National Financial Press Foreign property news Daily we are seeing huge residential real estate portfolios acquisitions in Germany by large international fund managers
Financial Advisory Report German residential property The difference between the German real estate and other major international real estate markets is huge. Germans in general do not usually own their houses, normally preferring to rent instead, the impact of social housing has therefore been tremendous and the financial system is more rigid when compare to other European countries. The divide between east and west is also significant and has been a key factor in the past underperformance of the real estate market. Thus, we would like to prepare investors for what we believe will be a wave of German housing IPOs acquisitions.
Financial Advisory Report German property – gold or silver mine? Despite the fact that the current market capitalization of listed real estate companies is currently around EUR11bn, from which around half of which is residential property, which within an international context is a very high share; we have compared the German residential market to other key global international real estate market fundamental and valuation factors. From a fundamental financial perspective, German residential real estate offers significant business opportunities compared to other countries for the following reasons:
• The homeownership rate in Germany is one of the lowest in Europe and due to the need for retirement housing and failing state pension system, we believe that ownership will significantly grow, which will by default increase demand.
• German residential construction activity is at a historically low level and current date indicates that current supply is lower than demand. If this persists it could lead to a supply shortage in the long run.
• Despite the expected rise in global interest rates we believe that the business fundamentals are improving at a faster rate, thus providing an opportunity to achieve higher yields in the future.
Financial Advisory Report Clever Property Investors German property sectors are recently seeing huge influx of foreign investment. The long period of economic stagnation has kept residential and commercial property prices low for the past decade. With property prices in most German cities being in some cases more that 50% lower than in other European cities, more and more investors now see this as an opportunity. “Apartments in large German cities can be bought for 1/8th of the price of similar properties in London and are surprisingly even cheaper than several eastern European capitals”, “Low property prices combined with an excellent legal system and low fixed interest rates are laying the landscape for investors to enter the market with very little risk.
Financial Advisory Report Significant change ahead for the German property market Currently, we are advising our clients that the German residential market represents one of the world’s most attractive real estate markets for investors due to the fact that 1. The rental yields are attractive, 2. Germany offers investors a stable rental market, 3. Significant capital growth expected to bring German property prices in line with European levels, 4. Stable and legally sound property laws for foreign investors. We believe the Germany property market will look very different in 10 years time; expecting around 1 million residential portfolios to change hands with the majority going from public owners to private entities. We can only start to imagine the amount of business opportunities which will arise from the tailwind of these expected multi-billion euro transactions from public to private ownership.
Financial Advisory Report German property – Upside expected While German property valuations are now more competitive and appealing, having missed out on most of the European shifts, we see significantly improved near term momentum compared to basic fundamentals in markets like UK, France, and Spain. We do not believe a property price increase will occur according to recent UK price benchmarks but we do anticipate a significant and selective recovery, in which the residential sector will probably perform best.
Financial Advisory Report German property update Germany’s economy finally looks to be heading for recovery. Confidence among business leaders is at its highest point in a decade, the German economy growing by around 2% per annum. Taking into account Germany’s export industry and recent government changes committed to execute economic reforms, Europe’s sleeping giant is slowly awakening from its long hibernation.
Financial Advisory Report The German property boom Large multinationals such as Morgan Stanley, Fortress, Goldmann Sachs are moving in quickly, having all recently acquired billions of Euros of real estate property in Germany.
