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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Investors pile into Berlin’s booming real estate

Article written by Emily Perryman in JLL real views

Overseas investors are pouring money into Berlin’s real estate sector, attracted by the German capital’s burgeoning economy and strong growth prospects.

After a record third quarter, which saw almost $3 billion of capital flowing into the city, Berlin has become the third most popular European destination for cross-border investment in 2017.

High-profile deals included the €1.1 billion acquisition of the Sony Center by Oxford Properties and Madison International Realty – one of the largest single-asset deals in the European property market this year.

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Berlin, meanwhile, saw GDP growth of 2.7 percent in 2016, making it the strongest growth state alongside Saxony. The city’s population is also expanding quickly and is expected to increase from 3.5 to 4 million by 2035, according to the Cologne Institute for Economic Research.

Rising prime rents, which have risen around 7 percent since the start 0f 2017 to €29 per square meter per month, have further fuelled investor interest.

Kadelbach says: “Germany is generally regarded as a safe haven and Berlin, as the capital, is the first choice because of its positive economic growth and demographics. Investors from all over the world, including the Americas, France, Norway and Asia, are attracted by its stable political environment and dynamic rental growth.”

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Is Germany the next property investment market for Hong Kong investors?

Article written by Ian Sigmund in the South China Morning Post

With Brexit uncertainty, the US being overbought and high interest rates in Canada and Australia, Germany could be a viable option among developed markets

As the Hong Kong market continues to heat up, Brexit uncertainty, and other global markets appearing priced in, investors in Hong Kong are increasingly looking to western Europe, specifically Germany.

Germany, despite boasting Europe’s largest economy and population, has not always been a natural destination for Hong Kong investors seeking to invest in property overseas. Perhaps due to an Anglo-centric bias from Hongkongers, and other jurisdictions closer to home, the German property market has hitherto been overlooked for some years.

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There is a marked housing supply-demand imbalance in major cities across Germany, which is particularly prevalent in Berlin and Frankfurt, and increasing with flourishing migrant populations and a birth rate that has risen to a 33-year high. This supply deficit is forecast to remain at levels of up to 40 per cent until 2030.

In Germany’s capital, 40 per cent of the population is under 35 years old and the city ranked third on the 2016 Youthful Cities Index. Berlin’s growing number of start-ups and new businesses is also fuelling population growth and a youth-centric culture, with 400,000 new residents expected by 2030.

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For investors looking to purchase micro-flats, the main draw is the very attractive rental yields that they offer. The small square-footage of the units allows owners to rent them out at costs that, compared to the average property or full-sized home, are relatively high per square foot, but that are also affordable to tenants who might not be able to afford to live in a larger property in a central location.

For example, Neukölln has the second highest rental growth in Berlin only behind Friedrichshain, its more developed neighbour, and its popularity keeps increasing as more shops, restaurants, bars and cafes keep opening week on week. As a result, the studio flats have high yields – up to 6.4 per cent compared to the 3 to 3.5 per cent average in Berlin.

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Berlin buffs up its appeal as a post-Brexit haven

A building boom and low prices are luring the super-rich to the German capital

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Berlin, long famous as Europe’s capital of hipsters, students and semi-retired rock stars, is being reborn as a haunt of the super-rich. When David Bowie moved to West Berlin for three years in the 1970s, the city was awash with cheap housing and a thriving underground music scene.

Today, Schöneberg, the district where Bowie lived, and neighbouring Kreuzberg, popular with Turkish immigrants, are unrecognisable. The punks and revolutionaries have been replaced by young professionals, and squats have given way to penthouses and artisanal coffeehouses even as graffiti decries the area’s gentrification.

Germany is home to more than 13,000 ultra-wealthy individuals (those with a net worth above $30m), according to Wealth-X, the research company which tracks the activities of the super-rich, up almost 5 per cent compared with 2016. In terms of appeal to the wealthy, its research ranks Berlin as the 11th most attractive place to invest.

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Written by Hugo Greenhalgh in the Financial Times (Nov 14 2017)

Berlin Retains Top City Billing in Emerging Trends 2018

Berlin has been ranked the top city for investment and development for the fourth year in a row by Europe’s real estate community.

The German capital came first out of 31 cities in Emerging Trends in Real Estate Europe 2018, the annual forecast published by the Urban Land Institute and PwC. The report is based on the opinions of more than 800 property professionals.

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Equity and debt are expected to be just as plentiful in 2018, despite the threat of rising interest rates, while this year’s high levels of investment are forecast to continue.

The fact that German cities once again took four of the top 10 spots in the report’s score card of prospects ‘is no surprise’ says the report’s section discussing Markets to Watch. ‘Germany has been steady state for a long time now. With Berlin, people truly believe it’s going to become a major city’, a pan-European financier says.

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Article written by jane Roberts, in Market Watch.

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.

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