GERMANY - Eastern Germany has been off the radar for many real estate companies during the crisis, but interest in the region is on the rise again, according to Austrian real estate company Premium Immobilien.
Speaking to journalists in Vienna, Hannes Schöckler, chairman at Premium, said: "Many investors are still underestimating the market in Eastern Germany - including the property sector."
Thomas Gindele, managing director of the German Chamber of Industry and Commerce in Austria, agreed, saying many investors lacked "sufficient information" and very often had the wrong impression about Eastern Germany's economic development.
Gindele conceded growth was likely to be lower than in Western Germany over the next couple of years, but only because Eastern Germany had suffered less during the financial crisis.
"Because there are still many small and medium-sized companies that are less internationalised, the region suffered less during the crisis," he said. "But now it is more difficult to gain momentum from the international recovery."
Nevertheless, his outlook on the economic development of the region remains very positive, not least because of a competitive salary and property price level.
Gindele pointed out that it was a political decision to keep salaries lower in the eastern provinces after the re-unification of Germany to boost the economy and said it would take another 20 years for the East to catch up with the West regarding salary levels.
Many international companies have started to locate in the region, and universities have adjusted to these industry-specific needs, pulling in students from all over the country, he added.
"While many young people left Eastern Germany just a few years ago, they are now staying, and students from Western Germany are also coming over," Gindele said.
For the real estate sector, this means a young, growing population in university cities at a low pricing level. According to Premium, rents for a one-bedroom apartment are currently around €260 per month, and residential property prices are at around €630 per square meter, which means there is "certainly room for an increase".
Additionally, Germany is a "safe haven" when it comes to economic development in the euro-zone, Schöckler added.
Walter Wittmann, managing director at Premium Immobilien, said Eastern Germany had been on the radar of many international investment companies before the crisis, but that most had left when times got rough. Now they are returning.
Wittmann told IP Real Estate: "I do not see a run on Eastern Germany yet, but interest will definitely increase."