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,”

The Facts and Figures that Support Charlottenburg’s Investment Case

(Part Two of Two)

In Part Two of our introduction (Part One here), we reveal who lives in the area and the numbers behind the investment case that highlight why this City-West location is so appealing to real estate investors.

Home to Wealthy Berliners, Creative Students and Young Families

Charlottenburg has always attracted Berlin’s wealthiest and chicest residents, ever since Sophie Charlotte commissioned the stunning Schloss Charlottenburg. Today, the district counts politicians and local celebrities among its affluent residents. The area has previously been likened to London’s Fitzrovia.

Charlottenburg’s high-end villas and spacious apartments are typically larger than the average in Berlin, with many featuring balconies, garden access and cellar space as well. Wide roads and pavements, elegant avenues lined with trees and classic 19th century architecture make this an attractive and refined neighborhood.

Yet, despite constant development in this busy city centre district, Charlottenburg still offers quiet corners of oasis and pockets of greenery, including playgrounds which attract many middle-class families to the area. To the east, Charlottenburg borders Tiergarten Park, a vast expanse of lakes and woodland in the heart of Berlin, comparable to London’s Hyde Park.

Charlottenburg is also an easy commute to the CBD and other prominent employment areas. The Strasse des 17. Juni runs eastwards from Charlottenburg Gate, through Tiergarten Park, to the famous Brandenburg Gate – connecting Charlottenburg with Berlin-Mitte (Central Berlin) in just a 10-minute drive. What’s more, the prime central location of Charlottenburg as an inner-city district inside the S-Bahn ring (train network) means this area is unrivalled in location as well as class.

In addition, Charlottenburg boasts a large student population due to two local universities: the Technical University of Berlin and the Berlin University of the Arts. Combined, they have a population of over 30,000 students.

Facts and Figures: Charlottenburg as an Investment

Charlottenburg is one Berlin’s best-performing property markets. A traditional, mature and middle-class neighbourhood, rather than an ‘up and coming’ district, Charlottenburg is an evergreen location for property investment in Berlin. Every property in the entire district is considered to have a sophisticated, premium and much sought-after address.

As of the end of 2015, Charlottenburg was reported to have a population of over 330,000 (CBRE). A strong continued pattern of population and price means there is a predicted population growth forecast of 6.1% before 2025.

Therefore, it’s no surprise that demand far outstrips supply and value is rare. Land for new builds is scarce in City West locations such as Charlottenburg-Wilmersdorf. As of January 2017, there were 460 apartments, either under construction or planned, per 100,000 residents – well below Berlin’s average of 890 per 100,000 residents (CBRE).

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.

Link to article

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.

Link to the article

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

Real Estate in Germany Growing as Wave of Mergers and Acquisitions Rise

German real estate is seeing a wave of mergers and acquisitions rise with low interest rates offering investors an open window for growth.

Mergers and acquisitions are on the rise in Germany’s real estate segment as industry players look to capitalize on low interest rates and a virtual standstill in property prices. Unlike neighboring countries who are experiencing unsteady growth rates. In a report by Gulf News, Vonivia, the top dog of real estate joined the fray and revealed plans of offering €14 billion or $16 billion for its nemesis Deutsche Wohnen after its failed bid to acquire LEG Immobilien.

Spain Remains Top European Property Investment Target, Germany Second

According to Knight Frank, active investors see Spain as the top investment target in Europe, with Germany following close behind in 2015.

Knight Frank’s recent European poll showed 27% of over 150 investors identified Spain as their preferred investment target for next year, clearly indicating the strength of its recent recovery with values still well below their previous peak.

Humphrey White, Head of Capital Markets at Knight Frank Spain, comments “The fundamental rationale behind investing in Spain is even stronger than this time last year. Prime CBD office rents have risen by 20% over the past 12 months, but remain nearly 40% below the 2008 peak, and both footfall and sales have been increasing in dominant shopping centres for six consecutive quarters.”

Over a quarter (25.4%) of attendees chose Germany as their preferred target.  Results mirror the buoyant investment activity seen in the country, with a total of €30 billion invested in property during H1 2015, an increase of 35% compared to H1 2014.

Joachim von Radecke, Head of German Desk at Knight Frank in London, comments “The increase is driven by the rising flow of foreign capital into the country and the 50% increase of domestic investor activity.  Foreign investors’ share of the German market continues to grow, and now accounts for almost 60% of all transactions in H1 2015.

“We saw the usual trend towards the “big five” markets – Berlin, Frankfurt, Munich, Hamburg and Düsseldorf, with 78% of total office transactions recorded in these cities.”

The UK again featured strongly in this year’s poll, attracting 17.4% of the votes, on the back of the continuing recovery which has now extended to the UK regions.

Chris Bell, Managing Director of Europe at Knight Frank, comments, “The UK is well ahead of the rest of Europe in terms of the property cycle and has already seen significant yield compression.  However, it is encouraging that rental growth is beginning to re-emerge more widely across Europe, helped by the strengthening of occupier demand and the steadily falling availability of good quality space exacerbated by the lack of development over the preceding recessionary years.”

– See more at: http://www.worldpropertyjournal.com/real-estate-news/spain/madrid/european-property-investor-data-2015-spain-real-estate-investments-made-2015-germany-property-investments-international-property-investors-humphrey-white-joachim-von-radecke-9376.php#sthash.uUr0nG4v.dpuf

 

See more at: http://www.worldpropertyjournal.com/real-estate-news/spain/madrid/european-property-investor-data-2015-spain-real-estate-investments-made-2015-germany-property-investments-international-property-investors-humphrey-white-joachim-von-radecke-9376.php#sthash.uUr0nG4v.dpuf

Checkpoint Charlie Sites Said to Be Sold to Berlin Developer

The last development sites at Checkpoint Charlie, the most famous border crossing between former East and West Berlin, are being sold after years of laying fallow, three people with knowledge of the deal said.

Trockland Management GmbH, a local developer agreed to buy loans on the two plots in the city center from Irish bad bank National Asset Management Agency, said the people, who asked not to be identified because the sale is private. Trockland will pay about 85 million euros ($95 million) and plans to build mostly homes, in addition to stores and a hotel, two of the people said.

A representative for Trockland declined to comment. A spokesman for NAMA didn’t immediately respond to a request for comment.

Checkpoint Charlie was a border crossing in West Berlin controlled by the western Allies — the U.S., U.K., and France – – until the opening of the Berlin Wall. Since German reunification, the site has become a tourist attraction where hawkers in G.I. costumes charge for photos and souvenir shops sell fake Berlin Wall fragments. Tenants in the area include Starbucks Corp., a Michelin-starred restaurant, and a sausage museum.

The plots, one on either side of upscale shopping street Friedrichstrasse, have a total of 9,100 square meters (98,000 square feet), according to to BNP Paribas Real Estate, the broker that marketed the properties.

Dublin-based Cannon Kirk bought rights to develop the land in 2007, and during the financial crisis, Ireland’s bad bank National Asset Management Agency took over the debt, BNP said in September.

A spokeswoman for BNP declined to comment.

The area abuts two of Berlin’s most expensive neighborhoods: Mitte and Kreuzberg. Twenty-six years after the fall of the Berlin Wall, the little remaining wasteland that once separated East from West is still prized by investors because it’s centrally located.

(Original Article – http://www.bloomberg.com/news/articles/2015-05-05/berlin-s-checkpoint-charlie-sites-said-to-be-sold-to-a-developer)

Germans Give Up Savings Accounts, Invest Into Real Property

Low interest rates are driving Germans to rethink their investments and put their money into real property or future retirement funds.

A new survey revealed that Germans viewed savings accounts as less attractive to increase capital and preferred to invest their money into private houses or future pensions, according to the German “Der Spiegel” magazine.

Only 10% percent of respondents considered savings accounts attractive in comparison to 24% in 2011. 70% of Germans found saving-bank books unattractive, while a half of them completely opposed this way of investment.

The respondents also showed a tendency to put money into riskier forms of investment, such as shares and funds.However, the survey revealed that Germans are far from becoming speculators. 15 percent of respondents prefer to keep their money at home, with majority of respondents willing to invest into real property and pensions.

Germans are not alone in their desire to invest into real assets. Most of 6000 respondents from France, Spain, the UK and the US prefer such type of investment to any others and put their money into private houses and flats.

It is no surprise either, Central Banks in Europe have destroyed any incentive for savers. Zero interest rates provide no capital accumulation, forcing investors into riskier assets.

German portfolio investment volumes reach €26 billion in 2014

Savills latest research on portfolio investment finds that more than €26 billion was invested in German residential and commercial property portfolios during the 12 months from December 2013 to December 2014, 2% higher than that invested in single assets during the same period.

Savills reports that the residential portfolio market has enjoyed the greatest momentum, with the transaction volume growing almost five-fold from approximately €3 billion in 2009 to circa €15 billion last year. The commercial property sector has also seen significant growth in recent months, particularly with regard to office, hotel and logistics property portfolios. Transactions for office portfolios specifically has almost doubled compared to 2013 from €2.5 billion to approximately €4.8 billion.

Property companies and REITs were the most active investor in 2014, accounting for 31% of the overall portfolio transaction volume, followed by private equity funds at 13%. Both groups favoured portfolios last year, investing only 6% and 3% respectively in the single asset market.

Karsten Nemecek, managing director for corporate finance and valuation at Savills, comments: „Private equity investment activity in Germany has been particularly interesting and we have identified three key patterns. First, investment tends to follow more pronounced cycles than the portfolio market as a whole and cycles are shorter. We have also seen that activity tends to be counter-cycle. Recently this has been particularly apparent in the residential sector where funds were active purchasers between 2009 to 2012 and active vendors since that period, opposite to other investors in the market. Lastly, the sector does not appear to be of decisive importance for private equity funds. They do not invest in anyone sector exclusively but rather in all when the time is right.“

Marcus Lemli, head of European investment at Savills, adds: „We have seen strong interest from international investors in portfolio assets accounting for circa 44% since 2009 compared with just 31% in the single-asset market during the same period. One reason for this differential is that portfolio acquisitions allow investors to rapidly secure a significant share of a regional market or to obtain a certain amount of exposure to a national economy.“

Savills notes that there has been a significantly lower average sale price per square meter; €1,700 in 2014 compared to €2,100 in 2013. The firm attributes this to more non-core assets being included as part of the portfolios.

Matthias Pink, associate director of research at Savills, explains: „Since opportunistic investors such as private equity funds are significantly more active in the portfolio segment than in the single-asset market, the proportion of non-core assets changing hands is also significantly higher. The average sale price has fallen consistently since 2011 and particularly during the current year. This indicates that the risk tolerance of investors has continuously risen – a trend that is likely to continue in 2015.“ (SOURCE)