Newsletter December 2008
| December 2008 Update |
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Welcome
Welcome to our second newsletter
bringing you all the latest from the property market in Germany. In this issue we hope to bring you lots of useful, up-to-date information on activity at ‘the street level’ and also the latest property offers we have on the market. I hope you find the newsletter interesting and
we wish you a Merry Christmas and a prosperous New Year! All the best,
Mat
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| Please click on the following titles to read the content or scroll down to read the whole newsletter |
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How is Germany reacting to the Global Economic Slowdown and what is the outlook for the Euro / £ relationship?
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80% LTV availability to continue into 2009 with rates of 4.3%-4.8%
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Busiest Month for ProVenture and Septima set to expand to match demand
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What factors to research when looking to invest: Yield. Sustainability and Potential
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Recent Property deals available
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German Economic Update
The turbulent times in the financial markets across the world continue with huge fluctuations in equities, commodities and currency trading. For investors outside of the the Eurozone, the continued strength of the Euro against most major currencies is a trend with historic highs against Sterling and the Dollar.
As the world’s greatest exporter by value, Germany is feeling pressure from a decrease in global demand for its products and a strong Euro making pricing less competitive. This effect has so far been most obvious in the automotive sector; where output has fallen. Of interest is how Germany is differing in its response to the global slowdown. Having not experienced a real-estate bubble like other major economies, and with a savings ratio of around 12% (amount of net income that individuals save), the need for dramatic financial stimulus packages as seen in the UK and France is less. This divergent strategy and its effect will be interesting to watch in 2009 to determine if levels of consumer spending and employment continue to rise in Germany.
Equally interesting will be the effect of other countries within the Eurozone, as economic data is released. An increase in negative data from new entrants as well as from Italy, France, Spain and Ireland would weaken the Euro against other major currencies.
Finance Update
We brokered another 5 finance deals for our clients in November. Typical rates have fallen in line with EURIBOR and look set to continue on this trend. Five year fixed rates are currently around 4.3% with 10-year deals around 4.8%. With typical net yields of 10% and above, the cashflow position on our investments continues to improve. Perhaps as a reflection of this, the outlook for 2009 is positive in terms of finance, with deals of 80% loan-to-value being the norm.
Activity on the Ground
Our latest deals are attached to this newsletter. As a new departure, you will notice the first offers from the capital city, Berlin. This has been introduced as a new area for investment in response to client demand. Additionally, we are working on projects in 2009 to deliver single apartments in Berlin and Leipzig, again this is to meet demand for this different offer. We hope to have more details in our next newsletter.
November saw a busy month for our partner, Septima, with new staff being employed to meet the continued high demand for good quality, well managed apartments throughout Leipzig and Halle.
On the sales side, it was again, our busiest month with 7 properties going under offer. Enquiry rates in December show strengthening demand with a 100% increase in both web traffic and telephone enquiries. We have a good number of investors booked to come and brave the cold streets of Germany in January and February. Please look at our inspection dates link from the homepage of our website, should you also wish to come over.
Top Tip – Researching an Area
Probably the most important part of the investment process before focusing down on an individual property is to research an area. Fortunately, with the advent of the Internet, much of this research can be conducted from the comfort of your front room and low-cost airlines make it quick and easy to follow-up this research on the ground.
Those of you who have invested with us already appreciate the importance we place on the level of yield a property delivers. A simple expression of yield is annual rental income/purchase purchase price (x100 – to gain a percentage figure). So, as a first step, the level of yield should be determined. This is very easy to do in Germany as rental lists are very transparent; tenants are often in place or the level of rental for a new tenant will be well defined. As a general rule of thumb, a property should be cash flow neutral (or ‘wash its face’) if a net yield is around 2% above the mortgage rate, if finance is taken. To ensure an investment is profitable, we usually seek properties yielding around 2x the mortgage rate or currently around 9% and above.
The next step in research is to determine the sustainability (if already tenanted) or the attainability (if tenants are sought) of a particular location. Good sources of information will be provided by the letting industry through portals or through discussion with letting agents. A good idea is to get data on new tenancies in an area for the last 3-6 months which will provide a good indication of demand. Finally, once on the ground, other factors can be investigated to determine whether an area is looking like it has an an upward or downward potential . Indicators such as day and night foot and vehicular traffic, type and quality of commercial outlets and the level of building activity in an individual street.
Latest Property Offers
NO LONGER AVAILABLE TO VIEW