Interesting article in the FT.com about the relative sentiments in the European property markets. Germany holding up well - mainly due to the fact that it's not gone up in 10 years. This poor performance obviously puts the dampener on any expectation for future rises, ie past performance is a "good" indicator of future performance... I suspect the German property market (Munich and other cities) will surprise, and revert to the mean performance, ie go up significantly.

QUOTE
German house prices have remained flat or fallen over the past 15 years or so. Unsurprisingly, almost half of German owners expected the price of their house to remain unchanged over the next five years. Nevertheless, 40 per cent of Germans surveyed expected an increase over the same period
UNQUOTE

Europeans optimistic on property prices

FT.com / World - Europeans optimistic on property prices

MunichbBuyer, your points about the market being very poor for the past 10 years are correct although I believe we are close to the point of change of this property market compared to the rest of Europe.

The macro economic factors suggest the German economy is just starting to warm up after many years of regeneration due to the reunification. With property markets espeacially in the former East, such as Magdeburg and Leipzig at such low prices compared to the former West, these are hot spots ready for the taking. Yields are great and it's always important to rememeber that property is always in the main going to be driven by this factor.

Investors want to see the asset can manage itself... with yields at 4.5% in Berlin with no real industry surrounding it, I would question but don't discount other locations as every property market is local. It's the local economic drivers, infrastructure, amenities etc that will have a long term impact on the growth and prosperity of your investment.

Re. If the German economy continues to pick up, these upward pressures on house prices can only increase. " Deutsch Invest
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Actually recent news from Germany suggests that the country is indeed being affected by the credit crisis which originated in the US last year. It is now thought by commentators that the German economy has tipped into recession. From now all, all bets are off concerning German real estate. It will be best, I believe, to wait until the full amplitude of the crisis is known, before taking new positions in this market. This may well take another 12 months.

Suggestions that housing starts have dropped in the country, leading to an increased housing shortage and therefore to higher prices are misguided. For why should builders pull back when the market is booming, and prices are rising? The answer is that the economic slowdown is now here, are its effects are now directly affecting housing. Be prudent!

Be prudent is a valid warning for all investors in all markets anywhere in the world,it is not something just to be dragged out because some areas of Germany are not as good as others and the fact that the economy has slowed somewhat in Germany.

A couple of months ago there seemed to be a general and steady rise throughout Germany. There has been an undeniable blip. My feelings are this is not merely a temporary blip - Germany will not be immune to the world malaise.

It will, almost certainly, however ride out the storm in better condition than the likes of the the UK, I would be surprised if the bottom in Germany is as deep as most of the industrialized world or as prolonged.

The recovery when it comes is likely to outpace the recovery elsewhere in Europe.

Of course - I don't have a crystal ball and may well end up with egg on my face.

This year I have travelled to Italy, Germany, USA, France and Poland talking to top people in their fields. I have been visited by same from Canada, Germany, Croatia and Eire seeking my input.

I have found confidence (with some justification) to be the lowest in Italy. The consensus amongst all was that Germany was best placed to weather the storm.

Where I disagree with neustria is whether or not to continue to purchase property in Germany.

My company has taken on other developments/areas due to localized economic factors even though the nations are suffering.

Some areas of Germany still feature highly because the value for money in those areas still surpasses most.

The greatest factor inhibiting my activities in Germany has been the inability to find the level of finance I was able to find clients 3 months ago. Germany had only just started to explore the levels of finance taken for granted throughout the world when the brakes were re-applied by the banking world.
The demand from my client base has not diminished - my ability to find the sort of finance they have come to expect has. Maybe never to return - as I said at the start - crystal balls are in short supply