Discover the three best things about the Berlin property market for property investors (part 2-3)
October 2, 2023
With interest rates hitting a 13-year high in the UK, investors are looking increasingly favorably on Germany’s historically low-interest lending. Currently, we’re seeing clients with mortgages fixed for 10 years at 4.5% - far superior to anything a UK lender can presently offer.
Read our first blog on why Berlin is so good for property market investors.
What’s so good about Berlin?
SECOND, Preferential Mortgage Rates
Why has Germany had historically low interest rates?
European Central Bank (ECB) Monetary Policy
Leans towards accommodative monetary policies, including lowering key interest rates and implementing quantitative easing measures. These measures helped stimulate the economy and keep borrowing costs low.
Economic Conditions and Inflation.
Low interest rates in Germany are partly a reflection of the economic conditions and inflation levels in the country. Whilst Germany has had its fair share of inflation this now stands at 4.5% down from 8.6% in 2022 leading to a relatively stable economic climate. When inflation is low and economic growth is subdued, central banks often lower interest rates to encourage borrowing, investment, and spending and here at RPA we feel like we are not far off the next ‘spending boom’.
Safe-Haven Status.
Germany has a reputation as a safe haven for investors during times of economic uncertainty. Investors seek the safety of German government bonds, leading to high demand and lower yields. As bond yields influence other interest rates, this increased demand for safe assets contributes to lower interest rates in Germany.
Demographic Factors.
Germany's aging population and demographic trends play a role in low interest rates. An aging population typically results in higher savings rates, as older individuals tend to save more for retirement. Increased savings can lead to a surplus of funds available for lending, which, in turn, can put downward pressure on interest rates.
Property Tax Deductions
Property owners can deduct property tax payments (known as Grundsteuer) from their taxable income. This deduction helps reduce the overall tax liability associated with property ownership.
Economic Structure and Productivity.
Germany has a strong manufacturing sector and is known for its export-oriented economy. This economic structure, coupled with high productivity levels, has contributed to Germany's competitiveness and stability. These factors have helped maintain low inflation rates, which, in turn, have influenced the lower interest rate environment when compared to other western markets.
The RPA Group are property and investment specialists rather than tax advisors and individual circumstances do change the position on everything mentioned above. If you are looking at German property we would strongly recommend you do not rely on the above and speak to a German qualified tax advisor to fully understand your position.
Stay tuned for our follow up blogs on why Berlin makes so much sense from a property investor's perspective.
READ OUR PREVIOUS BLOG POST:
GEORGE RADFORD
MANAGING DIRECTOR (UAE &AFRICA)
about the AUTHOR
George is the co-founder of RPA Group and Managing Director of the business in the UK and Africa. A qualified Chartered Surveyor (MRICS) with almost 20 years of property investment experience, George has helped his clients to successfully grow and strengthen residential property portfolios over multiple markets and territories. Active in building and advising upon his client’s investments, George is now focusing on procuring UK investments exclusively for RPA Group clients and investors, providing insightful and strategic advice and opportunities.