Property remains preferred 2018 investment asset for UAE residents

Article written by Jessica Combes in CPI financial – Tuesday 09, January 2018.

The annual YouGov survey conducted by IP Global, a leading full-service property investment company, has confirmed that property remains the preferred investment asset by UAE residents, with 40 per cent of residents planning to invest in property in the UAE and 18 per cent planning to do so overseas in the next year.

In a biannual study taken by 1000 people, when choosing which asset type to purchase, property ranked above stocks, shares or bonds (27 per cent), highlighting the continuous appeal of real estate, possibly due to the stable, reliable returns it offers. Despite the recent political global events, the latest YouGov study also showed a seven per cent increase in appetite by UAE residents in the last six months for property investment.

When UAE residents were asked where they would consider purchasing property abroad, Canada (20 per cent) and the USA (20 per cent) were the most popular countries selected from the list. The UK with 15 per cent, plus Germany and Australia with 12 per cent each completed the top five preferred investment destinations.

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Within Europe, Berlin’s recent economic boom and population influx mean that the German capital is being viewed as a promising destination for property investment. With a current 40 per cent housing deficit, Berlin’s rental market is strong, with between 5.1 per cent and 6.9 per cent rental growth in the past three years, and approximately 6 per cent in 2016 (5). On a whole, Germany is the perfect investment opportunity for UAE residents, as overseas investors do not have to pay any capital gains tax for properties owned for more than ten years. Overall, we are delighted that the YouGov study has shown the increased appetite of the UAE residents for property investment and in the current market, with a weak pound making it cheaper for USD pegged investors to buy property abroad, real estate is calling out: the time is now,” said Bradstock.

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German start-ups attract record investment in 2017

Article written by Tobias Buck on January 10.2018, in the Financial Times

Funding jumps 88% as Berlin tries to eat into UK’s European lead in tech sector.

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German start-ups enjoyed a record year in 2017, with investment in newly-launched companies jumping 88 per cent to €4.3bn.

The sharp rise in funding was driven by a string of big investments in relatively mature businesses, such as meal-kit service HelloFresh and food delivery company Delivery Hero, both of which were listed on the stock market last year.

Berlin-based businesses accounted for the lion’s share of funding, drawing 70 per cent of the country’s total start-up investment, bolstering the German capital’s claim as home to one of Europe’s most prolific start-up scenes.

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Peter Lennartz, a partner at EY, said the data highlighted investor confidence in Germany’s start-up scene but also the sustainability of some of its tech companies. 

Berlin in particular was proving a magnet for founders and investors. “The Berlin ecosystem has reached a high degree of visibility — foreign investors now have Berlin on their radar screen. The location is on a par with Paris and only a bit behind London,” said Mr Lennartz.

Both France and Germany are gradually catching up with London, according to recent research. A report issued last year by Atomico, the London-based venture capital company, found that France had outstripped the UK for the overall number of deals for the first time in five years. However, the amount of money invested in the UK was markedly higher.

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The Case For Investing In Berlin’s Real Estate

Article written by Christian Schulte Eistrup, managing director of Optimum Asset Management, 2 January 2018, in Wealth Briefing

Berlin has changed considerably in recent years, yet it remains one of the most compelling market opportunities and appealing cities in Germany. The capital still offers excellent value; provided a proactive investment approach is taken.

We were an early entrant to the Berlin property market in 2006, when the city was not so popular. However, as evidenced by the city’s fourth successive appearance atop PricewaterhouseCooper’s Emerging Trends in Real Estate survey, Berlin has entered new territory.

The property market in Berlin is booming and offers great value to businesses. It is one of Europe’s most dynamic destinations for tech companies, large and small. The Sony Centre deal in November was one the largest European real estate deals in 2017.

Furthermore, the city is now among the most popular tourist destinations in the EU – recording the fastest expansion in the total number of nights spent in tourist accommodation between 2005 and 2015. On this metric, Berlin has seen almost twice the rate of growth for London.

While residential prices have been rising, they remain good value compared to other major capitals such as Paris or London, where prices per square metre are at least five times higher. Berlin remains a high-growth, supply-constrained city. With one of the highest GDPs per inhabitant in the country, low unemployment and healthy wage growth – the economic fundamentals here are strong. (Eurostat, 2017)

The city has also benefitted from the continuing transfer of government ministries from other parts of Germany and according to Berlin’s Senate, the population is set to grow by more than 250,000 by 2019. With this comes ever-increasing demand, including for home ownership, and pressure on the occupier supply/demand imbalance – the potential for real estate value growth is significant.

A proactive approach to asset management is key to generating strong risk-adjusted returns. This approach can generate an uplift of up to 80-100 basis points in yield, by focusing on mismanaged properties. This requires a more strategic analysis of single assets and concept creation for spaces; inspired by a combination of a property’s architectural aspects and the profile of intended tenants.

Take, for instance, properties in the range of €10 million ($11.9 million) – €50 million. Property at this price point is often out of the reach of private investors, but below the radars of institutions. For example, we recently purchased buildings located around Stralauer Allee that were, in a previous life, retail warehouses. With retailers struggling due to online competition, the properties were reimagined around the concepts of media and technology. This attracted higher yielding, future focused tenants such as Porsche Digital Lab.

Within Berlin’s residential stock, there is still unrealised value to be unlocked by buying high-quality buildings whose characteristics make them eligible for a condominium conversion strategy. A building purchased in the fashionable district of Charlottenburg, for example, can result in an uplift of €3,000 per square metre.

Based on our experience spanning over ten years in Berlin, there is real estate in several other selected cities that is beginning to match the capital as the best source of attractive returns with low underlying risk.

Potsdam, Dresden and Leipzig all exhibit the occupier supply/demand imbalance that attracted investors to Berlin in the first instance. The three markets offer modest risk, but with even more affordable prices and attractive yields. Each are growing centres of technology, education and industry and offer investment opportunities comparable to Berlin, specifically with regards to mismanaged but high-quality properties.

Cologne, Düsseldorf and Hamburg also offer further opportunities, on a selective basis, to participate in the positive macroeconomic and property fundamentals.

In Berlin and across these six other locations, office and residential vacancy rates are falling and demand continues to increase year on year. Some have become concerned that markets could become overpriced and thus dampen returns on new investments. In our view, strong population growth coupled with rapid property and rental price growth are clear indicators of Berlin’s prosperity.

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