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Germany's regions and property markets

The Federal Republic of now contains sixteen federal states (or Länder, pronounced: lender) – including the city-states of Berlin, Hamburg and Bremen – which enjoy considerable autonomy in various contexts. This has special significance for the real estate investor and property developer.

Germany’s historically developed regions – which don’t necessarily overlap with the federal states – have distinct cultures and economic environments that should be considered in any investment decision.

East and West

The main regional dividing line in today’s Germany, the one we are all familiar with, follows the border that separated the German Democratic Republic (GDR or East) from the Federal Republic of (West Germany) from shortly after WW II until Unification of the two states in 1989.  At Unification eastern Germany was in a desolate economic state indeed. Today, parts of it are growing strongly due to the Federal German government’s huge investment made in its infrastructure.  Most of eastern Germany is remarkable for it good roads and public transport, fine public spaces and impressive new construction.  But still, large parts suffer from depopulation and are economically under-developed or, even, regressing.  Other areas within eastern Germany, however, profit well from their modern universities or proximity to economically expanding former Eastern Block countries.  They stand out for their strong growth and are notable as centres of industrial research and technological innovation.

There are many attractive real estate investment opportunities in the former GDR where prices can be relatively low, demand strong and growth potential very real.  At the same time, however, extensive backwater areas, even with good infrastructure and very low-priced objects that might be physically quite substantial, should probably be avoided by an investor expecting strong value appreciation.  In these areas, due to loss of population and de industrialisation, significant growth cannot realistically be anticipated for the near future. Careful, qualified assessment of individual particulars is essential.

North and South

Another important regional division – historically more remote and therefore not quite so sharp – separates Germany’s north and south.

For Germans, the south means above all the states of Bavaria and Baden-Württemburg.  These relatively well-off parts of the country are famous for – besides their good food, beer and wine – the industriousness of their residents and, not surprisingly, for their successful industrial sector.  This applies to both large corporations (for instance Mercedes, BMW and Siemens) and small to medium sized family-run businesses.

The exciting metropolis Munich, the capital of Bavaria, has a solid, world class real estate market with prices approaching London’s.  Of course yields on new investment there tend to be accordingly low.  But since Germany has long persued an effective policy of strong regional development, economic vitality and good quality of life is generally well dispersed.  The many smaller cities and towns especially in Germany’s prosperous south, but also in other more restricted areas throughout the country, therefore often provide especially good real estate value with attractive income and real growth opportunities at reasonable prices:  probably a good way to get to know Germany and its real estate business.

Map courtesy of www.theodora.com/maps used with permission.

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