It is being fuelled by expectations of an interest rate rise by the European Central Bank (ECB) within the next 12 months.
This is encouraging investment funds and individuals to view Germany as a prime target as it has good economic growth and stable property prices.
According to Commerzbank, Germany's second-largest bank, investors are likely to shift assets from countries more advanced in the cycle, such as Spain and the UK.
Wealth funds, insurance companies and pension funds are keen to increase their portfolio allocations in stable property markets with the potential for rising prices, according to David Stanley Redfern Ltd.
Demand has also been boosted by the return of many German property investment funds to their home market, said spokesman Liam Bailey, head of international research.
'There is also widespread perception that the peak of banks' asset writedowns, a result of the credit crisis, has been left behind, forecasting a distinct pick-up in property deal-making in Germany in the second half of 2008,' he said.
'We have long been talking about the major players in the financial sectors entering or re-entering the German property market and buying apartments in bulk. It stands to reason that some equally big players outside the financial sectors would follow them. The effects have and are already beginning to be seen, with rental rates rising across the board, and the mood, even in Berlin – where less than 20% of the population own their own homes,' he added.
The arrival of the Condo-Hotel market is also adding to interest. Those involved in this particular sector believe it is a less risky investment for cautious buyers. 'Frankfurt is the financial heart of Germany and with over 170 hotels, it regularly achieves over 80% occupancy, demonstrating steady increases year on year,' said Mark Bingham Managing Director of Owner Invest which is specialising in this sector in Germany.
'In a sluggish market, investing into hotel suites in a city that demonstrates such a high occupancy has to be regarded as one of the shrewdest investment opportunities ever,' he added.
'Condo hotels are still a relatively new principle to the UK way of thinking. The advantages are low entry level investment, no maintenance worries and steady income generators. Unlike traditional investments into apartments or villas where rental opportunities can be erratic and often reliant on seasons, hotels in sought after locations provide year round rental rewards.'