GSW Immobilien AG adds around 4,400 apartments to its Berlin property portfolio

GSW Immobilien AG has negotiated the
purchase of around 4,400 apartments in Berlin in three transactions.
The execution of the contracts is subject to the usual market
conditions and is expected to be completed by the end of the year.
The properties are in the districts of Spandau (43 percent), Mitte
(26 percent), Reinickendorf (12 percent), Charlottenburg-Wilmersdorf
(11 percent) and Treptow-Köpenick (8 percent). Around 88 percent of
the rental units were constructed before 1949 and are therefore in
one of the most attractive age categories. The other properties (12
percent) date from the 1950s and 1960s. Rental levels for all the
apartments average around EUR 5.32 per square metre per month, while
the average vacancy rate is 2.4 percent. The purchase price for the
three portfolios was around EUR 200 million. “The majority of
buildings in the newly acquired portfolios are in the immediate
vicinity of our existing housing stock and complement it perfectly.
The purchases will have a positive impact on our average rents in the
overall portfolio”, explained Jörg Schwagenscheidt, whose
responsibilities as COO of the MDAX-listed property company include
acquisitions. With the biggest portfolio of the three transactions,
GSW is buying back properties that were sold to a foreign investor in
2005 as part of the GSW privatisation, and that have since been
managed by a GSW subsidiary which was recently sold to Strabag. “In
addition to the purchase price, other key factors for us were that we
know the portfolio well, it fits in perfectly with our properties,
and the vast majority of the apartments have been either partially or
completely modernised”, explained Schwagenscheidt. (more)

German Property Market Flourishing Not Bubbling

German property sales and prices are soaring and again, as happens so often to outperforming markets in the post-crash era, some supposed experts are voicing their concerns that the German housing market may be bubbling in places.

According to a recent report by research company F+B the average sale price of homes in Berlin has increased by 23% over the last five years. Jones Lang LaSalle, a property consultancy, estimates that median prices in Berlin have risen even more sharply: 20 per cent in the 12 months to June, and 37.5 per cent since 2009.

For the latter, this is incredibly strong growth by anyone or any market’s standard, except Germany and especially Berlin.

Since the crash erupted bubbles have been on everyone’s mind and many markets, most notably China but also Switzerland and others have taken action to cool down price growth so as to avoid the possible formation of a bubble after runaway price growth. But Germany was one of the only property markets where price growth was regulated by the government long before the crash, albeit effectively regulated rather than actually regulated.

Let me explain: Germany has one of the highest proportions of people renting their homes as oppose to owning, and Berlin has one of the highest proportions of renters within Germany. In order to prevent people from being priced out of the rental market, the government regulates rent rises in line with wage growth. Because most buyers in the market are buy to let investors targeting the rental market, this regulation of rental rates effectively regulates sale prices in the market.

This tacit regulation has effectively kept a lid on growth in the German housing markets for going on 2 decades. Rents have been allowed to grow when the economy is growing, and only inline with wage growth, and even when the market has seen popularity with foreign buyers still the long-awaited long-predicted house price boom never came. If we use over-valuation of property as  a measure of a housing market’s health, Germany has long had one of the healthiest property markets in the world. Indeed, by many standards German property has been well undervalued, especially given that construction is and has also been very low in the country.

So, prices may be growing stronger now than they have for years, and faster than economic growth would seem to support. But because of the decades of weak price growth, the market has a lot of room for growth before we need to worry about a bubble.

Indeed most experts disagree that there is any risk of a bubble at present, pointing to several factors that sustain higher prices, including lower interest rates, a robust jobs market and the catch-up from a long period of stagnant prices. They also point to the fact that while growth is currently strong for Germany, it is still weak by comparison to other markets during the boom.

Union Starts $655 Million Institutional German Property Fund

Union Investment GmbH, Germany’s second-largest property fund manager, started a 500 million-euro ($655 million) fund to buy offices, shops and hotels.

The UniInstitutional German Real Estate, aimed at institutional investors, will acquire properties valued at about 20 million euros to 50 million euros, the company said today in a statement.

German property has been one of the biggest beneficiaries of the European debt crisis as investors seek a safe place to put their money. Investors poured about 2.6 billion euros into open-ended German real-estate funds in the first eight months of this year, more than three times as much as in the same period a year ago, according to data compiled by the German Funds Association BVI.

Hot money heads for German real estate funds despite recent upsets

At first glance, trends in German real estate don’t add up.

As German property funds suffer a series of liquidations, house prices continue to drive relentlessly upwards causing mutterings of a property bubble in Europe’s core economy.

Yet the curse of German real estate funds refers to retrospective challenges, according to Ulrich Steinmetz, managing director at RREEF, Deutsche Bank’s dedicated property group, and manager of its Grundbesitz Europa and Grundbesitz Global funds.

‘Private interest and the question of rising property prices in Germany are things that have started very much in the last 12 to 24 months,’ says Steinmetz.

‘I don’t think there is a disconnect between this and the liquidation of property funds, it is just a question of timing.’

Financial turmoil over the past five years has compelled retail and institutional clients to drop real estate funds and search for higher yielding assets. (READ MORE)

Euro-zone crisis leads to German property price boom

BERLIN — Ariane Jauss knew the Berlin property boom was getting serious when, a few months ago, she went to the courtroom auction of a repossessed flat.

More than 60 prospective buyers for the 102-square-meter apartment, valued at 86,000 euros, crowded the room. By the time the sale had ended, the flat — in the formerly marginal suburb of Wedding — had been sold for more than double the estimate.

“It was unbelievable,” says Jauss, a property agent in the once-divided German capital for 20 years. “Even two years ago, you would never have seen that.”

Berlin is at the forefront of one of the surprising consequences of the euro-zone crisis: Germany’s property price boom. Long an outlier in Europe for its relatively low levels of home ownership and its sleepy housing market, Germany has caught the property bug to the extent that rises in price in some locations point to a potential bubble, according to some property professionals. (READ MORE)