(1888PressRelease)
February 23, 2007 - Over the last decade, Europe's largest economy has suffered from the twin devils of high unemployment and high inflation but a series of free market reforms that have taken places over the last few years are finally beginning to bear fruit.
Buoyed by a successful World Cup, the economy expanded by 2.5 per cent last year, the fastest since 2000, and forecasters predict that this rate will be sustained this year.
A new report released by the European commission today says the recent growth is indeed an example of the drag from the 1989 reunification easing but that there are still a number of factors, including low labour force participation and tax obstacles to investment, that are preventing the economy from reaching its full potential.
Therefore, if Angela Merkel's centre right government proceeds with its reforms, the country is likely to see even stronger economic growth.
Some of this growth is beginning to manifest itself in the property market, which grew by a tentative 0.2 per cent last year, after making losses in 2005.
Berlin in particular has seen a number of multi-billion pound investments in property from the UK and Europe. Investment bank Terra Firma is currently buying up large apartment blocks and leading multinational corporations Son y and DaimlerChrysler have recently made large investments in the city's commercial property market.
Stuart Law, chief executive of Assetz, said: "Germany is a new market for most overseas investors and it will take time to develop, so I would advise taking a ten year view rather than expecting instant returns.
"However, the growth triggers investors have been waiting for are starting to occur, with prices in some residential areas such as Charlottenburg, Wilmersdorf and Shoneberg seeing small rises after years of declining or static prices."
Berlin is unique among major European cities as only 14 per cent of residents own their own homes. This represents a huge untapped domestic rental market for the overseas investor, but one that is likely to diminish as an increase in activity is likely to drive a growing preference for home ownership.
Mr Law added: "With economic conditions remaining favourable, it is inevitable that the Berlin market will catch up, as the UK-led phenomenon of buying your own home continues to spread rapidly across Europe."
