South China Morning Post
SPECIAL REPORT: PROPERTY MATTERS
Richard Warren
Aug 19, 2009
Investors play safe in German market
The European Union's most populated country is expected to buck the trend of falling prices as demand grows
Germany's housing market has so far been relatively stable, with a marginal fall in prices since last year. But growing demand for properties in the country is likely to have upward pressure on prices in the long term.
According to financial services group Hypoport, prices for new homes have remained steady because construction costs are growing.
With wages and commodities prices expected to rise further, prices for this type of property will increase, the company forecast. "Prices for new homes will most probably rise because they are highly driven by the costs of construction," said Thomas Kretschmar, Hypoport's co-chief executive.
He added that Germans usually bought homes later in life, preferring to rent in their younger years. So, with the population growing older, the number of buyers would increase.
For property investors, buying developments in Germany could be a good long-term investment.
According to Barbara Walter, owner of London-based buying agency German Property Finder, Germany's residential market is relatively strong. "I consider buying in Germany a safe long-term investment," she said.
And now is probably a good time to consider investing in Germany's property market.
According to the Hedonic House Price Index, published in May by Hypoport, prices for apartments in the secondary market slipped 1.88 per cent to an average of €130,441 (HK$1.43 million) over the 12 months to May this year. As for houses in the secondary market, prices for these were hardest hit, dipping 5.54 per cent to an average of €167,678.
The fortunes of Germany's housing market were influenced by its changing demographics, Ms Walter said.
Germany has a population of 82 million people, the European Union's largest, but it has been declining since 2003.
In 2007, Germany's population was estimated to have contracted by 0.12 per cent.
Depopulation has undermined Germany's housing market. Figures from consultancy BulwienGesa show German residential property prices fell marginally in all but one of the 15 years to the end of last year in real terms with inflation factored in.
Demographic decline started in eastern Germany during the 1990s and is spreading to the western districts, Deutsche Bank research shows.
Most German regions will have fewer people living in them by 2020 compared with today, the bank forecasts.
The growth of population lies in Berlin and southwest Germany, according to the same forecast by Deutsche Bank.
A trend towards an ageing population living in larger towns rather than the countryside, and an increase in single-person households, would provide opportunities for investors, Ms Walter said.
"Demographics are the weak point," Ms Walter said. "But right now there is hardly enough new build to meet the demand, so prices have hardly budged in the good areas or are even rising in places such as central Munich.
"Buy where demographics are good, such as southwest Germany and around Berlin, although this one [Berlin] has been hyped up in the past year."
After 15 years of falling prices, the longest sales slump in Europe, German homes have become less expensive compared with many other places in the world.
According to the Global Property Guide, Berlin is 62nd on its list of the 112 most expensive property markets. The average price of a 120-square-metre apartment in the city is US$3,030 per square metre, which is marginally more expensive than for the same type of property on the Greek island of Crete.
Munich, in southwest Germany, has the country's priciest property market and is 25th on the Global Property Guide's list. A 120-square-metre abode in the Bavarian city costs US$5,255 per square metre on average.
In the upmarket west Berlin district of Schoneberg, a refurbished two-bedroom apartment is on the market for £187,000 (HK$2.41 million) through property portal property-abroad.com. The 74-square-metre abode has a balcony.
In the less salubrious central Berlin district of Kreuzberg, a one-bedroom studio flat with balcony can be purchased for £31,424 through property-abroad.com.
The property portal's sales blurb says the rental income from the 38-square-metre property is €1,560 per year, equivalent to a 4.2 per cent gross return.
In central Munich, a second-floor, 130-square-metre apartment with three rooms and modernised bathroom, in a high-rise block, is on offer for €130,000 through estate agency Blue Homes.
Entire blocks of flats are sometimes traded between investors in Germany.
A six-storey, 100-year-old block of 33 apartments in salubrious Charlottenburg, central Berlin, is on the market through estate agency FrontlineBerlin for €4.15 million. Renting out all the apartments would produce a gross return of 5.4 per cent, the Berlin-based company said.
29.4.2009
Richard Warren at globalpropertynews: ALL THE WORLD'S A HOME
Homebuyer's guide to the international property market
Reliable Germany
Buying agency, German Property Finder, considers housing stock in Europe's biggest economy “a secure long term investment”. Prices for brand new homes rose 4 per cent over the past year and are projected to go higher in the next twelve months by financial services group, Hypoport, which monitors the housing market.
Prices for second-hand homes fell 5 per cent over the past twelve months Hypoport says. But they will start rise in the "medium term" as the growing proportion of older, wealthier Germans look for somewhere to settle down in their later years, it forecasts.
Nationally, the population is declining by 50,000 a year, but Deutsche Bank says the number of people living in south west Germany and Berlin will keep growing over the next decade. Investors ought to buy the most desirable properties in these locations German Property Finder recommends.
German property is relatively inexpensive. A refurbished, two bedroom apartment in a salubrious part of central Berlin is on offer for GBP187,000 through property-abroad.com. There are no restrictions on overseas investment in German property.
http://globalpropertynews.blogspot.com/2009/04/german-reliability.html
FT : July 20th 2008 : Europeans optimistic on property prices
German house prices have remained flat or fallen over the past 15 years or so. Unsurprisingly, almost half of German owners expected the price of their house to remain unchanged over the next five years. Nevertheless, 40 per cent of Germans surveyed expected an increase over the same period. In the other large countries covered by the poll, 64 per cent of Italians, 57 per cent of Spaniards and 56 per cent of Britons expected prices to have increased by 2013.
The results of the survey suggest that a majority of Europeans expect prices to remain flat over the next 12 months.
Still, in France, Italy, Spain and Germany the proportions expecting an increase in prices were larger than the shares expecting decreases.
HAVE A LOOK AT REAL PRICE I.E. ADJUSTED BY INFLATION IN GERMANY OVER THE LAST 30 YEARS AT http://media.ft.com/cms/770d9924-53f4-11dd-aa78-000077b07658.pdf . THIS SHOWS THAT GERMAN PROPERTY IS VERY STABLE VS INFLATION AND CURRENTLY ON THE CHEAP SIDE. AS PURCHASES ARE SELF-FINANCING, WE WOULD CONSIDER THIS A VERY ATTRACTIVE PENSION INVESTMENT.
Reuters : March 20th 2008 : Perella ready European Property Fund
Leon Bressler, who oversaw Unibail's rise as one of Europe's biggest property firms, is poised to make his long-awaited market comeback, armed with more than 1 billion euros ($1.56 billion) in fund money.
Despite that and the fact commercial property prices had fallen more -- much more -- than elsewhere in Europe, the UK was likely to remain out of bounds for the fund in 2008.
"There are more promising markets than the UK, like Germany where the office market is very sound and more broadly based," he said.
Also unlike the UK, Germany had not seen a property bubble for 15 years. Its households were less indebted and its economy was based on manufacturing exports not services.
