Chinese buying also underpinning new German investment

It’s not just the Qataris who are looking ever closer at the German real estate market. Part of the increase in demand - particularly for residential property - is now coming from Chinese investors, attracted by Germany’s stability and robust legal environment. Based not just on anecdotal evidence, interest in commercial property by the Chinese also seems to be on the rise.

According to Jan Linsin, head of research at CBRE in Germany, the trend is likely to increase as institutional investors in China are released from their government-imposed constraints on investing overseas: “Usually in Europe the first step is London, then Paris, then Germany. We’ve seen an interest in London in the last three years, so we are now expecting an increasing interest from Asia and especially China in German property.”

The stream of Chinese money coming into the German residential market in is gathering pace, fuelled by two main sources: high net worth business people seeking premium apartments for their own use, and Chinese parents buying accommodation for their children who are attending German universities.

Luxury real estate agent Engel & Volkers has reported increasing sales to wealthy Chinese buyers in the past two years, a sudden jump from almost zero activity in that market three years ago. “There has been a significant growth in demand from Chinese clients. It wasn’t noticeable before, but now it’s very noticeable,’ according to Anne Riney, Sales Director at the office of Engels & Volkers in Berlin’s city-centre Mitte district. “They are doing it for the capital appreciation and the yield, as they view the market very much as a safe haven. Germany is a very stable economy.”

Ms. Riney observed that residential property prices in Mitte have increased by 30% in the past five years, a much sharper rise than in the preceding five years. She said most of her company’s mainland Chinese client base worked in a branch of Bank of China which opened in April on Leipziger Platz in the heart of Berlin, while other buyers were executives from Chinese companies opening branches in Berlin.

Among the properties Chinese investors are drawn to seem to be hotels and shopping centres, typically priced at €5 million to €6 million, with multiple buyers each purchasing a share.

With the numbers of Chinese living across Germany becoming noticeably larger, even here in REFIRE’s corner of Frankfurt, the influx of Chinese money accompanying incoming Chinese businesses and actual Chinese is likely to prove quite sustainable.