German House Price on Fire!

Germany’s housing market price rises have been accelerating for several months. In a country where the housing market has historically been extraordinarily stable, this is a significant shift.

The reasons?
Strong economic growth, 1.1 million refugees, high work-related immigration, weak construction supply and low interest rates.

The German housing market was one of the few that avoided a slump in the wake of the 2008-2009 global financial crisis.

German house price changes:

In 2009, the price index fell by 1.9% y-o-y (-2.7% inflation-adjusted).
In 2010, prices bounced back, rising by 3.6% y-o-y (2.2% inflation-adjusted).
In 2011, house prices rose by 4.7% y-o-y (2.7% inflation-adjusted).
In 2012, house prices rose by 4.6% y-o-y (2.5% inflation-adjusted).
In 2013, house prices rose by 3.2% y-o-y (1.8% inflation-adjusted).
In 2014, house prices rose by 3.7% y-o-y (3.5% inflation-adjusted).
In 2015, house prices rose by 5.6% y-o-y (5.3% inflation-adjusted).


Statistics of price rise during the year Q2 2016:

In North-East Germany:

In Berlin apartment prices rose by 7.7% to a median price of €3,036 (US$ 3,301) per square metre (sq. m.). The median price of one- and two-family houses rose by 4.6% y-o-y to €2,104 (US$ 2,287) per sq. m.

Hanover had the strongest y-o-y apartment price hike in Q2 2016, rising by 10.02% to €2,172 (US$ 2,361) per sq. m. However, one- and two-family houses increased by only 1.33% to €1,719 (US$ 1,869) per sq. m.

In Dresden, median apartment prices rose by 1.79% to €1,987 (US$ 2,160) per sq. m., while one- and two-family houses increased by 6.35% to €1,995 (US$ 2,169) per sq. m.

In Hamburg, median apartment prices increased by only 1.41% to €3,480 (US$ 3,783) per sq. m. One- and two-family houses rose by 2.57% to €2,325 (US$ 2,528) per sq. m..

In West Germany:

Dusseldorf had the highest apartment price increase in the region, rising by 7.62% to a median price of €2,261 (US$ 2,458) per sq. m. In contrast, the median price of one- and two-family houses fell by 1.57% to €2,163 (US$ 2,352) per sq. m.

In Cologne, median apartment prices rose by 5.79% to €2,474 (US$ 2,690) per sq. m. One- and two-family houses had a price increase of 1.92% y-o-y to €2,099 (US$ 2,282) per sq. m.

In Dortmund, median apartment prise fell by 3.05% to €1,300 (US$ 1,413) per sq. m. Prices of one- and two-family houses also fell by 1.06% to €1,872 (US$ 2,035) per sq. m.

In South Germany:

Frankfurt had the weakest y-o-y apartment price hike in South Germany, increasing by 3.29% to €2,600 (US$ 2,827) per sq. m. The same is true for its one- and two-family houses, which rose by only 1.44% to €2,219 (US$ 2,413) per sq. m.

Apartments in Munich enjoy the highest y-o-y price hike in the region, increasing by 10.52% to €4,821 (US$ 5,241) per sq. m. One- and two-family houses had a price increase of 5.75% to €3,627 (US$ 3,943) per sq. m.

In Stuttgart, apartment prices rose by 9.07% to a median price of €2,519 (US$ 2,739) per sq. m., while the median price of one- and two-family houses rose by 8.29% to €2,525 (US$ 2,745) per sq. m.

Berlin’s still cheap, but….

Berlin’s rising rents and overstretched supply of living units is a problem that’s not going to go away on its own. While rents in the German capital are still comparatively cheaper to rates one would find in London, Paris or major US cities, Berliners also generally earn less than their counterparts in other world metropolises.
But Berlin is playing catch-up with its global peers –and the current tightness on the rental market is just a symptom of that.
“Since reunification in 1990, and structural problems have existed for a long time, and now the city is transforming into a world-class city,”

Investment in Berlin startups jumped by €1 billion this year, study shows

Venture capital investments in German startups hit a record level in the first half of 2017, with Berlin seeing a huge rise in funding for its startup scene, a new report shows.
Funding rounds for startups in Germany and the overall value of funding hit record levels in the first six months of this year, a report released this month by professional services firm EY reveals.

Investment Capital Berlin - Source: EY

The total number of investments in German startups rose by 6 percent in comparison with the same period in 2016, to 264.

But the really explosive growth was seen in the overall size of investment. In the first half of this year, €2.163 billion of investors’ money went into startups, an increase of roughly €1.2 billion in comparison with the first half of 2016.

That growth was mainly driven by the e-commerce sector. At €939 million, over 40 percent of overall funding went into e-commerce. But health, FinTech and software startups all saw significant investment growth.

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WHAT I LEARNED ABOUT BERLIN AFTER A DAY OF MEETUPS

Berlin is the fourth largest Meetup city in Europe and one of its fastest growing cities globally. Madhvi Ramani spent an entire day Meetup-hopping to gain a unique view into Berlin and its inhabitants.

It’s 8:30 a.m. and I’m riding the U-Bahn. It’s crowded – at least, as crowded as it gets in Berlin. Everyone is able to hang on to a few inches of personal space as well as their dignity. Still, their rush hour demeanours are familiar: harassed, grim, preoccupied with smart phones and tablets.

I feel smug in my yoga pants, because my day promises to be anything but monotonous. I’ve signed up to an entire day of Meetups – events organised via the social networking website that brings people with similar interests together.

Since the site’s 2002 launch in New York, Meetups can be found all over the globe – but for some reason, Berlin is one of its fastest growing cities. Since its first Meetup was mooted in 2008, it has become the fourth largest city in Europe. What does that say about the city? I’m here to find out.

( . . . )

This, the React Native Meetup is the biggest I’ve been to all day, with almost 300 attendees. Tech Meetups are a popular way for developers and designers to network, and are heavily linked to the city’s burgeoning start-up culture, of which Zalando is one of the major successes. Nearly 30 per cent of all Berlin Meetups are now tech-related.

Officially we’re here to listen some presentations about using React Native, an open-source JavaScript library. Most attendees, however, seem more interested in the boxes of free pizza that are up for grabs. I cram slice after slice into my mouth as my neighbour says that the pizza provided by the Meetups of Berlin-based online bank N26 is better. Some people, it seems, are here with a single agenda – and I might be one of them, as I notice the curiosity and openness I started my day with are gone. As the speaker from Soundcloud begins to talk about using the framework for app prototyping, I lose interest and wander off to the loo.

. . .

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Germany Is Building a Wall to Protect the Berlin Wall

An effort to limit damage done to the Cold War landmark by tourists.

Souvenier-seeking tourists have done serious damage to the Berlin Wall, leaving Germany with no choice: A wall in front of the wall will be erected in summer 2018, to protect the landmark structure from further vandalism, reports the Art Newspaper.

This isn’t the first time the idea of a protective barrier in front of the Berlin Wall has been raised. In November 2015, authorities of Berlin’s Friedrichshain-Kreuzberg district, home to the “East Side Gallery” section of the wall, which is covered in murals created in 1990, announced plans to erect a permanent protective fence.

The wall, a designated heritage site, was erected in 1961, dividing citizens of West Berlin from the rest of the city and the surrounding East Germany until November 9, 1989. The wall began coming down in June 1990, but parts of the structure were left intact as a monument.

(…)

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Look out, London. Berlin’s startup scene is ready for a Brexit bonanza

Startups that previously looked to London are being wooed by Berlin’s fast-developing scene. But can Germany capitalise on Brexit uncertainty?

At a co-working space on Friedrichstraße, Berlin’s startup economy is getting ready for Brexit. Mindspace’s first location in Germany, opened in April 2016, sits in the heart of Berlin’s Mitte district, flanked by high-end fashion shops and perfumeries. Its walls are adorned with hand-stencilled signs directing people, in English, to the “yummy kitchen” and “awesome offices”. It feels exactly like the startup scene in London – and that’s deliberate. What London stands to lose after Brexit, Berlin hopes to gain.

(…)

“Berlin is starting to be considered as a startup ecosystem, particularly targeting the tech startup scene,” says Nijvenko. The company’s “official language”, she explains, is English. All signs, documents and posts on the community’s private Facebook group are auf Englisch. Its co-working spaces bare an uncanny resemblance to a template Silicon Valley, faux-hipster style – superfluous clocks; plush, well-worn armchairs; Communist-era televisions; and work from local artists adorn almost every remaining inch of space. Around 760 members pay between €250 and €450 per month (£215 and £390) to use the space, with the two additional sites in Berlin upping capacity to more than 2,000 people. Business is booming. “The political incentives right now are targeting the startup ecosystem. Berlin is very affordable, so for startups it’s the best place to be,” says Nijvenko.

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Bundesbank sees property overvalued in German cities, but no bubble

Residential property prices in German cities are overvalued by 10-20 percent, and even more in some quarters, but there is no property bubble threatening the entire financial system, Bundesbank chief Jens Weidmann said.

“For Germany as a whole, there is no discernible substantial over-valuation of residential property,” Weidmann said in the text of a speech for delivery in Munich on Wednesday.

Germany did not face the risk of a property bubble as credit growth was not particularly dynamic, and most banks remained fairly conservative in their loan issuance.

But Weidmann said residential property price rises in Germany in recent years had been concentrated in cities, particularly large cities like Munich, and these prices were now significantly over-valued.

“We estimate that prices are between 10 and 20 percent above the values that would be fundamentally justified,” he said, adding that over-valuations were even greater in popular areas of big cities.

“In summary, one can say of the German property market: vigilance is absolutely appropriate, but alarmism is unwarranted.”

Source – http://www.reuters.com/article/2015/03/25/germany-bundesbank-property-idUSL9N0P701R20150325

Low German Inflation Continues to Hide Underlying Economic Strength

German inflation figures may be low, but stronger than expected growth rates, rising confidence indicators and an ever tighter labor market make the ECB’s monetary policy look too expansionary for the Eurozone’s largest economy. With diverging economies within the Eurozone, German is poised to expand at a rapid rate as the European Central bank waits for Germany’s neighbors to catch up.

The first wage deal for this year suggests the strongest rise in real income for many years and above average increases in labor costs are set to undermine German competitiveness in the medium term. At the same time the risk of a property bubble is also rising.

German Q4 GDP growth was confirmed at 0.7% quarter over quarter, confidence indicators are climbing higher, with especially consumer confidence rising sharply. The labor market is already tight and Thursday’s jobless numbers showed another stronger than expected dip in headline rates. Inflation may be low at the moment, but mainly due to the impact of lower oil prices and from a German perspective, monetary policy clearly is already looking too expansionary even before the ECB starts its bond buying program.

The trend will boost consumption and domestic demand as exceptionally low interest rates are limiting the willingness to save. The German GfK consumer confidence numbers Thursday, showed a sharp rise in income as well as an improvement in the willingness to buy. This ties in with the details of German Q4 GDP numbers, which showed that in this recovery consumption and not exports, is a key driving factor.

For many Germans, urged to build up private pension portfolios property investment is looking increasingly attractive. Apparently safer than stock markets, but with considerably higher returns than bonds. While the price of the average property transaction is rising, the share of income private homeowner’s use for interest rates and repayments has fallen over the past years.

The current low interest environment won’t last forever and we have seen in countries such as Spain, Ireland and Portugal what happens when investors are unprepared for a rise in financing costs. The ECB argues that safeguarding against the risks of a property bubble are up to national central banks and governments. Germany has been promising measures to limit the trend and the Bundesbank is keeping a close eye on developments, but with the ECB preparing for even more easing measures, this is an area of risk that should not be overlooked, especially considering the devastating effects of the property crashes elsewhere. IF Germany should face the same problems, who would be there to bail out the largest country in the Eurozone.

With the ECB poised to begin its bond purchase program on Monday and sovereign bond hard to source, prices will continue to move higher which in turn should weaken the European currency. (Source)

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 Banks Chase Homebuyers Ensuring Biggest Profits

Commerzbank AG (CBK) is offering discounts on home loans in Germany and Deutsche Bank AG (DBK) plans to blanket the country with mortgage advisers. To keep pace, ING Groep NV (INGA)’s German unit is considering lowering interest rates in big cities.

“We’re feeling very sharp competition and we expect further competition in 2015,” said Helmut Straubinger, head of credit at Bayerische Landesbausparkasse, a Munich-based lender that lost market share this year. “A lot of banks have been pushing into the relative safety of property financing.”

Germany’s banks are trying to expand in one of Europe’s safest mortgage markets as record-low interest rates make fixed-income investments less attractive. In Germany, borrowers rarely default, employment is near an all-time high and housing prices are low compared with other European markets. Lenders earn an average profit margin of 1.2 percent from mortgages compared with yields of less than 1 percent from German government bonds, according to data compiled by Barkow Consulting.

Story: The Renaissance of Jamie Dimon

“Banks are taking market share from each other,” said Jochen Moebert, an economist at Deutsche Bank in Frankfurt. “Banks see real estate as a growth priority because it’s one segment that’s doing well.”

Lenders are competing for customers in a market that hasn’t been growing. German homebuyers borrowed 168 billion euros ($209 billion) in the first 10 months of 2014, a 0.4 decrease from a year earlier, according to Bundesbank data. The total amount of outstanding mortgages rose 2 percent from a year earlier to 1.18 trillion euros.

Loyalty Discounts

Commerzbank, Germany’s second-biggest bank, expects to increase lending this year by about 30 percent after expanding at about the same rate in 2013. The company’s market share has grown to about 12.4 percent from less than 5 percent in 2011, said Falko Schoening, head of lending at the Frankfurt-based bank. …(READ MORE)

German Residential Property Prices Rise Most in a Decade

German home prices rose at the fastest rate in at least 10 years in the third quarter as investors bought apartment buildings at a time when low interest rates make other investments less attractive.

Values climbed 5.2 percent from a year earlier, with multifamily houses gaining 7.2 percent, according to an index published today by the VDP Association of German Pfandbrief Banks. Prices for owner-occupied condominiums gained 2.6 percent as momentum in that market slowed following bigger gains in the previous three years.

Apartment buildings “continue to be sought after by institutional and private investors alike,” said Jens Tolckmitt, VDP’s chief executive officer. “The very low interest rate and the resulting search for attractive yields on investment support this trend.”

Investors are drawn to Germany’s reliable rental income and potential for further property-price gains at a time when fixed-income markets offer low yields. Low interest rates also make it cheap for buyers to take out mortgages.

Rents on new leases in apartment buildings rose 4.6 percent in the third quarter from a year earlier, VDP said.

Stocks Records

Listed residential landlords, such as Deutsche Annington Immobilien SE and Deutsche Wohnen AG, have benefited as shareholders bought the most property stocks ever this year, according to data compiled by research firm Barkow Consulting GmbH. German property companies have sold a record 4.1 billion euros ($5.1 billion) of shares this year, 15 percent more than in all of 2013, the firm said.

The FTSE EPRA/Nareit index of German property stocks has climbed about 25 percent this year, compared with a decline of about 3.5 percent on the benchmark DAX Index. (DAX) Deutsche Annington, Germany’s biggest listed landlord, has gained 39 percent this year in Frankfurt trading.

Investors seeking stable returns are also buying office properties. Office values climbed by 3.7 percent in the third quarter, while office rents rose 1.8 percent, according to VDP. Commercial properties are attracting professional investors with large cash reserves, including pension funds and sovereign-wealth funds.

Buyers acquired 25.5 billion euros of commercial properties in Germany in the first nine months, the most since 2007, according to Jones Lang LaSalle Inc. (JLL)

VDP collects price data from mortgage contracts signed across Germany by more than 30 member banks, which include Deutsche Bank AG, Commerzbank AG, Banco Santander SA (SAN) and ING Groep NV. (INGA)

(Source – http://www.bloomberg.com/news/2014-11-17/german-residential-property-prices-rise-most-in-a-decade.html)