German cities hot investment in 2008

Urban German property has been singled out for its potential growth, despite a slowing market across the large sections of the European continent.

Four cities in the country - Hamburg, Munich, Berlin and Frankfurt – have all been identified as potential overseas property hotspots for 2008, by trade magazine Jet-to-Let.

However, it is Berlin which has been singled out as the key location.

"Frankfurt, Hamburg and Munich are mature markets but still under priced in global terms. Frankfurt is the financial capital and will always be a good location for investment but, I believe, the real gains will be made in Berlin," explained Henry Powell-Jones, associate editor of Jet-to-Let.

"There is a clear disparity between property prices in Berlin and the other major cities both within Germany and the rest of Europe which is extremely attractive for the investor."

According to research carried out by UBS, Berliners have the third most purchasing power of the world’s major cities inhabitants.

"If you look at Berlin property prices at the moment, on average they are one eighth of London prices and are actually cheaper than Sofia where GDP is a quarter of that in Berlin," continued Mr Powell-Jones.

"It is also underpriced if you look at the ratio of rental prices to earnings."

Fly-to-let also cites the development of the Berlin Brandenburg International Airport, scheduled for completion in 2011, and the commercial developments along the River Spree as further reasons for investment.

The slowdown in new-build property coming onto the market, following a post-reunification boom, has also boosted the financial viability of investment in Berlin.

"The rental market in Germany is enormous with a huge demand for accommodation. There is a lack of good quality housing being built, so there will inevitably be a rise in demand from people wanting decent places to rent," said Mr Powell-Jones.

"As the economy strengthens, GDP will rise, and ordinary Germans will have more disposable income which is likely to encourage people to invest in property, because, just as in the UK, Germans do not have any confidence in their pensions," he added.

Only 14 per cent of the population are owner occupiers, compared to a European average of 60 per cent, according to Fly-to-let, which ensures a strong demand for rented property.