Best prospects for real estate

3 February 2009: With property values tumbling in the UK, Ireland and Spain as well as in many Eastern European countries, German cities emerge as the new favourites among European property investors. Real estate experts say that German cities are now the most promising and safest ones in Europe to invest in. A survey by the Urban Land Institute and PricewaterhouseCoopers (PwC) places four German cities among Europe’s top ten. Munich and Hamburg are awarded the top two spots, with Berlin and Frankfurt ranked nine and ten respectively.
European investors, developers, bankers, and brokers ranked Munich top of the investment market league table due to a combination of factors including: an increase in government spending, which may lead to future economic growth; the decline in unemployment; a fast growing population and increased consumer spending power. Munich also came top of the European City Risk league table. Munich is seen as having low risk because of its diverse economic base, which mitigates risky investments. Indeed Germany is considered ‘less volatile with more long-term investors’ helping Hamburg to second place with Frankfurt and Berlin also ranking among the top ten for investment prospects in 2009.

However the authors of the survey Emerging Trends in Real Estate Europe, 2009 point out that the investment climate in all major European cities had fallen. “This is going to be a tough year for many investors. For those who bought at the top of the market it could be a struggle for survival, particularly if banks become more aggressive in dealing with covenant breaches. On the other hand for those with equity to invest, there will be opportunities as the banks start to take action. Although new debt will remain in very short supply, banks may have little alternative to remaining as lenders during the restructuring of defaulting borrowers,” said PwC real estate director John Forbes.

Investment and development prospects fell for all of the cities ranked in the report, with overall investment prospects dropping from a rating of 5.6 (modestly good) in 2008 to 4.7 (fair) in 2009. Developments prospects fell even further, from 5.6 to 4.3 (modestly poor). Risk ratings have also worsened.