PROPERTY investors fed up with an "overstretched" UK market could do worse than look to Germany, say analysts.
Investing in UK bricks and mortar has reaped rewards over the last decade but some observers now suggest the market is becoming saturated.
Instead, they are touting German property as the place to invest, citing economic growth last year and the lowest rates of unemployment in four years as proof of a blossoming nation.
Stuart Law, chief executive of Assetz, says the growth potential in German property is finally starting to bear fruit.
“Germany is a new market for most overseas investors and it will take time to develop, so I would advise taking a ten year view rather than expecting instant returns,” he says.
“However, the growth triggers investors have been waiting for are starting to occur, with prices in some residential areas seeing small rises after years of declining or static prices.”
Oliver Jackson, commercial director at World Capital Partners, adds: “The UK property market is dangerously overstretched, wage inflation is significantly lower than house price inflation, and interest rates are creeping up.
“So people are looking abroad to invest in property, as the market out there is rising faster than the UK market has done over the past 10 years.”
Alex Ross, manager of Premier Asset Management's Pan-European Property Share fund, says his investments in Germany – around a quarter of his portfolio - are proving profitable.
“Most of my focus is now on continental European property where the medium term outlook is very attractive,” he says.
“This is because of the positive yield gap. It is positive in continental Europe against a negative in the UK.
“The reason a quarter of my portfolio is in Germany is because the country is in the middle of its cyclical curve at the moment.
“For instance, office rent in Germany is at a five-year low and, in Frankfurt, rent has fallen by around 35pc in the last three years.
“But this is now tailing off and we’re starting to see some rental growth kicking through. In fact, in the fourth quartile of last year, rent in Frankfurt was on the increase.
“Germany is now where the UK was around three years ago.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Matthew West on 020 7034 2636 or email scott,[email protected]IFAonline
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