Foreign Investors Buying up German Apartment Blocks

By Allison Halliday | September 5, 2012

According to an article in The Local, the latest trend in Germany sees foreign investors snapping up prefabricated apartment blocks. At first glance it might be difficult to see the attraction as they have plain concrete exteriors and low ceilings, and at best can only be described as drab.

However foreign investors view them differently, and about 50% of these apartment blocks with more than 10 flats have been bought by overseas buyers. They have spent €3.3 billion during the first six months of this year, which is the highest level of foreign investment into German real estate since 2008. It's also a lot higher than last year's total figure for investment which reached €2.4 billion.

Germany is currently being viewed as one of the best European countries to invest money in, and potential buyers certainly have a lot of choice. Apparently a lot of investors, including private equity firms have built up debt since the peak of the market in 2008, and it's estimated around 100,000 apartments will come onto the market. Typical examples include companies such as Blackstone that purchased 8,000 apartments from a bankrupt investor earlier this year, while Cerberus bought 22,000 apartments from another bankrupt German company. Fortress, an American investment firm is getting ready to sell 38,000 apartments in Dresden, and the sale is expected to attract considerable interest from overseas buyers.

A lot of these properties are prefabricated buildings and while many are in East German cities, some are also in West Germany. Part of the attraction for investors is that all the apartments are very similar, making them very easy to handle. In spite of their growing popularity some experts are taking a more cautious view, and believe that access to cheap financing and a lack of other viable investments has already pushed the prices of these apartments up to unsustainable levels in certain parts of the country.