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Germany seen as good potential for property investors

German real estate executives and analysts say buyers have been on hold awaiting a further slide in prices while sellers have stayed on the sidelines hoping that prices would return to the levels seen in late 2006 and early 2007.

'There is an expectation gap between sellers waiting for a recovery to the low yield levels seen before the turbulence and buyers waiting for a further price correction,' Commerzbank said in a report on the German property market.

'In comparison to other international property markets such as the UK, Germany is less advanced in the cycle, ranks among the most liquid markets and its yields are attractive,' the report concluded.

This makes Germany a prime target for investors thanks to robust economic growth and far less volatile property prices than in Britain, claims Burkhard Plesser, of real estate consultancy CB Richard Ellis.

Investment funds are leading the way. Sovereign wealth funds, many awash in cash from the surge in oil prices, and other state-owned investment vehicles, notably from China, are on the prowl in Germany.

'The same goes for other long-term investors such as insurance companies and pension funds, many of which are keen to increase their portfolio allocation to stable assets such as real estate,' said Plesser.

The demand side is also boosted by the return of many German open-ended property investment funds to their home market as prospective buyers after the diversification spree abroad which was their dominant strategy in the past few years, he added.

Also expectations that the European Central Bank (ECB) will raise interest rates to fight inflation caused by the rapid increase in consumer prices ought to encourage property investment.

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