German Market Continues Apace and into "off prime"
Around 22% of GDP, €560bn, was spent last year for investment or property-related consumption. Looking back to 2011, spending was at €338bn so 2012 saw a massive 65% increase in property-related spending last year which is phenomenal when seen from the backdrop of the wider Eurozone.
The report for the German government also noted that more and more metropolitan areas have seen housing shortages and resulting price and rent hikes over the past few years as we have reported in previous months. While prices and rents were fairly stable in the first decade of the new millennium – with only the largest cities posting increases – the number of cities and regions seeing rises has increased over the past few years.
This ties in with the increase in demand into "off prime" areas now by institutions and private investors.
While the focus on core German real estate continues, the best opportunities are actually available elsewhere, for example in assets with short lease terms, B cities, healthcare and logistics, says the German unit of the Swedish Catella group.
In its outlook for 2013, Catella Germany finds that increasing pressure on prices in core property should trigger a move outside this segment. Even if German real estate in general remains stable, it is characterised by uncertainty amid financial and euro crises and investment decisions this year have taken far too long and were overly cautious. “We saw a lot of fear but also greed in the market,” said CEO Klaus Franken. “For 2013, we hope for sustainable decisions .. instead of the way of least resistance.” He hopes to see more investors move into more complex assets.
One example of a questionable trend is for pension funds to buy new prime residential assets at a multiple of 22-23 compared to rents, a very high level. It also identifies a lack of affordable housing for the middle class, a challenge Catella itself wants to meet through development of 1,000 units for this income segment next year.
For a wider view on the 2013-14 economic outlook for Germany, please look here…
New Year’s Resolution – Get on the Cycle
Like capital and equity markets, asset markets like minerals and natural products follow cycles which can be recorded and observed. The property [and to be more precise land] asset class is no different, indeed the cycles here are if anything more defined and predictable.
A commentator from the UK, Fred Harrison is the most famous person to be linked with stating that the residential property market in most mature economies follows a distinct 18 year cycle, 14 years of growth and 4 years of decline. Indeed, Fred Harrison was sage-like in his predictions for the UK market and its crash in 2008-10, speaking of this as early as 1998.
Where are we on the property cycle in the cities we are operating? Find out here
Latest Property Offers
230,000€ | Dresden
Potential Yield: 11.77%
Type: Residential
Approx. Size: 496 sqm
This property investment opportunitiy is located in Cotta, a small district just a few kilometres away from Dresden city centre. Transport links are excellent, with regular buses running into town, as well as the nearby Dresden Friedrichstadt train station for inter-city travel.
This building consists of seven residential units, ranging between the sizes of 44 – 101sqm and therefore of interest to a broad range of the tenant market. The property currently has 2 vacant apartments, but can be delivered fully tenanted should the buyer wish. Whilst the external of the building would require decoration in the short-to-medium term, the seven flats are all in good condition with decentralised gas heating, and wooden or lino floors. Some windows have recently been replaced, and the the roof was fully replaced only three years ago. The property would now benefit from some upgrading to the façade and the internal areas units to achieve high rent levels.
450,000€ | Leipzig
Potential Yield: 8.05%
Type: Residential
Approx. Size: 676 sqm
This is a predominantly residential offering in the suburb of Grosszchocher, around 5km south of Leipzig city centre and in proximity of the lakeland recreational areas of the city. Tram lines lie around 200m from the property which make regular trips to the centre and also to the lakeland area to the south. The area is favoured by families for its more tranquil setting and recreational possibilities, whilst still being within 15 minutes of the city centre.
The property itself consists of 11 units and 5 parking places, set on a reasonable plot. The property has been re-developed in 2008 and has been done to a good standard.
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