Look for value on the periphery of larger cities – Gothaer

The German property market is in strong shape despite the recent price and rental growth, particularly in the housing sector, according to Gothaer Asset Management (GoAM), part of sizeable German insurance company Gothaer Versicherung. But investors need to be careful with certain prime commercial property categories in the larger cities, he believes.

“All indicators show that market mechanisms are functioning perfectly,” said Ingo Bofinger, head of property at Gothaer Asset Management, in a recent interview in trade publications Fonds Online. While demand for residential assets in the large conurbations continues high, there is no sign of a massive increase in mortage issuance. “In fact, the latest data from the Bundesbank even show that German citizens’ debt has fallen slightly. In our view, there is no indication of the emergence of a credit-based property price bubble.”

The Cologne-based Gothaer Asset Management holds €26bn in assets for both its parent insurance company as well as third party insurers and pension funds.

Bofinger sounds a note of warning for core assets in A-cities, which are attracting increasing international investor capital. “Prime locations in cities such as Munich or Hamburg have recently attracted investors from Asia and North America,” said Bofinger. “We’ve seen several assets trading at prices which would normally cause us to go into very cautious mode.”

Bofinger believes that the best residential investment opportunities are currently for assets located on the periphery, but not within, large cities. The trend toward urbanisation and limited space in the conurbations will strengthen the housing in regions that offer fast public transport into centres, green living spaces and a larger range of leisure activities, he believes.