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:
http://www.knightfrank.com/research/active-capital-2018-5650.aspx

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

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

http://www.dynamiccities.savillsim.com/

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:
http://www.dynamiccities.savillsim.com/resources/documents/Dynamic_Cities_ResearchPaper_2018.pdf
And an interactive presentation with visualisation of the the results and their components allowing direct comparison and search is available at this link:
http://www.dynamiccities.savillsim.com/city-rankings

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

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.

Changes on Share Deal Regulations To Make Them Less Attractive

The controversial methods used by property companies to avoid property sales tax (stamp duty) have been a thorn in the side of the tax authorities in the German states as they are the recipients of the revenue from this tax. The current federal government has picked up the issue as it is regulated by federal law and was agreed as an action item in the coalition agreement. The finance ministers of the states (Bundesländer) have passed a reform model for the regulations for Share Deals in their last joint session on Thursday. Any change in this taxation has to be agreed on by both levels of government.

In the Share Deal model the parties involved use a loophole in the tax code selling shares in a property instead of the entire property. If the amount of shares sold is below 95% there is no property sales tax because in theory the property remains with the company owning it and the company has not fully changed ownership.

• In the new model this quota is to be reduced to 90% in order to avoid property sales tax.

Another condition is, that the owner of  the remaining 5% plus, 10% plus in the new model,  has to remain in the company for a minimum of 5 years to avoid taxation.

• In the new model the minimum holding time is planned to be extended to 10 years.

As the tax rates vary between 3.5% and 6.5% (overview of the states) of the purchase price in different states it poses the question if these changes are enough of a deterrent to not try to avoid this tax. The total amount lost to the states through this model is estimated at ca. 1 Billion Euro annually.

Stay tuned for updates.

Changes on Share Deal Regulations To Make Them Less Attractive

Cash in The Attic - Rooftop Developments in Berlin

The Urban Land Institute Leader Summit 2018 in Frankfurt in May touched on the subject of repurposing roof space in Berlin. Be it your classic attic rooftop development or installing completely new units on top of existing buildings:

In Brief: Repurposing Rooftop Space as Values Climb in Berlin

With property in high demand in Berlin—it had the largest year-over-year real estate price increase of any city in the world last year—it makes more sense than ever to look up for new opportunities. A number of developers have found success (or are hoping for a top return) from add-on projects atop existing structures in Germany’s capital.

For the full article and video: https://urbanland.uli.org/development-business/brief-repurposing-rooftop-space-values-climb-berlin/

This is especially interesting in "Mileuschutz" protected areas as there are no "luxury" limitations for the new apartments and the rent is not limited. You just cannot integrate existing apartments into the development. For more information on "Milieuschutz" see The Can Do and Can't Do Renovating Apartments in Certain Areas of Berlin in this blog.

Cash in The Attic - Rooftop Developments in Berlin

IBB Housing Market Report 2017 for the Berlin and Greater Berlin region

The annual IBB Housing Market Report has a different angle at the market situation than the commercial reports produced by big property agents and banks. Here is how they characterise themselves:

"IBB is the business development bank of the Federal Land of Berlin. With its business support, it actively contributes towards developing Berlin as a hub for business and industry. Our staff working in housing and real estate promotion are the people to contact for all issues related to real-estate financing."

Their viewpoint is policy based and not biased to talking prices up for business purposes (also available in this blog). The main report is in German and a volume of 121 pages with very detailed data and information. There is an 8 page summary available with all key findings of the report addressing these topics:

Selected Data at a glance

• Economic factors
• Housing demand
• Housing supply
• Rents and housing market
• More detailed data available in the German version of the full report

General situation and important trends

• Berlin’s economy – growth once again above the national average
• Trend in demand
• Trend in supply
• Market for detached and semi-detached homes
• Market for freehold apartments
• Market for rented apartments
• Key topic: The “Berlin and greater Berlin” housing market region

Downloads:

2017 IBB Housing Market Report - Summary, English

IBB Wohnungsmarktbericht - Full Report, German

IBB Housing Market Report 2017 for the Berlin and Greater Berlin region

Expiring Energy Certificate (Energieausweis) can be very costly, even when renting out or selling only one apartment

Renting or selling an apartment or apartment block requires the presentation of a valid Energy Certificate at the time of viewing. Even an ad for the rental or sale requires certain information contained in the certificate. Otherwise fines and / or libel suits could follow.
If your building in Germany was completed after October 1, 2007 it was required to have an up-to-date Energy Certificate. These certificates are valid for 10 years and start running out this year. If the building is dated before 1966, Energy Certificates were required since January 2009, running out next year.

Von Eigentum vom Autor - Eigener Energiepass - Autor Dirkes1,
CC BY-SA 3.0, https://de.wikipedia.org/w/index.php?curid=2832021

There is no requirement to renew the certificate if you are not re-renting or selling. Owners associations with owners predominantly using their apartments themselves will be reluctant to spend the money for a new certificate if they personally don’t need it.

An example: You are expecting to rent your apartment in January 2019 because you know it will become vacant. This year’s owners meeting did not have a new certificate on the agenda because the property manager was not paying attention to the issue, so there is not budget item for it. Even if it is considered “normal management” which does not even need a vote, it needs to be budgeted. So a discussion with the management company and the co-owners might be advised.

As there are different types of certificates we recommend professional consultation if in doubt.

Expiring Energy Certificate (Energieausweis) can be very costly, even when renting out or selling only one apartment