Guardiola has signed a three-year contract with Bayern which begins in July, ending a sabbatical from football after a break in New York.
Ballack believes that the former Barcelona coach opted to choose Munich over Stamford Bridge because Chelsea could not offer the stability that he required.
He told The Sun: "If you want to work as a coach for longer term you need consistency, trust in the club and also the environment around the club.
"Maybe that is a point why he didn't sign it. But it is also a big challenge as a coach. It's a fantastic signing for Bayern and for Pep Guardiola as well. Nobody in Germany expected him to sign.
"It shows the Bundesliga has grown a lot in the last few years and his decision looks like it's not all about money, he is a coach with a philosophy. He needs a good environment and will find this in Munich. There is a good atmosphere, that was a big reason to sign."