Member Article

The German success

With their recent victory at the Fifa World Cup 2014 still fresh in the news, Germany are enjoying a period of celebration of their fourth World Cup title, with their last win back in 1990 – 24 years ago. Not only could the UK benefit from taking a leaf out of Germany’s book in the world of football, but this could also apply to the property market as well – rental property is increasing in popularity in the UK, something which has always been in the case in Germany.

The German property market is one that is often overlooked. Their approach to the housing market differs from many countries in the world, including the UK, Spain and the US, with home-ownership taking a low priority and rental property proving to be far more popular. Just 41% of Germany’s population own their own homes, compared with 71% in the UK and 69% in the US. In Germany “the proportion of renters to total households is among the highest in the world. And much of this is in the hands of private landlords (36% of the housing stock).”

The history of Germany helps to illustrate why the rental market is so favourable with the population. After the Second World War, many cities were destroyed in Germany, meaning that housing was needed fast. “Supported by generous government subsidies, public, co-operative and private developers built millions of rental units in just a few years.”

As renting becomes the only affordable option for many young people in the UK, the German rental market has set an example that could be wise to follow. Unemployment in Germany is low – at 5.2% - and their economy is growing year on year, seeing a GDP increase of 0.8% in the first quarter of 2014. Along with this, property loans and mortgages are not as easily accessible in Germany meaning that funds are only granted to those who are able to afford it. Consequently, the German property market was not hit as hard as other countries in the world during the financial crisis, thus making for a stable market to invest in.

Earlier this year, Belvoir Lettings commented that the UK could soon become a nation of renters, pointing out that “some estimates indicate that the private rental sector could make up 20% of the homes market by 2021.” The average age for owner occupiers in 2014 is 29 years old. Buy-to-let landlords could cash in on this nation of renters, making now an ideal time to invest in residential property.

Sources

Financial Times, Global Property Guide, Quartz, Property Wire, The Independent, Image sourced from the Telegraph.

This was posted in Bdaily's Members' News section by ERE Property .