At its worst, the British literary scene behaves like a community of nerdy parochialists who imagine themselves to be cosmopolitans, fretting about whether there can be any great novels any more now that Amis is past it and Updike has died. The ongoing story of literature in foreign languages is barely noticed, a background pixel in the all-important anglophone display.

Indie UK publisher Portobello has issued all three novels by Jenny Erpenbeck, a multi-prizewinning German who is one of the finest, most exciting authors alive. In our island, she's just another obscure outlander whose work attracts almost no reviews and certainly no media fanfare. This autumn, an extravagantly hyped American novel examining in exhaustive detail how the middle classes there currently feel about themselves will be bought by a great many Britons who'll strive to understand every local nuance. But Erpenbeck? East Germany? Who cares? How I wish that Visitation could change all that. How I hope that some room may be found to celebrate this author's uncanny gifts.

Erpenbeck's reputation was made by her 1999 debut, The Old Child, one of the best first novels ever written. Next came The Book Of Words, surreal and dreamlike but no less potent. Each of these pocket-sized novellas was about a young girl, yet also functioned as an enigmatic allegory of a country with dark secrets. In Visitation, allegory is toned down, history intrudes more explicitly, and the narrative canvas is bigger. The page count may still be modest, but the achievement and resonance are massive.

Visitation's central character is a place. In a grand house and its grounds, by a lake in Brandenburg, a succession of occupants dislodge each other, borne along by the political calamities of 20th century Europe. The Jewish family who own the property in the 1930s are forced to sell while they wait for visas out of the Third Reich. An architect renovates the house; at the end of the second world war, it's requisitioned by the Russian army; then, under the GDR, the architect has to flee for having done illegal business with the west. The place is reclaimed by returning exiles from Siberia, then resold by estate agents.

The set-up is strikingly similar to Simon Mawer's Booker-shortlisted The Glass Room, published only last year, although Erpenbeck's novel appeared in Germany in 2008. The handling could hardly be more different, with Erpenbeck's prose eschewing the conventional tactics, neatly sewn-up psychologies and film-friendly dialogue that characterised Mawer's work. Visitation is foreign in the profoundest sense of that word. We are shown no dramatic meetings, no fraught conversations, between the architect and the Jews he supplants; we only see him taking a swim and wiping himself dry with one of the towels that are still hanging in the bathing-house "before it could occur to his wife to wash them". He congratulates himself for having given the Jews the full half market-value set by the law, and for helping them escape persecution. "Strange towels," he reflects. "Cloth manufacturers, these Jews. Terrycloth. Top quality goods."

Quotes like this, while they hint at the troubling finesse of Erpenbeck's touch, don't do justice to the true subtlety of her fiction. It's common for literary authors to give objectionable characters a veneer of decency for us to see through; that's not what Erpenbeck is aiming for. She immerses us so deeply in the worldview of each protagonist that we grow fond of them all, worry about the things that worry them, cease to see the things that they ignore. We want them all to hold on to their home.

The one person known to all the owners and occupants – and thus the thread that binds the narrative together – is the gardener. Periodic updates are given of his activities, describing his routines in detail. The first few times, the repetitious litany of watering, pruning, composting, etc, seems unnecessary, but as the decades pass and the property gets eaten away by misuse and decay, the gardener's patient, pragmatic labours become unexpectedly moving. No word is ever heard from him, and Erpenbeck allows no access to his mind, but we end up feeling great relief whenever he reappears, and deep sadness as this increasingly frail figure does what he can to forestall his Eden's incremental slide into ruin.

Indeed, the amount of emotional engagement Erpenbeck manages to win from us, in a mere 150 pages, is just one proof of her mastery. In marked contrast to the unearned love that inflated novels so often demand, Visitation allows us to feel we've known real individuals, experienced the slow unfolding of history, and bonded unconditionally with a place, without authorial pestering or pathos-cranking.

Impressive as it is, Visitation lacks the jewel-like perfection of The Old Child. Its richly populated, realistic narrative poses a big challenge for an author previously hailed as a miniaturist, and Erpenbeck is tempted by different methods of tackling it. The introduction, describing the prehistoric forces that formed the landscape on which the house will stand, may strike some as pretentious. The chapter devoted to the first tenant and his four daughters, in the Weimar period, is part fable, part poetry, part database of superstitious custom, stylistically harking back to The Book of Words. Even once Erpenbeck has settled into the book's distinctive form, the concept of the Brandenburg estate as the narrative's picture-frame is not consistently adhered to: a chapter covering the fate of Doris, one of the exiled Jews, shifts the action to an abandoned house in the Warsaw ghetto. (A forgivable diversion. This 11-page episode, set mostly inside a pitch-dark closet, is one of the most powerful distillations of the Holocaust I've ever encountered in fiction: it deserves to be widely anthologised as a classic short story.)

Translator Susan Bernofsky, who did a superb job on the previous books, is back for this one. Erpenbeck's German is poetical, almost incantatory, taking full advantage of the portmanteau words and Rubik's cube grammar of that language. Bernofsky opts for a smooth style that won't come across as bizarre in English, sacrificing some of Erpenbeck's verse-like cadences and delivering a flexible, accessible narrative. Typical of her shrewdness is the title, Visitation, which at first glance seems a dryly prosaic alternative to Erpenbeck's original Heimsuchung ("homeseeking") but reveals its appositeness as the story unfolds: not only is there a literal visitation when a wife is granted access to her imprisoned husband, but the displaced residents of the house become increasingly like unwelcome ghosts haunting the locus of their lost lives.

So, there you have it: an extraordinarily strong book by a major German author, ingeniously translated, produced with love by an idealistic publisher intent on doing something about the shamefully small proportion of foreign literature whose existence our country acknowledges. Will Visitation find a home here? Or will the Anglo incumbents claim all the lebensraum?

Michel Faber's The Fire Gospel is published by Canongate.