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Is Brexit Making Real Estate in Germany More Attractive to Investors?

As with so much surrounding Brexit, it’s unclear exactly how it will affect the financial and real estate sectors. It’s now been more than two years since the UK’s Referendum vote to leave the European Union. Discussions have dragged on with no clear stance taken by either side.

Brexit impacts

Early November 2018 is meant to be the cut off point for an agreement. However, it’s looking more and more likely that the UK might crash out with no deal at all. Either way, global investors are looking for more stable, lucrative places to spend their money. And the stability of Germany is proving it’s more of a draw than ever.

Berlin at the top

Auditing company PwC and the Urban Land Institute recently released research that backs this up. Emerging Trends in Real Estate 2018 shows that Berlin is the most attractive city in Europe for development and investment.

Berlin, Germany

Berlin, Germany

The survey interviewed 818 people across the real estate industry. Not only did Berlin top the list, Hamburg, Munich, Frankfurt and Berlin all came in the top six as well. The “overall prospects” for London, however, are way down in 27th position on the list.

Investment is rising

Investment in Germany over the last 12 months reached €68 billion ($79 billion). This is up from €54 billion ($62.5 billion) the year before. It’s also more than the €66 billion investment in real estate in the UK over the same period.

This increased interest from global real estate investors in Germany is driving rents and prices up in Berlin. While this may be concerning for locals, PwC discovered that industry leaders consider the growth sustainable. This is down to its population increase, along with a thriving technological sector that is providing jobs and improving the local economy.

Prices are falling

The survey also found that London is the only European city in which prices are predicted to fall. A financier told PwC: “Germany has been a steady state for a long time now. With Berlin, people truly believe it’s going to become a major city.”

As soon as the Referendum result was announced in June 2016, there have been concerns about its financial impact. As time has moved on, and discussions been reported, this concern has increased. The lack of clarity and information surrounding the UK’s exit from Europe has led to may business sectors expressing worries about business post 2019.

An investor based in London told PwC: “We don’t see the next 18-month period as the end of Brexit, we see it as the beginning. That issue is going to weigh on investment sentiment and decision-making by all agents in the economy, ourselves included, for a number of years unless there is an unexpected upside surprise, but that seems quite unlikely.”

For Germany’s financial hub, Brexit is looking much rosier. Banks such as Goldman Sachs and Standard Chartered are preparing to base their operations in Frankfurt.

Frankfurt, Germany

Hauptwache, Frankfurt am Main, Germany

European strength

As core economies across Europe settle from their 2017 general elections, the political situation in the block appears more stable than a year ago. Investors are apparently attracted by the French president’s pro-business stance as well. Paris and France in general are also appealing more to global investors.

Another newly top-tier country is Copenhagen, which came in joint second with Frankfurt. The Danish capital city has a strong tourist trade. Its employment sector has also grown rapidly, spurring on residential developments.

German strength

As Europe waits with bated breath to see how Brexit will affect the economy and businesses, property investors will continue to turn to Germany. Regardless of the fallout, Germany will retain its strong economy and relative stability. These remain the most important factors to global property investors when choosing their target cities.

About author

Nery Alaev
Nery Alaev 1 posts

Nery Alaev is the current Director of ESN Investments GmbH, which engages in the acquisition and development of commercial and residential property in Germany and Austria.

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