A confident start to autumn in Germany

Findings of the GfK consumer climate study for September 2009

Nuremberg, September 25, 2009 – The upward trend in the consumer climate in Germany is continuing at the beginning of autumn. Economic and income expectations are increasing and the propensity to buy has once again improved on its good level. The overall indicator is forecasting a value of 4.3 points for October 2009, following a revised value of 3.8 points in September.

Over the past few weeks there have been a growing number of reports claiming that the economic decline is less severe than was feared several months ago. Consequently, the future outlook of consumers is becoming increasingly optimistic, with economic expectations rising for the sixth time in a row. In addition, the calm price climate and lack of inflation is ensuring that purchasing power is strengthening. Income expectations and the propensity to buy are therefore continuing their upward trend. The fact that the feared slump on the labor market has so far not materialized is also supporting the positive mood.
Economic expectations: upward trend consolidated

In autumn this year, the economic expectations of Germans are continuing their climb from the recessionary low at the beginning of 2009. The indicator has even recorded a double-digit increase of 10.9 points in September. Currently standing at 3.4 points, the indicator has therefore passed the zero mark – representing the long-term average value – for the first time since June 2008.

Consumer perceptions are evidently being increasingly shaped by the recognition that the "worst” is behind them and they can now look to the future with greater optimism. The third wave of a survey carried out by GfK- Nürnberg e.V. (the GfK Association) at the end of August/beginning of September this year produced very similar findings. Here too, the number of those stating that the crisis has yet to bottom out has fallen significantly over three months. Accordingly, the number of those who believe the worst of the recession has already been passed has increased. This is confirmed by the fact that a series of economic forecasts for this year have been revised upwards in the past few weeks. In addition, experts now assume that the labor market will suffer a less dramatic slump than was feared a few months ago. Employers are also assessing economic development in Germany more positively. This is demonstrated by the Ifo Business Climate Index, which rose slightly in September for the sixth time consecutively.
Income expectations: still on the ascent

The income expectations of consumers have recorded a fourth consecutive increase in September. Following another considerable rise, this time of 7.2 points, the indicator now stands at 16 points. A higher figure has not been recorded since July 2007.

In addition to the measures from the German economic stimulus package II, which have provided relief for private households, the currently very low level of inflation is having a particularly positive effect on consumers’ income expectations. As a result of stable or even falling prices, many consumers are experiencing higher purchasing power and have more money in their pockets. This positive situation is currently still suppressing any fears over job losses related to the threat of rising unemployment.
Propensity to buy: good level improves again

Despite its already good level, the propensity to buy has once again increased in September. The indicator has climbed 5.4 points to stand at 36.5 points, and compared with the previous year, a rise of just under 50 points has even been recorded.

The fact that consumers’ price expectations remain at a historically low level is supporting the propensity to consume. This correlation between price development and the propensity to buy has been observed time and again in the past. If there is a clear downward trend in inflation expectations, this has a stimulating effect on the propensity to buy. The amazingly robust labor market, which is still benefiting from the far-reaching short-time working regulations, is probably also currently providing additional support.
Consumer climate: continues to climb

The overall indicator is forecasting a value of 4.3 points for October, following a revised value of 3.8 points in September. The consumer climate is therefore continuing to improve. However, in a long-term comparison, the level of the indicator is comparatively low. The average value since German reunification is 9 points, which is markedly higher than the current level.

Private consumption therefore remains the major source of support for the German economy this year, since investments and exports will record a big loss for 2009. However, the further development of the labor market will be decisive in terms of whether domestic demand can continue to fulfill this supportive function. Should the number of unemployed people rise sharply in the coming months, this will adversely affect consumers and weaken the consumer climate.
The survey

These findings are extracts from the "GfK consumer climate MAXX survey”, which is based on around 2,000 consumer interviews conducted each month on behalf of the EU Commission. The report contains charts, forecasts and a detailed commentary regarding the indicators. In addition, the report includes information on proposed consumer spending in 20 different areas of the consumer goods and services markets. The GfK consumer climate survey has been conducted since 1980.

The next publication date will be on October 26, 2009.

Further information: Rolf Bürkl, tel. + 49 911 395-3056, rolf.buerkl@gfk.com
The GfK Group

The GfK Group offers the fundamental knowledge that industry, retailers, services companies and the media need to make market decisions. It offers a comprehensive range of information and consultancy services in the three business sectors of Custom Research, Retail and Technology and Media. The no. 4 market research organization worldwide operates in more than 100 countries and employs over 10,000 staff. In 2008, the GfK Group’s sales amounted to EUR 1.2 billion. For further information, visit our website: www.gfk.com.

For a pdf Version of the report including charts please go here.

For support in the identification of the right investment targets please visit our website at www.berlin-portfolio.com. Especially for international Private Investors and Property Funds we provide a task force service for quick reaction to interesting opportunities.

We provide independent support for the property search including foreclosure or auction properties and their valuation or appraisal. (Also see our free property market Research Service)

Please use this link to the contact facilities provided there to place any requests .

Uwe Falkenberg

A confident start to autumn in Germany

September 2009: Ifo Business Climate Index Slightly Improved Again

The Ifo Business Climate for industry and trade in Germany has brightened further in September. Appraisals of the business situation and outlook have improved. However, by far the greater number of firms still assesses the business situation as poor. Only with regard to the six-month business outlook is there now nearly a balance between pessimists and optimists. In light of the catastrophic developments over the past twelve months, this is good news.

In manufacturing the business climate indicator has recovered somewhat. The manufacturing firms no longer regard their present business conditions quite so negatively as in the previous month. They also anticipate a somewhat more favourable course of business in the coming half year. With regard to exports, their scepticism has subsided. However, more firms are now planning to reduce the number of their employees.

In wholesaling and in retailing the business climate index has risen. In both distribution sectors, the survey participants are less critical regarding business developments in the coming half year. However, the wholesalers are nearly just as dissatisfied with their current business situation as in the previous month. In contrast, retailers have given slightly more favourable appraisals of their present business situation than in August, assessing it now as nearly satisfactory.

In construction the business climate has clouded over somewhat. Although the survey participants have assessed their present business similarly to that in August, with regard to business in the coming half year they are more sceptical than in the previous survey.

Hans-Werner Sinn
President of the Ifo Institute for Economic Research at the University of Munich

For support in the identification of the right investment targets please visit our website at www.berlin-portfolio.com. Especially for international Private Investors and Property Funds we provide a task force service for quick reaction to interesting opportunities.

We provide independent support for the property search including foreclosure or auction properties and their valuation or appraisal. (Also see our free property market Research Service)

Please use this link to the contact facilities provided there to place any requests .

Uwe Falkenberg

September 2009: Ifo Business Climate Index Slightly Improved Again

Ballymore to invest 500 M in Berlin Project

With the acquisition of the Kudamm Karree in a prominent location of West Berlins famous shopping street Kurfürstendamm (called Ku’damm by the locals) the Irish Ballymore Group has taken on one of the biggest town planning challenges in the heart of Berlin. Based on a design by the British architect David Chipperfield the investment volume will be around 500 M Euro.

In a central location on Kurfürstendamm the complex is redevelopped and revived. The new Kudamm Karree will offer an exclusive mixture of apartments and business premises, hotels, cafés and restaurants, shops and leisure facilities. And not to forget: In a time in which otherwise also in Berlin many theatres and cultural facilities must be closed an entertainment theatre will be opened in the new Kudamm Karree in historical style. The total area will be approximately 63,000 sqm. Completion is planned for 2013.

This will pose another threat to the “Haus Cumberland” development by ORCO which is situated nearby and seems to currently be on hold.

For more information visit the project website please http://www.das-neue-kudammkarree.de/

For support in the identification of the right investment targets please visit the pre acquisition section of our website at www.berlin-portfolio.com. Especially for international Private Investors and Property Funds we provide a task force service for quick reaction to interesting opportunities.

We provide independent support for the property search including foreclosure or auction properties and their valuation or appraisal. (Also see our free property market Research Service)

Please use this link to the contact facilities provided there to place any requests .

Uwe Falkenberg

Ballymore to invest 500 M in Berlin Project

Berlin Property Market 2009 - Status and Outlook

Thanks to the financial crisis real estate values are in demand again. Investors increasingly focus on key figures of proposed real estate opportunities. The transaction volume has dropped considerably. The number of active market participants has reduced. In turn the market has become more settled and focused on results and not action. Less viewings to come to a transaction. Opportunist investors are very active in the market due to sales under financial pressure. International investors are less active some previously very active nationalities like Irish and Danish investors have almost completely vanished as buyers. They now appear on the sellers side due to financial pressures.

The buyers’ yield expectations are opposed to the sellers’ expectations but the gap is currently closing slowly. Closed special funds, insurances and pension funds, as well as owner-occupants and private investors dominate the scene. Interest rates for real-estate loans are still on a historical low. Banks, however, demand a higher equity share from the buyers. It has become more difficult to obtain a morgage. The benefit is with buyers who have sufficient own funds - equity is king.

Berlin Real Estate Market

With approx. 1.9 m. apartments Berlin is the biggest residential real estate market in Germany and the biggest German office real estate market. Berlin is a city of tenants with less than 13 % owner occupiers. According to economic data Berlin is still behind compared to other German major cities: High level of public debt, low growth rates, high unemployment, low spending power of the inhabitants.

But things are changing: Events like the 2006 Footbal World Cup, this year's Track and Field World Championship and numerous cultural events of international format have brought millions of visitors to the city providing income in the hospitality sector and related businesses. Also it has brought the idea of real estate investment in a comparatively under priced market to those visitors and their contacts back home.

The public authorities have modernized entire quarters, especially in ex-East Berlin, major projects have been started, the new airport Berlin Brandenburg International due to open in 2011 being one of them. The infrastructure is very good. Berlin is the seat of federal government and thus attracts decision makers from politics, lobby and business organizations.

Residential and mixed buildings

In the medium to long term the population will grow by 300.000 to 3.6 m. residents by the year of 2030; the number of households is growing. The rent level is still considerably lower than in other German major cities and other European capitals. The Berlin rents have been continuously rising in the last years, especially in popular and sought-after locations, even though a lot slower than anticipated by many investors during the boom years of 2005 to 2007 (see also recent postings on this blog). The demand for apartments is increasing.

Project developers are currently less active with a focus on housing developments for individual homeowners. The construction of new buildings remains on a low level and was actually decreasing during the past 18 months. We still observe a demand for typical Berlin pre war buildings focused on locations, such as Mitte, Prenzlauer Berg, Friedrichshain and the Western city centre, mainly Charlottenburg, Wilmersdorf, Steglitz and Schöneberg. Here demand is high and good deals are snapped up quickly. In demand are in particular properties in a range between 500,000 and 3,000,000 Euros with a yield expectation of a minimum of 7 %. As always the location is key. But also vacancy level and repairs backlog are clear knockout criteria especially for international investors. Saying this, there is a specific demand for development properties with purchase prices between 500 and 700 Euros per sqm in these locations.

Commercial real estate market

Tenants’ demand is focused on modern office space and retail units in the Eastern and Western city centres. The top rent is 20.80 Euros/m²/month and thus slightly declining. Peripheral areas are continuously becoming less important. On the other hand there are off center locations with a special edge: Adlershof for research and development and Friedrichshain with the Mediaspree area around MTV and Universal Music.

The sales volume has decreased considerably compared to previous years. Demand is reduced to prime properties, securely, long-term rented to blue chip tenants in good locations. New projects including modernizations are deferred or executed in such a way that allows short notice flexible response to changes in demand. Yields in medium and low end locations are therefor increasing. The top reail locations Kurfürstendamm and its side streets, Schlossstrasse in Steglitz, Friedrichstraße and Alexanderplatz in Mitte, as well as the touristy and cool locations around Hackescher Markt are in the focus and rents in locations with highdemand are naturally rising.

Outlook

Demand has returned to the market and is met by owners ready to sell at the adjusted market conditions. Yields for comparable properties have gone up by about 1.0% to 1.5% over a period of 18 months. In some locations demand is reaching or already exceeding supply. Conditions for investment are friendly: Interests are low, rents are high. The financial gearing of the past with 10% to 15% equity, sometimes even less are a thing of the past – pre Lehmann Brothers.

Shortly I will provide some actual price analysis of properties currently offered in Berlin. So come back to check or sign up to this blog.

Uwe Falkenberg

Uwe Falkenberg the author of this article is a Berliner and active in the German property market for more than 25 years. Experienced as project manager, developer and business owner he now operates Falkenberg solutions - Real Estate Consultans. His international background and local expertise is an ideal combination for an international investor.

Berlin Property Market 2009 - Status and Outlook

Residential Rents in Germany Rising Moderately in 2009

Residential rents in Germany have risen again in 2009 but more moderately than in the previous year. This is the result of a study comparing the official rent tables (Mietspiegel) in Germany performed by the "Hamburger F+B Forschung und Beratung für Wohnen, Immobilien und Umwelt GmbH". During the previous year, the average rent increase for a 65 sqm apartment with average standard and in an average location was 0.8% and 0.6% in 2009. In 1996 the increase for the same sample was almost 4%.

The differences between various regions, however, are significant: In eastern Germany and North Rhine-Westphalia, rent increases are below average, at 0.4% whereas in Baden-Württemberg and Bavaria saw increases at 1.5%, they are more than double the nationwide average. The City of Munich and a few of its suburbs are in the lead by far. In Munich, tenants pay 71% more than the national average for their apartments. Berlin, at the low end of the scale, is a bargain. In the western districts of the capital, the rent level is currently 7% below the German national average; in the eastern part, it is even 12% less.

For investors the latter indicates a significant developmant potential for mid to long term investments. Here is some catching up to be expected.

For support in the identification of the right investment targets please visit the pre acquisition section of our website at www.berlin-portfolio.com. Especially for international Private Investors and Property Funds we provide a task force service for quick reaction to interesting opportunities.

We provide independent support for the property search including foreclosure or auction properties and their valuation or appraisal. (Also see our free property market Research Service)

Please use this link to the contact facilities provided there to place any requests .

Uwe Falkenberg

Residential Rents in Germany Rising Moderately in 2009

Activum SG: British want to buy in Germany, not in U.K.

04.09.2009 Thomas Daily reports:

The British fund manager Activum SG is focusing on acquisitions in Germany. Purchases will be made on the European continent – especially in Germany – amounting to a total of €400mn during the next three years, declared Saul Goldstein, the founder and business director of the Jersey based firm, in an interview with the Reuters news agency. Germany, he explained, offers better opportunities than Great Britain: the German market is profitable because a prominent buyer group – the “high leveragers” – has been beset by problems in recent years, whereas in Great Britain, at the moment, too many investors are hunting for bargains. Besides, he added, the market correction on the island is still far from over, owing to the weakness of the national economy there.

Activum SG: British want to buy in Germany, not in U.K.

Berlin Liegenschaftsfonds Tries Freehanded Sale of Berlin City Properties

Liegenschaftsfonds Berlin

The Liegenschaftsfonds Berlin is owned by the Berlin city government and was set up in January 2001 to sell properties not needed for government purposes.

Initially the bidding process was complex and time consuming with uncertain outcome for the bidder after investing in concepts.

Starting September 1, 2009 there are properties available at fair market value for any interested buyer. The first lots are

Weißenseer Weg 15,16
Dolgenseestr. 29-31
Siegfriedstr. 208-210
Marzahner Str. 14
Rosenfelder Ring 13
Massower Str. 22-24
Hausvaterweg 8,10
Alfred-Kowalke-Str. 30
Bietzkestr. 20
Luzinstr. 11,13
Am Borsigturm 21,23
Krankenhaus Staaken Brunsbütteler Damm 401
Brückenstr. 12,13
Debenzer Str.15

all situated in Berlin. If you are interested in more detailed information we are happy to provide our Pre-Acquisition services for you. The purchase itself is free of commission.

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Berlin Liegenschaftsfonds Tries Freehanded Sale of Berlin City Properties

Cautious optimism for German property

Property Week.com reports 04.09.09:

Europe’s largest economy may have officially emerged from recession, but its property market is not getting carried away

Germany’s real estate sector is still coming to terms with the global financial crisis.

For one, the banks still have to wrestle with toxic legacy assets, and the government’s plans for a ‘bad bank’ have yet to be implemented.

The government also needs to continue to support Hypo Real Estate and Commerzbank. The market is awaiting a revival of Hypo, recently renamed as Deutsche Pfandbriefbank, following its nationalisation in March.

Keep it covered

But with increased issues in recent months of pfandbriefs – the covered bonds that give German banks low-cost funding – there is optimism that some liquidity will return to the market. In the second quarter of 2009, there were €35.8bn (£31bn) of issues. Although this represented a fall of 27% on the same period last year, it was a 91% increase on the first quarter of 2009, when only €18.75bn (£16bn) of bonds were issued. This has given confidence to banks such as Eurohypo, which is actively streamlining its activities.

Germany’s open-ended funds, one of the linchpins of the country’s real estate market, have also been making quiet progress.

Following a disastrous period last November, in which many barred redemptions to protect their liquidity, funds such as SEB’s Immoinvest and DEGI’s International have reopened, and others have started to take advantage of the low prices in global property investment markets.

In July, Deka ventured into Australia to purchase the 430,560 sq ft (40,000 sq m) office building at 15 William Street in Melbourne and the 236,808 sq ft (22,000 sq m) Australian Tax Office building in Perth for a combined €150m (£129m) for its ImmobilienGlobal fund.

In the same month, AXA’s Immoselect fund bought the 420,000 sq ft (39,018 sq m) Antegnate mall in the northern Italian city of Bergamo for more than €150m (£129m).

As Germans go to the polls on 27 September, they will be comforted by the fact that their economy is over the worst. This news will also provide some glimmers of hope for Angela Merkel, who looks set to be returned as chancellor.

That, in turn, may lead to more proactive government measures to assist a recovery in German real estate.

For support in the identification of the right investment targets please visit the pre acquisition section of our website at www.berlin-portfolio.com. Especially for international Private Investors and Property Funds we provide a task force service for quick reaction to interesting opportunities.

We provide independent support for the property search including foreclosure or auction properties and their valuation or appraisal. (Also see our free property market Research Service)

Please use this link to the contact facilities provided there to place any requests .

Uwe Falkenberg

Cautious optimism for German property