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.

Commentary:

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.

The International Monetary Fund: View of the German Housing Market

Eight Percent of Office Space Turnover in Berlin are Accounted For by Flexible Workspaces.

The average share of Workspace as a Service (WaaS) take-up in Europe reached 7.5% in Q1 2018,
up from 7.2% in 2017 and almost three times higher compared to 2016, corresponding to a total volume of 680,000 m² according to Savills.

“The effect of 'on-demand' economy on the office sector, is bringing the expectation for higher flexibility, shorter leases and personalised services.” 

Eri Mitsostergiou, Savills European Research

Briefing note Workspace as a Service (WaaS) Trend or necessity?

The largest market over the past five quarters was London (217,000 m²), followed by Paris (126,000 m²) and Berlin (81,000 m²).

Eight percent of space turnover in Berlin are accounted for by Flexible Workspaces.

Eight Percent of Office Space Turnover in Berlin are Accounted For by Flexible Workspaces.

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 Berlin Property Market Has Much More Scope

The Berlin Property play has more to give

Demand for rental properties remains strong, as the city continues to attract people from other parts of Germany and the rest of the world. However, supply of rented accommodation is unable to keep up with demand. As property prices remain lower than other major cities, the costs of building new homes is higher than current prices, which means supply of new homes is low.

Phoenix Spree: The #Berlin property play with more to give http://citywire.co.uk/…/phoenix-spree-the-berlin-p…/a1117964

The Berlin Property Market Has Much More Scope

CBRE: Berlin Office MarketView Q4 2017

Berlin Office MarketView Q4 2017

 

Foto: Uwe Falkenberg

• Year-earlier take-up record exceeded by 4%

• Prime rent at the €30 mark, up 9% y-o-y

• Weighted average rent rises 22% to €19.31/sq m/month

• Vacancy rate declines steadily to 3.1% – full occupancy in central locations

• Only one quarter of office space to be completed in 2018 still free

The full report is available for download at

https://www.cbre.de/en/research

CBRE: Berlin Office MarketView Q4 2017

AFIRE Global Ranking for Real Estate Investment: 1. London, 2. New York, 3. Berlin, 4. Los Angeles and 5. Frankfurt

The results of a new survey taken among the members of the Association of Foreign Investors in Real Estate (AFIRE) was recently released.
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 26th annual survey was conducted in the fourth quarter of 2017 by the James A. Graaskamp Center for Real Estate, Wisconsin School of Business. Press Release

Strong Showing for Germany; Emerging Markets Shift

For the first time since the question was first asked, two German cities are included among the top five global cities: Berlin in third place, falling from second last year, and Frankfurt, making this list for the first time.

Surce: http://www.afire.org/

The top 3 have shifted places, Los Angeles remained on 4th while Frankfurt made top 5 for the first time coming from #13 last year.
1.London (#3 last year)
2.New York (#1 last year)
3.Berlin (#2 last year)
4.Los Angeles (#4 last year)
5.Frankfurt (#13 last year)

Looking at the cost side of property investments in these cities, Berlin is still by far the best bargain as property prices still have not caught up with other major cities.

We support property search and assessment for investments in Germany berlin-portfolio.com.

AFIRE Global Ranking for Real Estate Investment: 1. London, 2. New York, 3. Berlin, 4. Los Angeles and 5. Frankfurt

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

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14. Paris

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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

Winning in Growth Cities - Cushman Wakefield Report 2017 and Outlook 2018

Key global cities are winning the race for investment – but which ones? The ‘Winning in Growth Cities’ report, published today, is an annual survey looking at global commercial real estate investment activity.

Key Highlights

• Global property investment rose to $1.5tn in the year to June.
• Led by New York, the US dominates the ranking of global cities but Asian markets made the most impressive gains in the past year.
• London is still the number one global market for cross border players. Paris closed the gap in third place but German cities are the ones to watch.
• While gateway cities again dominated, with the top 25 taking nearly 50% of the market, tier two cities have taken market share.
• The economic background is more encouraging for real estate than many expected, with global growth forecasts raised by the IMF for the first time since 2011.

One of the key factors determining which cities will out perform is technological change. Developments such as virtual reality and big data are set to enable more rapid change and will start shaping cities and tenant demand within months rather than years.

This report aims to identify some of the key enablers and emerging technologies and looks at what will determine which cities are the winners in this radically shifting environment.

For Germany and especially Berlin we support all activities regarding property investment with our experience and specialized network of property professionals.

Download the PDF

Winning in Growth Cities - Cushman Wakefield Report 2017 and Outlook 2018

International Property Handbook - Trends 2017

The International Property Handbook from Deloitte’s Global Real Estate & Construction group tracks real estate capital flow, and provides a view of investment trends and key deals in the most active international markets. It reflects back on 2016 analyzing economic data and real estate investment in 21 countries around the world to provide insights on potential trends in 2017.
Key trends include:

• Overall economic outlook is stronger, and there’s a significant increase in cross-border investments, especially in Europe.
• While the total investment volume remains stable, countries with positive investment volume growth are those in which investors expect growth due to macroeconomic indicators, expectations of rental growth, and yield compression.
  
• Offices continue to be the preference for investors.
• Private and unlisted funds are the most active net investors, followed by institutional funds.
• The capital raised continues to increase and investors are exploring new alternative markets.

Download the handbook to learn about the trends in the market.

International Property Handbook - Trends 2017

Have You Recently Bought a Condominium Apartment in Berlin?

Many international investors have bought condominium apartments in Berlin during the last years. Some will have full-service packages taking care of everything, hoping that everything will be alright. Some have bought an apartment, maybe even coming personally for the handover, proudly looking at their apartment - but what now?

Photo by All Bong on Unsplash

Just a few points to be thought of, best done a few months before:

• Who makes sure that any snagging is done right and timely while you are back home?
• How serious will the developer be when his last payment depends on the tick in the box on snagging - do you trust him to be acting in your best interest without supervision?
• Who holds the keys?
• At what rent should the property be rented - or should it be rented furnished with short-term contracts?
• If you want to go down the "Furnished Apartment" road, who takes care of this and who does the marketing for it?
• Who manages your apartment and rent collection, including
  
  • Budgeting
  • rent collection incl. chasing if necessary
  • payment of contributions to the owners association
  • property tax payment (quarterly)
  • tax documentation and handover to tax consultant in Germany
  • representation at annual owners meetings

Critical Point in Your Investment

This is the point in your investment that is as important as the purchase contract. The purchase contract and all the brochures are a promise. Now it comes to the fulfilment of your expectations - don't leave it to the developer and the agent who received a healthy commission - either from you or the developer - to make sure your plans work out. Even more important if reality does not meet brochure - you want someone on your side who knows the game. It also is a critical point for reclaiming some of the money you paid for a promise that was not 100% fulfilled - the clock starts ticking on handover day.

Our recommendation

Be prepared, don't leave it until the last day. But even if your handover has already happened and you are in the midst of having to make decisions by the minute - get some professional support with local experience. Someone with broad knowledge, experience and solutions. Everybody can point out problems, the next step is much more important - what to do? You don't need a lawyer, an architect and a rental agent to identify your next steps, you need someone who "owns" and "lives" your property and then proposes other specialists when needed and with specific tasks. Otherwise, you are likely to receive long documents with lots of possible or even real issues attached to a big fee account and still no solution.

We don't offer off the shelf solutions because every investor has a personal view about the degree of their own involvement. We can go from one-stop-shop including the management of the investment to just the production of a checklist based on the contract and its documentation. We are happy to engage in a conversation to find out what you feel is best for you.

Have You Recently Bought a Condominium Apartment in Berlin?

What is the best Property Location (In Berlin)?

In my career as a property professional I have heard plenty of advice about property investment and to come to the conclusion right up front -  there just is no lid that fits all pots.

There are investors with various investment philosophies, one that will go for prime locations for investment, put the lid on the pot and see what happened after 10 years. You know what, if it was not a major natural disaster area (take your pick) or politically unwise like Crimea, they will most likely be delighted about the value appreciation.
Now turning that theoretical value appreciation into cash through a sale to someone who believes in this new value is another story. This is an investment philosophy for someone who wants to park their money in a safe and useful way but does not need it for income purposes - this comes from somewhere else. They say that only poor investors look for income from property.

A different weathered property investor in the GERMAN rental market, the emphasis is on purpose, told me once that he would always invest in blue collar areas, anywhere in the world, because these are straight forward people who would do anything to pay their rent and stay out of trouble (eviction) as opposed to white collars who would rather pay a lawyer than their rent.

Let's take another angle:
If you invest 500k in a rented apartment(s) and buy a top tier apartment in Berlin-Mitte it would buy you 1 with about 60 m². How are you going to monetize it? Lock it up, air it once a month and run the taps and hope the authorities will not catch up on you for "housing speculation"? Rent it - furnished or not furnished? What will be the extra cost for furnishing and upkeep and frequent change of tenancy? How big will the gaps be? Did you choose the right location for furnished rentals? What is the cost of vacancy - 100% plus. You don't only not get the rent but you have to pay all utilities charges etc. (Betriebskosten) throughout the vacancy.
If you bought 3 apartments at the same price in a blue collar area you were hedging your bets: How likely is it that all three tenants would default at the same time? Given the current housing market, it is very unlikely that you would be facing a vacancy of more than one month on any of those three units. I think going into more details at this point would be insulting your intelligence ...

Now here comes what you have been waiting for while you were reading: My proposal for the income orientated investor. At this point, I have managed to source two offers for multi family properties that are a fair offer in the current market scenario and have room for improvement in the mid-term. Have a look at some of these locations and maybe you will get interested. ... https://propertylocations.blogspot.de/

What is the best Property Location (In Berlin)?

Surprize Results In The Top 50 House Price Index: #Berlin at No.18 and Waterford, Ireland at 9

The Hurun Research Institute released the Hurun Global House Price Index 2017 Half-Year, listing the 50 cities with the highest house price changes in the twelve months to 30 June 2017.

China housing prices growing fastest in world

 6 Chinese cities in Top 10 & 21 in the Top 50

Toronto jumped 26% yoy, Number One in world

Hong Kong Top 5, with house prices rising 20.8% yoy

Wuxi fastest growing city in mainland China; Zhengzhou, Changsha, Guangzhou and Shijiazhuang in Top 10

USA, with 15 cities, led way for highest global property ROI (housing price change + RMB change + rental yield), followed by Germany (5), Australia (4) and Canada (4)

 The ranking for individual cities shows some surprizes:

Source: hurun.net

There are only 7 non-Chinese cities in the top 20 (blue frame) out of which 3 are European.

The report also looks at the ROI where Berlin ranks at No. 16. You can download the press release including the ROI ranking here ⇒ Hurun Report 1 - 2017 Press Release.

Surprize Results In The Top 50 House Price Index: #Berlin at No.18 and Waterford, Ireland at 9