Real estate investments remain attractive despite falling yields in Germany

Despite a moderate decline in what were already low yields, demand for real estate investments is not expected to decrease, reported the Handelsblatt on 10.03.2017. Real estate yields are set to decrease again this year and next, although the rate at which yields are decreasing is forecast to slow.

Although there have been recent reports of individual office transactions with purchase yields of less than three percent in Berlin and Munich, these were exceptional cases because the buildings were under-rented. “Anyone who was asking Eur 19.00 per square metre for well-situated office space in Berlin yesterday can easily ask for Eur 30.00 today,” said Cbre’s Fabian Klein.
Wolfgang Kubatzki from Scope dismisses any talk of investors exposing themselves to excessive risks, highlighting the fact that real estate yields are still much higher than the returns on German government bonds. Kubatzki also pointed to early indications that the market is bottoming out.

Strong demand for premium condominiums in Berlin
According to this year’s Knight Frank Wealth Report, an increasing number of ultra-high net worth investors are becoming interested in Berlin for the first time, in particular in those districts that are being regenerated and are enjoying a rapid influx of young creatives, reported Die Welt on 08.03.2017.
Knight Frank singled out the districts of Mitte, Friedrichshain and Kreuzberg, and lauded Berlin as a model for urban regeneration, praised the rapid growth in its start-up sector, its low cost of living and the fact that over half of the city’s new residents in 2016 came from overseas.
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