29 Mar For Some German Lenders Brexit Has Already Happened
As the UK government today formally triggers Article 50 to begin the two-year period of divorce negotiations from the European Union, British property buyers looking to raise mortgage finance in Germany are being treated by some German lenders as if Brexit had already happened.
Unlike the UK over recent decades, the German mortgage market has kept its long-term and stable approach to lending in tact and has required buyers to put in a higher proportion of their own equity than most British lenders, making taking a mortgage a more serious commitment that most Germans do later in life and swap around less often than their UK counterparts.
Until recently, non-German nationals purchasing a property in Germany would be expected to put up at least 50% of the purchase price – plus pay all purchase costs. This changed last year when some lenders raised their loan-to-value limits to 75% in certain circumstances, but the effect of the UK’s Brexit vote last June has already deprived many British buyers from this increased availability of capital. Why?
In short, The Pound. Since last June, the value of Sterling has taken a downward direction against the Euro and many other major currencies. Apart from making property prices on mainland Europe more expensive in relative terms for UK buyers, the volatility of currency values we have already seen – and are likely to continue to see over at least the next two years – has made many German lenders nervous to lend at all to people who earn their main income in Sterling. With UK domestic inflation also rising and wage growth stagnating, lenders are taking the view that British loanees are becoming to high a risk. For these institutions, Brexit has already happened.
With property prices in Berlin still rising from their historic lows, on the flip-side, UK buyers who bought property in the city in the last decade have made a very healthy profit on their investment. That said, Berlin remains one of the most affordable major cities in the EU for anyone from the UK looking to make a base on the European mainland, and ranks as more affordable than other German cities such as Frankfurt, Hamburg and Munich. So what should UK buyers looking to buy in Berlin do now?
Over the past year we have seen increasing interest from buyers who have released equity from their UK property and are looking to invest in Berlin rather than the frenetic and expensive British property market. Some of these are parents with children who are studying in the city and are buying both for them and for long-term investment. Others are simply attracted by buying in one of the best-regulated and safest property markets in the world.
While property prices have increased substantially in the most popular areas of the city, and some international estate agents are quoting returns on investment that sound more like London levels than Berlin, if you see beyond the hype there are still many sensible and affordable opportunities to be part of one of the most dynamic, vibrant and entrepreneurial places on the planet.
If you don’t want Brexit you need Berlin.