RICS: Germany Commercial Property Monitor - Overall outlook remains positive

Overall outlook remains positive although portions of the retail sector are showing signs of fragility

Occupier Market

The Occupier Sentiment Index returned a reading of +29 in Q1, very similar to the previous figure of +32. Consequently, this indicator continues to suggest occupier market conditions are improving to a solid degree.

Source:
www.rics.org Global Commercial Property Monitor

Investment Market

The Investment Sentiment Index moved to +37 in the latest results, representing a slight easing on +45 in Q4. Although this measure is still consistent with solid investment market trends, it represents the most modest reading since 2014.

Source:
www.rics.org Global Commercial Property Monitor

Global Commercial Property Monitor RICS’ Global Commercial Property Monitor is a quarterly guide to the trends in the commercial property investment and occupier markets. The report is available from the RICS website www.rics.org/economics along with other surveys covering the housing market, residential lettings, commercial property, construction activity and the rural land market.

The full report is available on the RICS website.

RICS: Germany Commercial Property Monitor - Overall outlook remains positive

The German housing market in 2018

Price and rent outlook for Berlin, Düsseldorf, Frankfurt, Hamburg, Munich and Stuttgart

The following information was provided by Deutsche Bank Research in their Germany Monitor.

Metropolitan areas in Germany are booming. The current real-estate cycle started in 2009 and has led to significant price increases for residential property in many cities. Prices for apartments have as much as doubled in some cities. Strong population and employment growth and declining unemployment rates are driving demand, and supply elasticity is low. New construction is slow to pick up, and vacancy rates are declining. As a result, rent growth is accelerating. Regulatory measures are unlikely to provide sufficient relief. House prices and rents look set to rise markedly in 2018.

Data from a number of cities confirm that demand is high and supply insufficient. In Munich, the vacancy rate is near zero. In Berlin, employment increased by c. 4% in 2017. Frankfurt was already 40,000 residential units short in 2015 – which suggests that 2017’s 15% yoy apartment price increase was not just Brexit-related. Stuttgart’s location in a basin restricts construction activity, contributing to the doubling of apartment prices during the current cycle.
Prices in Hamburg and Düsseldorf have risen strongly as well, even though demand growth has been slower in these two cities than in other metropolitan areas. The local housing-markets might therefore be more sensitive to interest-rate changes than their peers. Still, as our baseline scenario foresees only marginal interest rate increases during 2018, Hamburg and Düsseldorf should experience
price and rent uptrends, too.
Overvaluations are rising, and the risk of a price bubble in the German housing market is increasing. The price uptrend is likely to continue for several years, at least in most major cities in Germany.

The full report is available for download here: >>> The German housing market 2018 - DB Research

The German housing market in 2018

Eastern Germany Property Market Report and Investment Opportunities

The Berlin Residential Property Market has been on the forefront of the German property boom of the last 2 years and signs are pointing at a continuation of this trend. With increasing rents, purchase prices are rising as well and lately faster than the rent level. See Rent levels in the German Big 7.

As a reaction, investors are looking for alternative locations with similar prospects for the future but lower price levels. One of the obvious choices could be East Germany with a generally still lower price level. But caution is required: Some of the regions have been losing population while others have (re-)gained workplaces and inhabitants.

Research on alternative locations is complex and wrong decisions can be costly. To help your assessments for informed decision making we enclose the link to this report at the bottom of this message.

Through our Network we can provide 3 investment opportunities in this region

1. Multi-tenant home Leipzig with development potential, balconies
04179 Leipzig
asking price € 930k€
642.31 m²
33,807.72€ net rent p.a.
potential for increase

2. Multi-tenant home Leipzig with balconies
04177 Leipzig
asking price € 1,270k
581 m²
38,200.08€ net rent p.a.
potential for increase

3. Multi-tenant home in attractive location in Halle
06110 Halle
asking price € 650k
571 m²
34,619.64€ net rent p.a.
at its current potential

For more information on these properties, please contact me directly
uwe.falkenberg@falkenberg-solutions.com
_________________________________

Download the Report

Eastern Germany Property Market Report and Investment Opportunities

The Berlin Property Market - Outlook 2018

We wish you a Happy, Healthy and Successfull Year 2018

The German and especially the Berlin property market experienced a record year in 2017 and left quite a few loose ends to watch out for.

Rent levels in the German Big 7

... Berlin, Munich, Stuttgart, Frankfurt am Main, Düsseldorf, Cologne and Hamburg have risen significantly although at quite different rates. This applies to all market segments but is most outstanding residential properties in Munich and Berlin. Some market participants will tell you that the limit is reached and others will say that especially in Berlin there is still plenty of scope compared to other European metropolia like Prague or Warsaw.

Construction of new Apartments and Office Space

... does not keep up with demand in the big population centers and increases the upward pressure on rent levels.

Legal Challenges in the Residential Market

Almost all legal measures undertaken by the Federal Government and Local Authorities have been somewhat successfully challenged in court. Mietpreisbremse battle taken to Germany's Federal Constitutitutional Court Another challenge is the use of Airbnb by tenants and apartment owners.

Financing Property

... might become more expensive in 2018 as the inflation rate in December was at 1.8% the highest in 5 years. The main cause was the rent development and energy cost. This could have an impact on interest rates which in turn might have a slowing effect on property price increases.

These are just a few items to keep an eye on. Stay informed about the developments: Sign-up for updates from this blog and visit our website berlin-portfolio.com.

The Berlin Property Market - Outlook 2018

Investors favour Germany over UK for commercial real estate for first time

One in three (33 percent) commercial real estate investors have suggested that Germany is their preferred region to invest in, according to the latest BrickVest commercial property investment barometer. According to the latest market barometer of 3,500 professional real estate investors from BrickVest, the online real estate investment platform, suggests that more than a third of professional real estate investors are trending towards Germany as their preferred region to invest in. This is the first time that Germany has been chosen as the number one region to invest in, ahead of the UK which was selected by a quarter (27%).

The Barometer also revealed that UK, French, German and US investors are now less favourable towards the UK since last year.
BrickVest’s Barometer also showed that the investment objective for the majority (55 percent) of its online investors is capital growth compared to 33 percent who said income. This is a good explanation for the popularity of Berlin Real Estate despite yield compression - appreciation.

 

Investors favour Germany over UK for commercial real estate for first time

Emerging Trends in Real Estate in Europe 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.

A joint survey by PwC and Urban Land Institute provides an outlook on real estate developments throughout Europe in 2018. The forecast is based on the opinion of more than 800 property professionals.

Some of the results:

German cities have four representatives in the TOP 10 with Berlin at No.1 coming as no surprise. Some of the other interesting placements:

2. Frankfurt and Copenhagen

4. Munich

5. Madrid, performing a jump up by 4 places

6. Hamburg and 7. Dublin, both kicked out of the top 5

.

.

14. Paris

.

.

27. London

The survey demonstrates growing optimism in view of the general macroeconomic development. Especially Germany and Berlin are highlighted:

'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.

The placement of London at the bottom of the ranking seems in contrast to predictions Savills published only recently: Savills: 2017 central London investment set to hit £20 billion – and could set new record.  But the uncertainty of BREXIT clearly reflects the outlook of the panel and could contribute to a self-fulfilling prophecy during 2018.

The DO and DON'T for 2018

Logistics and niche residential sectors such as student housing, senior living and healthcare are seen as the front-runners whereas anything retail is seen very critically.

The survey also addresses non-quantitative issues driving discussions and developments in the real estate community with Technology being top contender:

Key features of the report:

Major non-quantitative topics covered by the survey:

• Risk and return in today's business environment
• Alternative platforms
• Markets to watch
• Impact of Brexit - UK
• Space as a service

The survey:

Emerging Trends in Real Estate®: Europe 2018

is available for download here.

Emerging Trends in Real Estate in Europe 2018

Study: Eastern Germany's mid-sized cities are becoming increasingly attractive

TAG Immobilien AG Housing Market Report 2017

• TAG Housing Market Report Eastern Germany 2017 analyses 27 large and mid-sized cities in Eastern Germany
• Growing demand for housing in areas around major Eastern German cities
• Increase in popularity and new residents drives up rents and purchase prices, while vacancy rates fall 
• Household housing cost burden remains stable or even declines due to strong purchasing power growth

Hamburg, 18 October 2017 - Eastern Germany's housing markets are on course for further growth. Urban populations continue to expand while vacancy rates fall. As a result, rents and property purchase prices are increasing in many locations. The good news: "Despite the fact that rents are rising, dynamic purchasing power growth means that household housing cost burdens remain stable or have even declined in some places", said Claudia Hoyer, Member of the Management Board at TAG Immobilien AG. This has been confirmed by the "Eastern Germany Housing Market Report 2017", published by TAG Immobilien AG today. As with last year's study, the real estate consultancy firm Wüest Partner Deutschland analysed data from 27 large and mid-sized cities in Eastern Germany, including data on population and economic growth, rents and purchase prices, property yields and the financial burden of housing costs across the region.
The report also includes interesting details about the development of gross yields and price development in Berlin.


Further findings, including the complete Housing Market Report Eastern Germany 2017, can be downloaded for free here.

Study: Eastern Germany's mid-sized cities are becoming increasingly attractive

Global Real Estate Market Perspective August 2017 As Seen by JLL

Renewed momentum extends real estate cycle

Global economic growth has invigorated real estate markets worldwide. Leasing demand remains steady, while investors continue to allocate a larger portion of their capital to real estate. Deal flows so far are in line with what we saw in 2016.

2017 Prospects

Capital Values 6% Increasing

Rents 3% Increasing

Development 28% Peaking

Vacancy Rate 12.1% Rising

Leasing 39 m sqm Stable

Investment US$ 650bn Firm

Leasing, vacancy, development, rents and capital values relate to the office sector. Full-year 2017 forecast values. Capital values, rents and development figures refer to percentage change. Global vacancy rate - percentage value, leasing volumes in million square metres, investment volumes in US$ billions. Source: JLL, August 2017

There is a wealth of analytic information in the most recent report and we will look at it especially as it applies to Germany and compares to other reports. One item that sticks out when looking at residential investment in Europe is the JLL clock:

After all the persistent talk about aproperty bubble in Germany JLL research does not seem to confirm this for Berlin.

Some more headlines from the report:

• Office rental growth quickens
• Western Europe leads as most dynamic leasing market (office)
• Global retail markets facing unprecedented structural changes
• Logistics rents surging

Here is the linkk to the full report: https://goo.gl/RERdk6

Global Real Estate Market Perspective August 2017 As Seen by JLL

Deutsche Bundesbank: There is no property bubble in Germany

There are always those predicting doom and if they just keep doing so long enough they might be right one day and nobody counts the false alarms - they hope. The Deutsche Bundesbank (German Central Bank) does not belong in this category but is known for being very cautious about price developments, especially when they have an impact in banks lending policies for properties.

Only in May of this year Dr. Andreas Dombre, a board of directors member at the Deutsche Bundesbank warned about a price bubble building up in the German property market and the fact that you can't predict the actual "pop" only acknowledge when it happened.
Speech transcript in German:  https://www.bundesbank.de/Redaktion/DE/Reden/2017/2017_05_04_dombret.html#doc398274bodyText2

Photo by Markus Spiske on Unsplash

Asked about the topic at a press conference on 30.08.2017 introducing "Results of the 2017 low-interest-rate survey" Dombre stated that the Deutsche Bundesbank currently does not see a property bubble but fears a tendency that financial institutions are considering taking higher risks in residential property financing. Press release: https://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2017/2017_08_30_joint_press_release.html

 

Especially in the Berlin housing market, we are successfully sourcing off-market investment opportunities for private investors in the popular segment between 1 and 2 million Euros as well as high-end private homes and villas. For more information please contact us at: http://www.berlin-portfolio.com/feedback.html

 

 

Deutsche Bundesbank: There is no property bubble in Germany

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Trend Barometer for the Property Investment Market in Germany 2017

The EY Trend Barometer for the Property Investment Market in Germany 2017 predicts a moderate decline for the second year in a row due to lack of offers:

Demand for German real estate will remain high through 2017, led by the search for good office space in Berlin, Stuttgart, Hamburg and Munich – while in the residential sector, Frankfurt will see the strongest demand, according to the latest Real Estate Trend Barometer published at the beginning of the year by EY Real Estate.

EY partner Christian Schulz-Wulkow comments in the survey that "all the lights are still showing green in Germany", with real estate valued at between €60bn and €65 billion expected to change hands this year, still well ahead of the average of the last 10 years (€44.3 billion), but down on the €79bn seen in the peak year of 2015 and down marginally on last year.
However, the EY researchers add the proviso that much of this is dependent on the political climate, both in an election-filled year in Europe, and in the United States after the advent of Trump.
For one thing, interest rates in the US are expected to rise faster than in Europe making the US more attractive – important for Germany, given that 43% of all commercial real estate transactions last year were made by foreign investors. The EY consultants are recommending to their clients to boost their liquidity reserves, in case interest rates rise faster than expected, resources are withdrawn from the market, or tenants experience problems.
The Brexit effect is most clearly to be seen in Frankfurt, where the residential market shows little sign of cooling down. Schulz-Wulkow comments in the report that this has to do with the narrowness of the market, with the office market not quite as sensitive, given both available vacancy and the attraction of alternative centers such as Paris or Dublin.
Co-author of the study Paul von Drygalski comments that despite the danger of overheating in certain segments, the German market has lost little of its attraction for international investors. If anything, Germany is still seen as economically and politically stable, with real estate benefiting from the low interest-rate environment, which 98% of respondents viewed as unlikely to change noticeably in 2017.
Another factor causing optimism among German investors is the likely smaller transactional size expected in 2017. Here, 91% of respondents agreed this could be an advantage for German investors, as the big Asian competitors tended to focus on very large transactions – for example, the purchase of the Commerzbank Tower in Frankfurt by Samsung in 2016 for €660 million and the takeover of the BGP residential portfolio from the biggest Chinese sovereign fund CIC for €1.118 million.
Leading the drive among investors are the insurance companies and pension funds, among whom the survey found that 96% rated the German market 'attractive' or 'very attractive'. However, high demand is being met with constrained supply, meaning deal size is getting smaller. The most sought after assets are parking houses, healthcare properties, student apartments and micro apartments, in addition to the classical hotels, retail properties, offices and residential apartments. Offices and residential in the better locations are expected to get even more expensive particularly in cities like Berlin, which is still benefiting from the dynamism of its startup sector.
Germany's recent real estate boom reached its zenith in 2015, when real estate volume of €79 billion was transacted. This compares with the €13.4 billion transacted in 2009, after the onset of the financial crisis, and the €65.7 billion transacted in 2016, where the figures were flattered slightly by giant takeovers such as Blackstone's taeover of OfficeFirst and Vonovia's takeover of Convert.

In the German residential and office sector in 2016, German buyers were the dominant force. Of survey respondents, 80% expect rising prices in residential, as well as in logistics and hotels. Yields in the office segment have fallen to 3.3% in Berlin and Munich. Banks are becoming more generous in providing financing, with loans of 80 to 90% of the purchase price no longer an exception – well up from the 60% of only fairly recently.
The EY survey shows that 90% of respondents view project developers to be the likely main winners from the current market situation. Likewise, 90% believe that investors are increasingly likely in the future to secure properties via forward deals – in contrast to three or four years ago, where German institutional investors such as insurance companies shunned any involvement with project developments. Now, given the shortage of available product, investors are prepared to take on higher risk and to expand into other geographical territories that offer higher yields.
When questioned which investor groups were most likely to be on the selling side in 2017 respondents were of the majority opinion that opportunity and private equity funds along with other international funds would be among the most active sellers. They are selling for profit-taking and for portfolio optimization. According to Schulz-Wulkow, "it is now a market for exiting, with many opportunity funds having already sold."
However, with 1/3 of all respondents saying they plan no exit this year, even from individual assets, supply is likely to remain very tight for primarily insurance companies and pension funds as well as open-ended funds and family offices most looking to buy.
Adding to the shortage of supply, unrealistic price expectations and the reassessment of risk exposure are acting as brakes on transactions. EY cite the example of asbestos, which in the past would have led to the immediate break-off of discussions, but now it might be accepted at an appropriate discount. A further example of how sellers at the moment have the upper hand, the report suggests.
Respondents expect retail properties to show a sideways price tendency at best, even in fairly prime locations. 62% of respondents believe that office property will be the hottest segment and the preferred asset class, up from 49% believing that last year. Berlin property is particularly in demand, while overall residential is falling out of favor with investors, down to 28% from last year's 65%. The key reason for this is what is viewed as excessive political regulation, with 94% of respondents expecting even tighter rental constraints.

The report is in German and available at this link.

For our local support services in Germany please refer to our website www.berlin-portfolio.com

Trend Barometer for the Property Investment Market in Germany 2017

Property Sales Tax (Stamp Duty) in the German States as of January 2017

Property Sales Tax in the German States as of January 2017 

http://immofux.com/grunderwerbsteuer-der-bundeslaender-in-deutschland/

Property Purchase Services

Contract, Risk and Financing

For the purchase phase, we provide an Investment Management Service supporting the gathering and submission of any project related information to banks and act as local contact for the investor and the bank. We also assist in finding local finance institutions and possible government subsidies for renovations.
http://www.berlin-portfolio.com/Purchase.html

Property Sales Tax (Stamp Duty) in the German States as of January 2017

German property investment market ends year with extraordinary strong fourth quarter

In their latest quarterly review (Q4 2016) JLL shows a record 4th quarter but a decline of the total annual transaction volume compared to 2015. Last year had actually the third highest volume.

Transaction Volume Germany quarterly 2017
Source: JLL Research

There was a Slight dip in demand in the Big 7 and Frankfurt reclaims its position as the investment capital. This map shows the Transaction Volume 2016 by Region
:

Transaction Volume 2016 by Region
Source: JLL Research

Further observations mentioned in the report are:

• All asset classes feature on the shopping lists of national and foreign investors.
• Further yield compression with increasing capital values.
• No fundamental change in investment strategy.
• Above-average residential transaction volume despite lack of megadeals

Residential Transaction Volume, Germany
Source: JLL Research

 
The full report is available on the JLL Research website http://www.jll.de/germany/en-gb/research/1472/investment-market-overview

For property search and purchase support please visit our website www.berlin-portfolio.com.

German property investment market ends year with extraordinary strong fourth quarter

AFIRE Foreign Investors Survey 2017: 1. NYC, 2. Berlin, 3. London

US RE Grabs Foreign Investors’ Intentions!
 95% Will Maintain or Increase Investment Levels in 2017

NYC is Big Winner as London and DC Slip
  Washington, DC (January 3, 2017) – Ninety-five percent of the respondents to the new survey taken among the members of the Association of Foreign Investors in Real Estate (AFIRE) and released today say they will maintain or increase their investment in the US.  New York City is in its seventh year as the number one US city among foreign investors and is in its third year as top global city.

Both globally and domestically, Washington DC has fallen out of favour. For the first time since the survey began in 1992, it has dropped from the list of investors’ top five US cities. It has not been among the top five global cities since the 2013 survey and dropped in rank again – from eighth place last year – to fifteenth this year.
 
AFIRE members are among the largest international institutional real estate investors in the world and have an estimated $2 trillion or more in real estate assets under management globally. The survey was conducted in the fourth quarter of 2016 by the James A. Graaskamp Center for Real Estate, Wisconsin School of Business.

Brexit Woes
With concerns about the effects of Brexit on investors’ minds, London, which had been ranked either first or second among global cities for the last five years, slipped into third place. In terms of its potential to offer stable and secure real estate investments opportunities, the UK slipped into fifth place.

Among foreign investors, the top five US cities are New York, Los Angeles, Boston, Seattle, and San Francisco. The top five global cities are New York, Berlin, London, Los Angeles, and San Francisco.

The US: A Strong Market but Not Without Concerns
By wide margins, the US continues to rank as the country offering the most stable and secure opportunities for real estate investment and the country providing the best opportunity for capital appreciation.  Investors cited the country’s sustainable economic growth, strong rule of law, transparency, and relative overall security for investments.  More than 50% of survey respondents said Brexit would have a positive effect on the US real estate market.

Despite investors’ investment intentions, 33%, or one third of respondents said their sentiment about the US market had become more pessimistic; 60% felt their opinion was unchanged, and only 6% considered themselves more optimistic. In last year’s survey, 8% felt pessimistic, 85% had an unchanged opinion, and 8% felt optimistic.

“As uncertainty rises with a new government in Washington and interest rates that have risen dramatically, it is no surprise that investors have signaled a note of caution,” said James A. Fetgatter, chief executive officer, AFIRE. “Previous, comfortable spreads between cap rates and interest rates have narrowed making the investment criteria more selective and difficult. Increased market research and discipline will be required.”

US Investment Market Broadens
Industrial property edged out multifamily to take first place among property types; hotels remain the least favored property type. While “core” properties predominate as an investment strategy, more than half of survey respondents report plans to increase both value-added and opportunistic allocations in the coming year. Similarly, several new cities, including Nashville, Portland, Charlotte, San Antonio, Madison, and Pittsburgh, representing smaller urban markets with strong job growth and young, affluent populations, were cited as having investment potential.

“Washington, DC is a global gateway city with good leasing activity and a growing economy bolstered by a young workforce. The combination of those stable fundamentals will continue to attract capital from around the world," said Catherine Pfeiffenberger, AFIRE chairman and senior vice president of Skanska USA Commercial Development. "The new administration's focus on the defense and aerospace industries is also expected to benefit the DC area in the coming years."

Global Highlights
For the second year in a row, Berlin ranked among the top five global cities, moving to second from fourth place last year. Germany retained its second-place ranking in terms of providing stable and secure investment opportunities; it ranked third in terms of countries offering the best capital appreciation. In terms of providing an opportunity for capital appreciation, Australia joined the ranks in fifth place. China, Mexico, Brazil, India and Chile were again named as investors’ top five emerging markets, although their order shifted from last year.

Survey Snapshot -- US

 
Top Five US Cities

1. New York (#1 last year)
2. Los Angeles (#2 last year)
3. Boston (#5 tied with Seattle last year)
4. Seattle (#5 tied with Boston last year)
5. San Francisco (#3 last year)

Ranking of US Property Types

1. Industrial (#1 tied with multifamily last year)
2. Multifamily (#1 tied with industrial last year)

3. Office (#4 last year)
4. Retail (#3 last year)
5. Hotel (#5 last year)

Survey Snapshot – Global

Top Five Global Cities

1. New York (#1 last year)
2. Berlin (#4 last year)
3. London (#2 last year)
4. Los Angeles (#3 last year)
5. San Francisco (#5 last year)

Most Stable and Secure Countries for Real Estate Investment

1. US (#1 last year)
2. Germany (#2 last year)
3. Canada (#4 last year)
4. Australia (#5 last year)
5. UK (#3 last year)

Countries Providing the Best Opportunity for Capital Appreciation

1. US (#1 last year)
2. Brazil (#2 last year)
3. Germany (tied with the UK this year; #7 last year)
4. UK (tied with Germany this year; #4 last year)
5. Australia (unranked last year)

Top Emerging Countries

1. China (#2 last year)
2. Mexico (#3 last year)
3. Brazil (#1 last year)
4. India (#5 last year)
5. Chile (#3 last year)

AFIRE members have a common interest in preserving and promoting investment in cross-border real estate. Founded in 1988, AFIRE currently has nearly 200 members representing 22 countries. AFIRE is located at 1300 Pennsylvania Avenue, NW, Washington, DC 20004, 202.312.1400. www.afire.org

Interviews:  James A. Fetgatter, chief executive officer, AFIRE.

AFIRE Foreign Investors Survey 2017: 1. NYC, 2. Berlin, 3. London

German Residential Property: Price pressure remains high.

Purchase and lease levels in residential markets across Germany are expected to keep rising in 2017. This is the result published in a market report by Deutsche Bank Research, download the report in German here https://goo.gl/ab33hQ.

Macro-economic conditions that could indicate an end to the current price rally are not moving in that direction: Reversal of interest policy, significant increases in available property, or declining immigration, are not in sight in the foreseeable. The most dynamic city according to the report il be Munich; the high gravity for new residents and very low vacancy rate should keep prices on the rise for several years to come. This also applies to Berlin, in this case, because of the still-low price level and excellent labour market development. Frankfurt is already showing a Brexit effect in anticipation of London bankers with deep pockets, prices of single family homes have climbed 11.25 % compared to the previous year (other metropolitan areas 6%). Hamburg is showing declining lease activity and busy construction dynamics, while Düsseldorf has a relatively high vacancy rate. Rising interest would have a slowing effect on price increases in these cities.

For more in-depth information about the German property market and especially the Berlin Housing Market you might want to subscribe to this blog and visit our website http://berlin-portfolio.com.

German Residential Property: Price pressure remains high.

5% Increase in Property Management Fees in Germany

Three out of four property managers in Germany are planning to increase their fees in 2016. This is the outcome of a survey by the Association of German Property Managers (DDIV) http://ddiv-service.de/hp1/Startseite.htm. The aim is an increase of 5%. Preparing for any upcoming discussion (not only for this purpose) it is important for every property owner or future investor to understand the current market situation and price level for property management services. The development will most likely have impact on calculations.

Last year the Center for Real Estate Studies (CRES) https://www.steinbeis-cres.de/ performed a survey of property management service providers and their fee models and fee levels. They were instructed by three main organizations in the German property business: ZIA, IVD and BVI.

The purpose of the study was to determine the tasks included in the basic property management service and which tasks are considered out of scope thus triggering an extra fee either pre-agreed in the contract or offered as needed.

The study provides benchmark values for average fee and service packages for specified market segments with regional differentiation. The main market segments are

1.    Owners Associations (German: Wohnungseigentümergemeinschaften WEG);

2.    Rental Apartment Blocks;

3.    Commercial (business use) properties.

Due to the structure of the membership of the organizations sponsoring the survey the feedback the third group (Commercial) was only 7% of the returns on the questionnaires.

The following fee information is based on Germany wide averages; the regional differentiation is significant and will be provided in follow up articles.

1. Owners Associations

The average fee per apartment is mainly determined by the size of the property:

Units	€ per unit per month excluding VAT
99 units or more	17.10
50 to 99	18.37
20 to 49	19.67
11 to 19	21.34
< 10	25.58

The increase in cost with reduction in size of the number of owners is plausible as many tasks are the same with any owners association no matter how many owners, e.g. the annual meeting, and thus are shared between a bigger or smaller number of owners.

2. Rental Apartment Blocks

The average fee per apartment is mainly determined by the size of the property:

Units	€ per unit per month excluding VAT
60 units or more	18.01
31 to 60	19.53
12 to 30	25.00
< 11	22.47

There seem to be some idiosyncrasies in the comparison of the size brackets but the variances within the clusters are relatively big, e.g. in the 12 to 30 units segment it ranges from 15 € to 30 €. Some of this effect might be explained by the fact that small buildings are more likely managed by smaller property management businesses more eager for business.

3. Commercial (business use) properties

The average fee per unit is mainly determined by the size of the property:

Units	€ per unit per month excluding VAT
60 units or more	20,18
31 to 60	20,89
11 to 30	24.26
< 10	25.18

The sample for this segment was relatively small (7% of the returns).

Other interesting aspects are the rent management for condos and pricing for extra services. Detailed analysis for the market segments and regional aspects will be provided in separate articles shortly. Don't miss the follow-up and subscribe to this blog.

5% Increase in Property Management Fees in Germany