France has Paris, Great Britain has London. And Germany? Berlin, Hamburg, Munich, Cologne, Frankfurt, Dusseldorf, Stuttgart. These "Big Seven" might be familiar as core locations to most foreign investors. Germany does not know the centralism of other states. The one who invest in Germany should take a closer look at the German history.
Healthy competition in the province.
Until the foundation of the German empire by Bismarck in 1871, Germany was a colored rag rug of single more or less independent kingdoms, princes and dukedoms. The Germans – a nation of many states. The subdivision of country and power among many small regents – until the rise of Prussia - had not only disadvantages. Because of the competition many different educational institutions, cultural facilities as well as a variety of economic centers which tried to surpass themselves were established. Still today this positive mind of the federalism and the variety is to be felt. The geographical distribution of the economic power and the prosperity is in Germany clearly wider diversified as in many other states which are attractive for investments.
Chances away from the main cities.
The majority of the investor's money for real estate flows relatively concentrated in the above mentioned main seven cities. Thereof the prices rise and the yields fall. A reason for this development might lie in the intense analysis of B and C locations, since for these towns only little comparative and valuing statistics material exist. Besides, "the province" offers in principle the same security like core locations. And indeed, the base yields with hotel investments in smaller cities lie partially more than 10% higher than those in the "Big Seven" (base: 1. Quarter in 2017). Experts expect on account of the restricted offer and the rising inquiry further rising prices with the fact that the yields will develop in the "capitals of Germany" further negatively.
10% higher yields possibly.
So from now on, it will be more important to work with the "pearls of the province" as alternatives, before the prices will move upwards also here. An example of such a provincial pearl is the city of Herford in North Rhine-Westphalia. Here a hotel will be built shortly, with the long term lease contract with a famous hotel operator and a guaranteed yield starting with 5.6% p.a.
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