Time To Buy German Real Estate?

A few weeks ago, analysts over at Source Multi Asset Research published a research note highlighting the attractiveness of real estate investment trusts.

Source presented data which showed that year-to-date, real estate (the FTSE EPRA NAREIT index) has been the best performing global asset with a USD total return of 12.6%. Within the US the return is 16.5%, which beats equities, Treasuries, and credit.

But the argument for REITs as an asset class doesn’t stop at the beginning of this year. Indeed, Source analyzed nearly two decades of data and found that real estate had outperformed equities, Treasuries and high-yield since 2000 — almost 16 years of outperformance. The FTSE EPRA NAREIT has generated 2.5 times the return on stocks since 1990. Since 1990 real estate has produced a total return of 13% per annum versus 9.4% equities.

Still, the performance of REITs is dependent upon the performance of the asset class underlying the instrument. REITs will only outperform the wider equity market if real estate markets remain buoyant. With property values looking frothy in traditional real estate investment markets such as London, New York, and Hong Kong investors now seem to be taking a cautious approach to buying in the sector. Nearly a decade of ultralow interest rates has pushed up property values around the world as investors have charged into the asset class seeking high, and stable returns in an uncertain market.

Analysts over at Jefferies believe that there is one real estate market in Europe that is on the cusp of a renaissance after lacklustre returns from the sector for the past few years.

Time to buy German real estate?

A combination of wage growth, negative bund yields, dormant inflation and a booming current account surplus is priming the German real estate market for a demand boom according to Jefferies’ Germany Equity Strategists.

In comparison to other Western Europe real estate market, the German property market is starting from a much lower base, making the region attractive to outside investors. Further, as the country has missed out on the real estate boom taking place in other regions, the country has not been a rush to introduce measures to slow down property price growth. Another reason why the region’s is more attractive to outside investors.

Economic fundamentals are supportive of home price growth. Wages are growing faster than consumer prices and Germany is benefiting from the European Central Bank’s policy of keeping interest rates at, near or below zero.

Overall, Germany is a very attractive place to be looking for real estate at this current point in time:

“With the economy running a large current account surplus at the same time as real rates are negative should ensure that property prices are well bid. One further factor that ought to drive demand is that affordability is still good. Furthermore, the weak euro ought to mean that foreign demand for real estate is also high. Indeed on most straightforward measures of property price to income or rent, Germany comes out as inexpensive.” — Jefferies

Source http://www.valuewalk.com/2016/08/time-to-buy-german-real-estate/

Court rules small victory against Berlin Airbnb ban

A court just issued a small blow to the capital city’s ban on Airbnb-style holiday flat rentals.

A court in Berlin ruled that people with second homes in Berlin may rent out their flats to tourists in a decision that runs counter to a newly implemented ban on Airbnb-style rentals.

Berlin officials passed the ban, which went into effect in May, due to concerns about limited available housing space and rising rental prices. It forbids property owners and tenants from renting out whole flats or houses to tourists through websites like Airbnb.

Those who violate the ban face fines of up to €100,000, although hundreds have nevertheless been flouting the law.

But the court ruling on Tuesday opened up the possibility for people with only second homes in Berlin to rent out their flats to vacationers during the parts of the year when they live in their primary homes.

The three complainants who filed the challenge to the ban live in Rostock in northern Germany, Denmark and Italy.

The court said that renting out a secondary home that otherwise would not be used does not lead to a loss in living space.

“In terms of the availability of housing in the city, it doesn’t make a difference whether a secondary home is rented out or empty while the owner is away,” the court stated, adding that the three owners who complained did not show evidence of abuse of the law in wanting to rent out their Berlin homes.

The court called on neighbourhood officials overseeing the areas where the complainants own their second homes to make an exemption for them from the ban.

Berlin’s ban on the use of sites like Airbnb to rent out whole flats has been met with contention since it first came into force, with dozens of suits being filed against it.

The first legal challenge was shot down in June after four individuals tried to argue that the law ran counter to property ownership rights.

Sources: http://www.thelocal.de/20160809/court-rules-small-victory-against-berlin-airbnb-ban

Berlin identified as the top five ‘opportunity’ markets for expansion of the serviced apartment sector across Europe

Dublin ranked Globally for serviced apartment sector

International real estate advisor, Savills have identified Dublin, Stockholm, Amsterdam, Berlin and Barcelona as the top five ‘opportunity’ markets for expansion of the serviced apartment (also known as the ‘Extended Stay’) sector across Europe.

Dublin, Stockholm, Amsterdam, Berlin and Barcelona were all ranked highly due to them having sizeable corporate and overseas visitor markets with strong outlook in terms of GDP and employment growth. But more importantly they also had very constrained stock levels relative to their overnight visitor market.

According to Savills, €416.5m was invested into Europe’s Extended Stay sector in 2015, a year-on-year increase of 32.9%.

The majority share (90%) was invested into the UK, with Germany (7%), Switzerland (2%) and Belgium (1%) at the forefront of activity within what is a relatively immature asset class on the continent.

In order to identify the new opportunity markets for this sector, the Savills research team analysed the following factors within a matrix of 35 European cities – the presence of large corporates, GDP and employment growth forecasts and overnight visitor market and supply drivers (current stock relative to overnight visitor including that of hotels) for the sector.

Commercial research director at Savills, Marie Hickey says, “We anticipate that evolving consumer trends of millennial business travellers and the success of AirBnB in highlighting alternative accommodation options, such as Extended Stay, across Europe will help the sector further tap into existing unmet demand.”

Source: Link to the Business World’s article