Saturday, 4 January 2020

Co-living - Currently One of the Most Promising Ways to Invest in Property

There are obviously many ways to invest in Real Estate. The Forbes Real Estate Council has looked at the current market situation and identified four trends that can be taken advantage of: Invest in a digital REIT, build a tiny home in your backyard, Angel invest in a Proptech startup or purchase a property for co-living.

Purchase a Property for Co-living.

I would like to dig into this option:

The Co-living movement is very much a reaction to the intensifying urbanisation and workplace nomads who can perform their job almost anywhere with internet access. Another driver is the ongoing price increase in urban areas around the world. Bigger units are hardly affordable, even for tenants with relatively high income.

Photo by Aw Creative on Unsplash

Investors are buying larger units with more than two or three bedrooms and rent the single rooms individually with shared, well equipped kitchen, bathrooms and lounge/living room. To meet the needs of the mobile generation most likely attracted to this form of living, certain standards have to be met: Fast WiFi, comfortable beds, security. A smart solution for laundry and responsive service in case of problems are a MUST.
On the financial side all utilities including e.g. electricity and TV-license have to be factored into the rent as they are key factors for mobility.
A set-up like this will command a much higher rent and, despite the inclusion of ancillary costs, a much better result than renting the entire unit to one household.

There are companies trying to offer just the shell room and will have some initial success in very tight markets but they will lose the tenants to more convenient set-ups as the competition is growing.

"It’s uncertain how large of a renter audience will be interested in this dorm-like life, but it’s gaining traction. Similar to the tiny homes, be sure to look into local zoning rules before purchasing a property." (Forbes Real Estate Council)


Monday, 9 July 2018

Construction and Repair Cost Increase In Germany

Construction costs for apartments and offices increased by 4.1%

According to the Federal Statistical Office (Destatis) prices for the construction of conventionally manufactured residential buildings in Germany in May were 4.1% higher than a year before. This is the highest increase since November 2007 (+ 5.8%). For office buildings and for commercial buildings a price increase of 4.1% was determined. In particular, concrete construction (+5.4%) was the price driver in housing construction, while masonry (3.7%) was less expensive. Carpentry and wood construction were 4.3% more expensive than a year ago.

Photo by Fancycrave on Unsplash

The interior finishing prices increased by 3.6% and maintenance, repairs and upkeep by 3.8%.


Especially the maintenance and repairs bracket is relevant for property owners as in most cases they will affect the bottom line of their investment directly. 


Sunday, 8 July 2018

The International Monetary Fund: View of the German Housing Market

Germany : 2018 Article IV Consultation – Press Release; Staff Report and Statement by the Executive Director for Germany

In summary the IMF concluded that Germany needs to keep an eye on its property market.  House prices are most overvalued in Munich, Hamburg, Hannover, and Frankfurt, and are estimated to be more than 20 percent above their fundament level on average in major German cities.
A housing valuation model using Germany’s ten largest cities and twelve European peers shows that since 2010, house prices in Munich, Hamburg, Frankfurt and Hannover have increased by 25 to 50 percent above the levels suggested by economic fundamentals. The average overvaluation gap in the 7 biggest cities was 21 percent in 2017.
Annex IX. Is There a Housing Price Bubble in Germany’s Main Cities? 
IMF Country Report Germany, Annex IX 
As most studies are based on country wide price levels a view at city-level is important as they expose a risk level that does not shown at the housing market aggregate level.
     Kajuth, Florian, Thomas A. Knetsch and Nicolas Pinkwart (2016).
     Assessing House Prices in Germany:
     Evidence from an Estimated Stock-flow Model
     using Regional Data.
     Journal of European Real Estate Research Vol. 9(3), 286–307.

IMF Country Report Germany, Annex IX 
The IMF concludes that there is no cause for an alarm yet because there is no lending boom to accompany the price boom.

The economy surprised on the upside in 2017.

The findings of the IMF Report on the general state of the German economy is headed:  IMPRESSIVE RECENT ECONOMIC PERFORMANCE. Real GDP growth picked up sharply, reaching 2.5 percent, as exports rebounded and triggered a much-awaited pickup in investment. Strong private consumption, supported by a robust labor market, was offset by a slowdown in public consumption as refugee-related expenditures stabilized. Although both exports and imports grew strongly, the contribution of net exports turned positive again. The labor market continued to tighten: even though employment grew more slowly than in previous years, reflecting diminished migrant inflows, job creation was strong enough to bring the unemployment rate to a new post-reunification low of 3.6 percent.1 In the first quarter of 2018, growth slowed to 0.3 percent (qoq), reflecting a normal correction following unusually strong growth in late 2017 and temporary factors (strikes, a particularly nasty flu outbreak, and early Easter holidays), but the labor market continued to perform strongly.


The Germany : 2018 Article IV Consultation – Press Release; Staff Report and Statement by the Executive Director for Germany by the IMF shows Germany as a stable investment environment in the Housing Market.


Global Cities Index Posts Weakest Property Price Growth Since 2015

Globally, urban prices are rising at their slowest rate since the third quarter of 2015. The Global Residential Cities Index, which tracks the movement in average residential prices across 150 cities worldwide, rose by 4% in the year to March 2018, down from 6.4% a year ago.
According to a new report by international real estate consultant Knight Frank, despite the global economy's strong performance, increased government activities to fight inflation in the real estate sector have slowed the price increases to some extent. While last year's report saw 12 cities with a growth of more than 20 % this years there is only one left in this bracket: the Indian city of Surat.
Europe's growth path continues as 11 of the top 20 cities in the ranking for growth are in Europe. Previously in the top ranking Berlin (14.9%), Budapest (14.4%) and Reykjavik (11.8%) are now joined by Rotterdam (14.8%), Edinburgh (12%), Porto (11.7%) and Sofia (11.3%).

In Canada Vancouver continues to outperform with annual growth of 15.4% as tracked by the National Bank of Canada.

In the US Seattle (12.9%) continues to lead the 15 cities tracked by the index.

Southern Europe is increasingly polarised. Whilst Italian cities are well-represented at the foot of the table, Spanish and Portuguese cities are registering stronger growth. Porto, Malaga and Madrid all sit high in the rankings with annual growth of 11.7%, 10.4% and 10.3% respectively.
The report also contains interesting insights in the bandwidth within countries which can go from + 22% to -5% within one economy.

For the full report just click on the graph or table above.


Friday, 29 June 2018

German Property Finance - LTVs are Decreasing "Only" Due to Price Increase


A recent finance study by IRE BS Immobilienakademie states that the Loan To VAlue ration in German property financing has decreased from 65% to 61% since 2016 but "only" because of price increases. In other words, banks  don't believe that current prices represent the value of the properties they are financing so they are cutting back on their exposure.

Why is this supposed to be good news? It follows the calls form the Deutsche Bundesbank about a Property Bubble even though several demand based indicators don't support the view. Maybe if they keep it up for another 5 to 10 years, one day, they will be right.

Press release in German.

Purchase the report in German.


Knight Frank Active Capital Report 2018: Canada and Germany Attract Further Real Estate Investment

Knight Frank Report: Active Capital - 2018.

Active Capital gives a unique insight into the dynamics of the real estate capital markets around the world. It projects that Canada and Germany have the greatest potential for increasing real estate investment from around the world.

Download the Report directly:


Wednesday, 27 June 2018

Berlin Remains in the Top 5 of the Most Dynamic Cities in Europe

Savills Investment Management LLP has published their annual  "Savills IM Dynamic Cities Index" for Europe.
Europe stands among the most urbanised regions on the globe. Trends
in urbanisation are increasingly important for investors. However, not
all cities are equal. With the predicted growth of disruptive technology,
it is vital to identify locations that will show resilience to change. 
The Savills Investment Management Dynamic Cities
index incorporates cities’ longer-term upwards growth
potential rather than focus on the one- to two-year,
shorter-term real estate cycle.
Using 60 indicators across 6 subcategories, Savills
Investment Management has identified London,
Cambridge, Paris, Amsterdam and Berlin as the top
five European cities for real estate investment.
KIRAN PATEL Global Chief Investment Officer Savills Investment Management

London, Cambridge, Paris, Amsterdam and Berlin remain the five most dynamic cities in Europe, according to Savills Investment Management. They claim their position in the new edition of the "Savills IM Dynamic Cities Index", for which 130 European cities and city regions were evaluated according to the criteria of innovation, inspiration, inclusion, networking, investment and infrastructure. The index is led by cities that are successful in attracting and retaining talent, promoting innovation, and increasing productivity, which in turn drives prosperity and population growth and thus has a positive impact on the commercial real estate markets. Most of the locations investigated achieved better results than in the previous year. In Germany, especially Frankfurt (+4 in 17th place) improved.

The full report is available at this link:
And an interactive presentation with visualisation of the the results and their components allowing direct comparison and search is available at this link: