There was a proliferation of property companies selling off-plan developments in both Germany and Romania last weekend at the Property Investor Show.

But for the man off the street how are they expected to be able to make an informed decision about where to invest when being bombarded by reams of information as to why one place is better than another?

Essentially, the biggest thing to realise is that while both of these countries have low prices - typically around €800 - €2000 psm in each - their property markets are at completely different phases of development.

Romania has long been a speculative market due to a relatively undeveloped mortgage market, mass emigration and economic difficulties since the fall of communism left prices very low.

Speculation to basement level opportunity

Nowadays, however, the stability, investment and economic growth brought about by the conditions laid down by the EU for membership to its club have transformed Romania from a high risk investment location to one where the conditions are ripe for short term rapid growth, followed by more sustainable long term growth.

Romania has moved from being a speculative investment to a basement opportunity.

Germany on the other hand was a very mature property market 10-20 years ago with one of the strongest economies in the world and very high property prices.

Germany, since the mid-90's, has suffered over 10 years of economic decline and year on year property price deflation. Such a sustained period of economic malaise has left high unemployment and shattered confidence.

It's not if prices rise - it's just when

Germany is considered a value investment by many people as prices surely cannot go any lower and therefore must rise.

While I agree that prices are sure to rise, it is impossible to say WHEN they will rise. And until the economy improves (a raft of reforms are needed to stimulate this heavily regulated economy) and confidence returns to the market I see little sign of this happening on any great scale.

Why tie your money up in a market with little sign of growth in the short term?

Far better have your money working for you today in a high growth market.

On the other hand, we predict the Romanian property market will follow a very clear growth curve:

Click to enlarge

Having been a speculative market, it is now showing signs of exceptional price growth and we expect prices to boom over the next couple of years, just as happened in Poland over the last 2-3 years.

Why Germany is different

Germany is different, however:

Click to enlarge

It has had more than 10 years of price falls and it is impossible to predict whether prices will continue to stay at such a low level for the next few years, or whether they will start to grow next year or the year after, or the year after that.

Is Germany really all that bad?

The cost of reunification, lack of reform and a large property market crash in the mid-nineties has left the German property market in a mess.

Banks are still very cautious about lending money, especially to foreigners.

Banks are conservative institutions at the best of times, especially in Germany, and they don't have the confidence to lend having been stung badly over 10 years ago.

Theoretically, you can get 60-80% LTV finance in Germany, but even many of the German property agents at the property investor show admitted most of their clients only get 50% LTV, with many simply choosing to buy in cash (not sure they've done their ROI calculations).

I spoke to a number of people who only managed to get 40% LTV.

Furthermore, buying costs are often around 12-13% of the purchase price.

This is a lot of dead money, and makes the property market very illiquid. With little capital growth in the market, you are really going to have to hold the property for a long time before you can even recoup your buying costs.

Tenancy laws

While the tenancy laws have improved recently for the landlord they are still heavily in the tenant's favour.

The laws make it difficult to get tenants out if they don't pay the rent, and impossible to get them out if they want to continue to pay the rent for the next 20 years!

There are rules around how much you can increase the rent on your property each year, and it must stay within the set rent levels for that area dictated by the rent control committee.

This lack of a free rental market is just another dampener on the property market there.

Need I go on? I'm sure I could, but I think the point has been made.

See our Germany Property Market Profile for a more in-depth look at this market.

It's not all bad though, to be fair.

Prices are very low. Germany is still the world's largest exporter and third largest economy.

There is talk of reforming the mortgage market next year, which should lead to higher LTV's, and there are tentative signs that the economy is picking up.

But, overall, before I start putting my money into Germany I'd need to see substantial economic improvements, better mortgages, lower taxes and less regulation and a return in confidence so that locals start buying again.

While I don't see this happening in the short term, luckily there are many other markets with far better opportunities.

Romania by comparison

Let's take Romania for a comparison example.

Without going into details about the virtues of investing in Romania here, the property market there clearly has a lot of potential for growth. See Blakebrough's Blog and Neil Lewis' Max Growth blogs.

Romania is at the start of a huge boom in its property market.

Investment is flooding into the country, unemployment is very low, wages are rising and there is a lack of supply of property.

While mortgages still aren't great in Romania, they are improving rapidly, and if they develop at the same rate as everything else in Romania then you can expect the landscape of the Romanian mortgage market to be very different this time next year.

Essentially, you have two markets - Germany, that is still on a downer, with its aforementioned problems and little sign of improvement - and Romania, that is clearly full of energy and at the start of a huge upward swing that is likely to continue for some time.

Let the trend be your friend.

I know where I'd rather put my money - anyone agree / disagree?

Please read our Property Markets Reports and Investment Decision Makers for full details on where we believe are the best places to invest in each market.