Germany Studies Tools to Halt Property Bubbles, Dombret Says

German financial regulators are studying tools that can be used to fight potential real-estate bubbles as liquidity measures by the European Central Bank increase the risk of escalating asset prices.

Germany’s financial stability committee plans in coming months to recommend that the government create the legal framework for putting such tools to use, Bundesbank board member Andreas Dombret said in the text of a speech in Berlin on Wednesday.

“Even if the risks on the property market seem slight at the moment, we still have to prepare for all eventualities,” he said. “The world has become a bit more dangerous for real-estate investors.”

The ECB said on Jan. 22 that it’ll buy 60 billion euros ($68 billion) of bonds every month through September 2016 in a push to put more cash into circulation and revive euro-area inflation. The measure was announced against opposition led by German officials in the Governing Council.

German home prices rose 5.1 percent in 2014, for the sharpest increase since 1993, according to researcher Bulwiengesa AG. Buyers, including private individuals and investment firms, are crowding into German real estate as a way to earn higher returns amid record-low interest rates in fixed-income markets. (Read more here)

Affordability of housing needs rethink

‘So, how much do you pay to rent an apartment in Berlin?” I asked Nemo, our young guide, when I visited the city last year. About €700 a month, he replied. That works out at about $NZ250 a week at current exchange rates.

Sound like a good price? I did an online search and came up with quite few cheaper Berlin apartments. One of them promised a five-year rental guarantee.

Of course, the apartment would be compact, less than 100sq m, but it would be comfortable and modern, with double-glazing and furniture. Rent also includes heating – a fundamental concern in a climate where winter temperatures plummet regularly below zero.

No grotty old sofas, mouldy bathrooms, cruddy kitchens, and windows icing up in winter. Compared with the rental accommodation some Kiwis are forced to endure, those Europeans don’t know what they are missing.

Try and find decent rental accommodation in Christchurch. It’s a struggle. Incomes are much lower than they are in Europe, so it’s even tougher. How can young people find anywhere even remotely affordable, let alone comfortable and well-heated?

Buying a new house has now spiralled beyond the reach of many New Zealanders. The latest Demographia survey places Christchurch and Auckland among “severely unaffordable cities” – same as last year. Affordable cities are those where an average house costs just two or three times average annual income. Here a house now costs at least seven or eight times as much.

While house prices and rents have soared, salaries and wages have more or less flatlined, rising a couple of percent a year if you are lucky. House prices have kept on rising seven or eight per cent a year. Food prices, local body rates, and insurance have also risen well above the official inflation rate. Which makes you wonder how relevant that official figure really is. For a house in New Zealand to be as affordable as it was in the late 1980s, you would have to be paid an average salary of $200,000 a year. Yeah, right. Unless you are in the tiny percentage of top earners, affording a house is tough.

For a country that once prided itself on having one of the highest rates of property ownership in the world, the decline in affordability is disturbing.

However, it has been continuing to get worse for nearly 15 years, and is mirrored by similar declines in other countries. You can’t blame one government, National or Labour. So what is being done?

So far, not a lot.

Housing Minister Nick Smith has signalled big changes are in store for the Resource Management Act (RMA). Good. About time….. (continue reading)

Increasing investor interest in assets

Dublin, Madrid, Athens, Birmingham, Amsterdam and Lisbon all set to benefit from increased investor interest, according to PwC and ULI

Competition for prime assets in Europe’s major real estate markets is leading property investors to continue their move into secondary assets and recovering markets, according to Emerging Trends in Real Estate® Europe 2015, a forecast published jointly by the Urban Land Institute (ULI) and PwC. The report highlights a surge in popularity for real estate investment opportunities in a number of cities that were hit particularly hard during the last market downturn, with dramatic rises in this year’s city rankings for Madrid (up 16 positions), Athens (up 23 positions), Birmingham (up 14 positions), Amsterdam (up 17 positions) and Lisbon (up 17 positions).

The report finds that in spite of economic uncertainties in Europe, property remains fertile ground for investors. 70% of investors expect more equity and debt will flow into their markets this year in a quest for the best real estate. The biggest problem is a shortage of assets, ahead of the challenges of regulation or the cost of finance. A large majority of investors (82%) believe the availability of suitable assets will have a moderate or significant impact on their business this year.

As a result, real estate investors – armed with capital from sovereign wealth funds and pension funds from Asia and North America – are moving into less competitive environments, looking at secondary cities, secondary assets and development opportunities. Berlin, for example, has replaced Munich as Europe’s top market for investment, as it is viewed as less costly than other major German cities.

Top Investment Markets for 2015

The top five European real estate investment markets in 2015 are predicted to be:

1. Berlin – The city has moved up the rankings from last year, knocking Munich off the top spot for investment prospects this year. Historically dominated by domestic buyers, Berlin’s investment climate has now changed as international investors pour capital into the city.

2. Dublin – Ranked again in second place, the city has had another strong year in which investors have jostled for opportunities.

3. Madrid – the Spanish city has shot up the rankings for investment prospects this year and many overseas investors are targeting the city. But whether Spain offers solid, long-term business prospects is hotly debated among opportunistic investors.

4. Hamburg – The city has slipped by one place this year, but this is mainly due to investors looking to smaller, less established markets rather than any real decline in the city’s fundamentals.

5. Athens – Athens is the biggest mover on the list this year, zooming 23 places to number 5. In recent Emerging Trends surveys, investors have indicated a willingness to enter other distressed markets such as Spain, Ireland and Italy, but Greece is starting to gain attention. Although Europe’s hardest-hit economy remains fragile, a few trailblazing investors are moving in to take advantage of pre-rebound opportunities. (source – http://www.financialmirror.com/news-details.php?nid=33742)

Berlin tech, Berlin boom

High-flying real estate investors are employing specialist tech teams to get an edge and to maximise efficiency and profitability. As one chief executive of a major global firm tells PwC for its Emerging Trends in Real Estate research, conducted together with Urban Land Institute, “We have a completely different focus on technology and technology investment now. We’ve doubled the budget in last 24 months, and it was high before that. I don’t have a board meeting without a tech guy being present.”

And innovation is one reason Berlin is tipped as Europe’s hottest real estate investment market in 2015, with the report citing the city for being a technology, media and telecoms hotspot. “What I like about Berlin is that any new product launch must include Berlin – tech, fashion, cars,” says one interviewee.

The truth is, though, that Berlin really doesn’t have a sound economic base. It might boast start-ups such as music streamer SoundCloud and games company Wooga, but it hasn’t been able to lure many major commercial organisations. What PwC is pointing to here is residential property speculation, something Germany hasn’t really known until recent years. Investors are being sucked in by what they consider relatively inexpensive Berlin assets and development opportunities.

“Real estate is awash with equity,” the report says. “Most of Emerging Trends Europe’s survey respondents and interviewees anticipate an increase in both prime and secondary values as a result of greater liquidity and the need to deploy capital in this asset class.”

What’s really interesting is that nearly two thirds of those surveyed believe that core property is overpriced in almost all markets. (Source – http://www.brand-e.biz/brande/2015/1/19/finance/berlin-tech-berlin-fires-property-speculation)

Dublin second only to Berlin for property investing – PwC

Dublin is still one of the most desirable places in Europe to invest in property, with only Berlin a better place to put money, say PwC.

According to its ‘Emerging Trends in Real Estate’ report for 2015, PwC believe Dublin is the second best city on the continent in which to buy property. The report lists the capital’s strong rental market and resurgent capital values as reasons to invest here.

“Dublin remains in the number two spot for the second year running for real estate investment and development in Europe,” the report states.

“This follows a strong year which saw a wide range of investors jostling for opportunities. Dublin has strong rental growth potential based on low supply, coupled with employment growth. Business confidence has returned and Ireland’s GDP growth is expected to continue in 2015.

“A huge amount of capital has poured into Dublin…€2.2 billion in the first three-quarters of 2014,” according to Real Capital Analytics. “Though office rents and values are recovering strongly, they still have some way to go before they regain their pre-crisis peak,” the report adds.

PwC Ireland’s head of real estate, Enda Faughnan, said there had been a “heightened interest in Dublin as a property investment centre, particularly from foreign investors”.

“There is still a lot of supply to come onto the market which will appeal to a wide range of buyers,” he added.

Berlin replaces Munich as the most desirable location in Europe for investing, with PwC citing the strong media and tech industries in the German capital as reasons for pushing up values.

Madrid, Hamburg and Athens complete the top five.

Source – http://www.independent.ie/business/commercial-property/dublin-second-only-to-berlin-for-property-investing-pwc-30908328.html

German property market hot after deals of $59 bln in 2014

Record low interest rates and investors’ search for higher yields will heat up Germany’s real estate market in 2015, after more than 50 billion euros ($59 billion) of property changed hands last year, several large brokers said on Wednesday.

The lion’s share of last year’s activity involved offices, commercial space and hotels, where investment volumes rose by almost a third to nearly 40 billion euros, the fifth consecutive annual increase, property investment manager JLL said.

Transactions in the residential market reached 13.3 billion euros, broker CBRE said, pointing out that its data referred to portfolio sales of at least 50 units and not individual properties.

Residential investors such as Deutsche Annington, Buwog and LEG Immobilien took advantage of cheap financing conditions to make acquisitions last year.

However, volumes in this segment fell 3 percent short of those in the prior year due to a limited supply of properties.

“Demand on the part of large residential property and institutional investors is being only insufficiently met by the supply on hand,” said CBRE’s head of residential investment Konstantin Luettger.

A number of investors have found the prices in major metropolitan areas too high and are branching out toward smaller cities where margins may be higher.

Commercial real estate, on the other hand, still has room to grow, with JLL predicting that transactions will surpass 40 billion euros this year, as the German market continues to draw interest from foreign and domestic institutional investors like pension funds.

The sale of The Squaire office and hotel complex at Frankfurt airport looks set to be one of the largest deals this year. Current owner IVG Immobilien is asking around 700 million euros for the complex, a person familiar with the deal told Reuters previously. ($1 = 0.8460 euros) (Reporting by Kathrin Jones, writing by Jonathan Gould; editing by Thomas Atkins and Susan Thomas) – (Original Source – http://www.reuters.com/article/2015/01/07/germany-property-idUSL6N0UM2QC20150107)

Berlin is a ‘no-brainer’ for British property buyers

It’s been 25 years since the wall came down – and Berlin is now better known for being an edgy and vibrant global capital with an interesting historic and cultural legacy.

Amid majestic historic architecture, newly gentrified communist apartment blocks and staid buildings from the Third Reich, the Berlin skyline is forested with construction cranes. Massive capital projects such as a much-delayed new airport are taking place alongside any number of more modest commercial and residential projects.

“The residential sector runs relatively smoothly for new construction,” according to Thomas Zabel, CEO at Zabel Property Group. “Although the procedure for building permits can be lengthy, property prices are buoyant.”

The economic think tank Institut der Deutschen Wirtschaft reports that newbuild apartment prices in Berlin rose by 79 per cent between 2007 and the first quarter of 2014.

“By 2007, the first wave of foreigners who had come for pure property investment were well represented by the British,” said Mr Zabel. “Many Britons fell in love with the city, returned often and eventually moved here on a permanent basis. Nowadays they buy property less for investment and more to live because Berlin is such a young dynamic city for business and culture.”

Residential property is far cheaper than in Munich, the country’s most expensive city. “Today, demand in Berlin exceeds supply “ said Julius Stinauer, principal consultant at Jones Lang LaSalle, a real estate company.

The central district known as Berlin-Mitte is the most popular property destination for international buyers. “Seventy per cent of our Mitte clients are foreign and a substantial number of these are British,” observed Fiede Clausen, Zabel partnership manager. “Expats see quality of life, security and value for money as much better than in Britain. And regarding retirees, it’s a no-brainer for lifestyle and affordability.”

From central Mitte to its outskirts there are several new developments with expat appeal that cost from high-end millions down to relative affordability.

In the heart of Berlin-Mitte at the top end of the market is Palais Varnhagen [pictured above], designed by British architect Sir David Chipperfield. Forty-nine elegant apartments and massive penthouses with up to six bedrooms are priced from just under half a million euros up to €5.5million (£4.3million).

For buyers who seek ultra modern design, the 14-floor Living Levels [pictured below] is one of the Mitte’s last riverside projects to be given a high-rise building permit. Each of the three top floors has around 500 sq m of living space and 360 degree views. All 56 one to seven-bedroom units include state-of-the-art environmental features and cost €335,000 (£262,000) to €6 million (£4.7million).

In an up and coming area on the outskirts of Mitte, The Mile development features 270 one to three-bedroom apartments priced at €179,500 (£140,500) to around €1 million (£782,400). The development is close to the almost completed new Bundesnachrichtendienst (the German foreign intelligence agency HQ) and next to an art gallery. The above properties are available from berlin-capital.com.

Berlin is, unsurprisingly, a city of contradictions. While unemployment is high, though improving, the economy is growing faster than the German average. That widely anticipated but elusive post-1989 era of prosperity is finally materialising. Perhaps the time is nigh to consider Berlin as a prime expat property destination.

In Germany, Renters’ Rights Trump Guest Bathrooms

As the country follows France with hardline protections for lower-income renters, new laws prohibit some property upgrades. And for many Germans, that’s just fine.

While Paris’ radical new housing laws have been attracting attention, France’s capital isn’t the only city in Europe that’s been taking legal action to stop social displacement and gentrification. Across Germany, cities are increasingly bringing in rules that aim to ensure that rising rents in desirable neighborhoods don’t push working class residents out of their homes. Called milieuschutz—loosely translatable as “community defense”—these laws are drawing the battle lines in what might seem the most improbable place for an urban-development standoff: the bathroom.

Essentially, milieuschutz is a law to prevent a neighborhood’s real estate from getting too fancy. In the areas earmarked for protection, owners are either restricted or banned outright from adding new balconies, installing under-floor heating, or carving out guest bathrooms. They’re also not allowed to knock two smaller apartments together to form one big one. Decided on a street-by-street basis at local rather than national level, these laws aren’t actually that new: Hamburg first experimented with them in 1972, Munich in 1987. What is novel, however, is their rapid spread across Germany at a time when inner-urban real-estate prices are going through the roof. Berlin now has 18 zones protected by the laws, and has just doubled one in size. Last month, Munich introduced one more district, while Frankfurt pushed the boat out with a total of six new protection zones spreading across the city’s denser districts. The social-engineering intention is clear. As Frankfurt’s mayor Olaf Cunitz baldly puts it, “Using this urbanist tool, we want to put a brake on upgrading and displacement and thus secure existing living space.”

(Full Story – http://www.citylab.com/housing/2015/01/in-germany-renters-rights-trump-guest-bathrooms/384219/)