Comparing US and German real estate markets

Comparing US and German real estate markets

Germany and the United States holding top positions as the most popular investment targets for Israeli investors. Many Israeli companies concentrate both investment and entrepreneurial activity in these markets and invest considerable efforts both in acquiring significant assets and in bringing Israeli investors to these markets.

Before making the decision on the target market for investment, it is worth examining the different characteristics of the markets so that you can make an informed decision to suit your profile of activity and the type of risk and returns you can expect.

American real estate market

Market risk level – The real estate market in the United States enjoys an extensive exposure and transparency as well as information about real estate properties, business history, environmental conditions and prices of similar transactions- all are available in an accessible and comfortable manner. The same applies for market players, the state of companies and their stability, as well as the regulatory infrastructure – the relevant types of legislation, restrictions applying to assets, current and future planning, and more. The availability of data and economic information is also true for entities that provide financing for the purchase of real estate, the ability to perform preliminary checks and the ability to assess the risk level of the transaction, as well as the level of risk and reliability of the tenants, make it easier to make informed decisions, reduce risk and avoid surprises.

Subprime crisis. The crisis of 2008 caused a sharp drop in prices and a significant crisis in the real estate market, with most of the real estate assets losing their value, with a market entering a process of recovery from a significant crisis. Purchasing power in the United States was damaged and many property owners had to quickly realize assets, for liquidity reasons or as a result of default. From the perspective of investors, this situation became an opportunity to purchase assets below market prices. The impact of the crisis is still felt today and there are many assets at attractive prices.

A wide range of properties for investment. US real estate market is very diverse in terms of types of assets available for investment, including residential properties, multi-faceted projects and a wide range of commercial properties, as well as investment in real estate companies and funds specializing in the acquisition, management, and residential areas in the United States.

The real estate market in Germany

Stability and level of market risk – the German economy is the most stable and growing economy Europe. German economy is pulling the European market and the strength of its economy affect the investment level in real estate and the funds available in the local market residential apartments and investment property. The German economy serves as a lever for rapid growth in large urban centers and generates demand for residential purposes both for purchase and for rent. With long-term contracts, and German legislation tendency to favor renters and tenants, the market favors long-term investment in residential assets.

Regulatory infrastructure – Real estate market enjoys a high standard of both acquisition and asset realization, as well as regulation and supervision of asset leasing contracts, regulatory stability and legislative infrastructure – all of which make it easier to execute real estate transactions and investment in yielding assets. In addition, the tax regime in Germany favors long-term investments and gives ease to property owners who hold the property for a longer period of time (over 10 years).

Interest yields and growth. Germany is a preferred destination for many European and Russian investors, who recognize attractive price levels, especially when compared to other investment destinations such as London and Paris. The combination of stability and growth in Germany, enable investors to make long-term investments and low risk relative to other European countries.

In comparison between the two markets, factors such as time difference and ease of access, the taxation regulation and its effect on the yield, complexity of the transactions, as well as differences between the investment strategy and the duration aspect, should be considered. It is also important to remember the differences between the different economies and the difference between working in Euros versus the Dollar. Many investors will also consider cultural differences that may play a role, especially for Israeli investors. The number of Israeli activists in the German and US markets now allow Israeli investors to have a choice regarding the type of their partners and the nature of investment in these markets.

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