There's no 25% tax on rental income in Germany. Income tax brackets depend on your annual income and go from 15% to over 40%.
The fact Germany has the lowest construction rate in Europe is not bad, it's positive for investors! It means in 5+ years there'll be a shortage of property in popular areas. Some cities are actually growing in population (incl. Berlin, Leipzig, etc), Berlin also has a high immigration rate. Whats even more important though, for a property investor, is the fact number of households is rising fast in Germany (as increasingly the trend is for small 1-2 people households).
Affordability in Germany is best in Europe; incomes are about 5-6 times higher than in CEE, but property prices are in fact lower in most of Germany, compared to main cities in the EU accession states!
I've invested in Germany and trying to buy more, although it's not as easy now to get high yield on good product, due to competition of international as well as (to a little lesser extent) german investors buying up apt blocks (especially in Berlin). Prices in good areas have actually risen quite a bit since mid 2005, although still very low.
I agree you need to research well, as there are significant regional differences, and understand all aspects of laws & regulations, tenant rights & rental caps, tax, etc. But, this applies to any market one invests. Sadly, most so called investors just don't do it.