more appealing place to work and live in over the past years.

Population: 3,754,000

The average offer price for apartments for sale in Dusseldorf in Q4 2019 was € 3’770.44 /m². It has increased by a total of 41% since Q1 2016.
Cologne

Cologne is the largest city in Germany’s economically important Rhine-Ruhr area. Multiple high-profile companies from the media and insurance sector operate from here – as also do Lufthansa, Ford and Bayer, who have major dependences or even their (European) headquarters in Cologne.

Population: 1,090,000
Dresden

The capital of the German state of Saxony is known for its rich research landscape. The city is home to several reputable universities and research hubs such as the TU Dresden, the Fraunhofer- and the Max-Planck-Institute. Thus, it comes as no surprise that the high-tech industry in Dresden continues to thrive.

Population: 560,000
Dusseldorf

Geographically close to Cologne, Dusseldorf is a strong competitor when it comes to the most sought-after real estate locations in the region. Its diverse economy houses well-known companies ranging from biotech to fashion and – as Germany’s second largest location for financial enterprises – banking, and so may also be a beneficiary from Brexit.

Population: 642,000
Frankfurt

Thanks to its impressive Skyline and its riverside location at the river Main, Frankfurt is also known as “Mainhattan”. With Brexit approaching, Frankfurt’s status as one of the most important financial centers in Europe is set to solidify further, as many banks look to move their businesses to the home of the Frankfurt Stock Exchange (FWB).

Population: 752,000
Hamburg

If Frankfurt is the financial center of Germany, Hamburg needs to be introduced as the country’s state capital in terms of trade. The Port of Hamburg is Germany’s largest and most important harbor and the European hub for trades with the world’s second largest economy: China.

Population: 1,800,000
Leipzig

In 2018, London’s Academy of Urbanism honored Leipzig as the “European city of the year 2019” for its commitment to sustainable urban development. Employers like Porsche, BMW, Lufthansa Cargo and companies from the healthcare and energy sector add to Leipzig’s reputation as one of Germany’s most attractive cities.

Population: 600,000
Munich

Bavaria’s capital is the most expensive German real estate location – yet, the demand for local living space stays high, with prices rising relentlessly. BMW, Airbus Defense and Space, Microsoft’s Munich office are just a few of the corporate giants that make the city a desirable workplace. In the Mercer Quality of Living City Ranking, Munich, as the top German city, ranks in third overall in 2019.

Population: 1,540,000
Stuttgart

Stuttgart lies in the center of one of the economically strongest metropolitan areas in Europe. Porsche, Mercedes, Bosch and numerous middle-sized companies are based here. Stuttgart is also an important knowledge hub for the aerospace sector.

Population: 635,000

Price development in Germany’s top 9 cities

Germany’s top cities in particular provide best-in-class investment opportunities in the real estate sector. As the country’s largest developer with projects planned and under construction in Germany’s top 9 cities, Consus is in an enticing position to play an important role in building the German real estate future.