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Alpha Real Estate Investments
German Property Newsletter
Welcome to the June issue of our German property newsletter.
Today we take a closer look at the Merkel government's plans
to boost owner occupancy in Germany. A gradual shift from
renting to ownership is one of the main reasons for strong
capital growth expectations, making this topic of interest
to all current and future investors in German property.
And, in case you've missed our recent newsletter issues,
they are available for you here:
In this issue you will find:
1. High Confidence & Sustained Growth
2. From Renting to Ownership
3. Wealth of Opportunities
4. Tell Us What You Think!
===================== FEATURE EDITORIAL =================
1) High Confidence & Sustained Growth
With several states elections scheduled for next year Angela
Merkel’s government is hoping that their economic performance
to date will boost their position. Further economic reforms
are rumored to be on the cards including a further weakening
of the tenant's position and strengthening the drive into
ownership to further stimulate economic growth.
Angela Merkel has a lot to be confident about. Delivering the
strongest period of economic growth for the last two decades
and the lowest unemployment since October 2001 [Federal labor
agency]. Unemployment figures this month show a further fall
by 0.4%, that’s another 161,000 people in employment.
It’s not only Merkel who’s confident on the coming years.
The European Central Bank is displaying a hawkish tone on
interest rates, which would be suicide for the Eurozone’s
economy without a sustained growth in Germany.
A German think tank announced that the economy could grow
by more than 3% this year and they see no end to the trend.
“Nearly all indicators paint a very positive picture of the
current economic situation,” the Kiel-based Institute for
the World Economy, or IfW, said in its report.
Businesses in Germany are also understandably confident with
the Ifo Institute's gauge of corporate moral remaining close
to its highest level since the euphoria of 1990 (reunification).
Property market news
This month again - with us risking sounding like a broken
record - the major investors have been forcefully carving
out some very serious positions for them in the German market.
Detailed below are some of the major transactions seen this
Earlier in the year London & Capital launched a pan-European
fund. After quickly deciding there was little point in spreading
their capital around they renamed the fund a German Property Fund.
Quote: "We had seen economic growth in Europe including the UK,
which Germany wasn't participating in. These countries have also
had active property markets. Yields in Britain are keen now -
we've seen a great deal of compression, as we have in Spain and
France. Germany has been the forgotten man in Europe, but now the
economy is improving and we're seeing better business conditions."
IVG Immobilien (the largest quoted real estate firm in Germany)
announced its launch of a 2 billion euro G-REIT for next year.
This is one of ten massive G-REIT funds that should all be
launched by the end of 2008 totaling 10 billion euros of
assets. That’s a lot of property!
Teesland’s (UK fund management group) fund raising of 370 million
euros for German property is currently under way. The plan is
to expand this to 2 billion.
Henderson entered in to a JV with Fuer Immobilien AG; they are
currently looking to raise 1 billion euros for acquisitions and
development of shopping centres in Germany.
For the commercial investors amongst you we have an exciting
retail complex in the north east of Berlin. With offers expected
around 8 million euros and an excellent yield of 8.8% it is
certainly worth a look for anyone serious about commercial
property. (Email email@example.com for details)
International Investment Bank (Bahrain) announced an acquisition
of an entire portfolio of commercial properties for 73 million
euros in Munich.
CMC capital Ireland has invested a further 100 million into
ING acquired an office building in Frankfurt worth 28.5 million,
the third property it has added to its fund portfolio. Axa
Property Trust has bought a retail property in southern
Germany for 24.7 million euros.
And it's not only Western investors who are seeing the
opportunity. Deutsche Bank is now handling around $1 billion
of purchases from Arab investors. Jones Lang La Salle went
on the record saying they expect a further $20 billion worth
of purchases this year.
So it would appear the forgotten man of Europe is forgotten
While all major German cities have been in the focus of
international investors, the low prices and high yields in
the capital have attracted the most attention. “Demand is
huge. More than ten billion euro was invested by foreign
buyers in Berlin property last year.” [BBC]
The time has never been better to take the plunge and get
involved in this rapidly growing market. As always our team
here have been working round the clock to source and vet the
best possible opportunities in the strongest re-emerging
market globally that we know of.
So whether you're looking for a single apartment, apartment
block or larger commercial property, contact us now at
firstname.lastname@example.org detailing your requirements. We will be
happy to help you stake your claim on this dynamic market.
2) From Renting to Ownership
Germany as a country has a rental culture with the national
split between renting and owning approximately 60/40. The
level of ownership in Berlin is more like 14% at present,
and this has grown over the last few years! Without a change
of attitude the market would never be as dynamic as the UK’s
of the last 15 years. So in this edition of our newsletter
we're going to look at what’s being done in Germany to cause
a shift to higher ownership.
Firstly, why change?
The Merkel Government has seen the economic stimulus of having
high levels of property ownership in much of the EU (UK, France,
Ireland, Denmark, Holland etc). A higher level of ownership
means a greater level of renovations, improvement and furnishings
which in turn increases demand for consumer goods. It also
results in a greater level of borrowing (mortgages), stimulating
the financial sectors (banks, insurance etc).
Of course as people’s lives develop they generally earn more
and having paid off part of their mortgage they tend to upgrade
and move to a larger or nicer property and the process repeats.
Above all else though Germany as a country has the same
population dynamic as the UK. With the retired baby boomers
soon to outnumber the working population this will put immense
strain on the government pension system and pensions will
almost certainly be reduced over the coming years. Someone
who owns their home outright requires a lot less income to
live than one who pays rent!
History repeats itself
As many of us may recall we had a strong rental culture here
in the UK, until a certain lady changed the face of the country
forever. Love her or hate her, Margaret Thatcher changed the
property culture here in the UK dramatically. Through the
privatisation/sale of social housing, which in turn led to
the right to buy (ex-council), she brought people into home
ownership from the bottom up.
As you may recall the German government sold billion upon
billions of euros worth of property to major institutions
(Morgan Stanley, Goldman Sachs, Fortress etc), some of which
are already offering tenants the right to buy (of course at
a profit). Sounds familiar?
Even the Germans with their strong rental culture don’t tend
to look a gift horse in the mouth when offered their home at
a price that makes owning cheaper than renting.
Many analysts expect a shift from 40% to 60% ownership in
the next decade. This effect should be much stronger in Berlin.
This of course would have a tremendous effect on the German
economy and I think we all know what this will do to the
value of properties in the country!
Government level intervention
The federal government has been bringing in several pieces
of legislation to effect a change in this situation. Some
of these are detailed below.
German Retirement Savings Act
Since 2002 the state-sponsored retirement provision (Riester-
Rente) has made it possible to draw between 10K to 50K euros
from accumulated retirement savings to build or purchase
housing to be owner occupied.
KfW subsidies and ownership programs
On 1st January 2005 KfW (Credit Institute for Reconstruction)
in conjunction with the federal government initiated a new
series of improved programs which allow people numerous
subsidised loans either to build new homes or upgrade
existing homes. These loans are granted if the purchase
and renovation works increase the energy efficiency of the
building. Although strict conditions must be met, the KfW
loans can be used to finance large parts of a purchase or
renovation at more favorable rates than from high street
lenders. Creation of owner-occupied property is additionally
Informing the public
There is now in place an information bank for private
individuals (with numerous leaflets and brochures) to
educate the German public on the benefits and ways to
enter the property market. These are available from various
Eviction of tenants for owner occupation
There have also been changes to the laws dictating when you
(landlord) can evict a tenant if you wish to live in your
property. It now only takes a 3 months notice if the tenant
has been in the property for less than 5 years, 6 months
for 5 to 8 years and 9 months if they have been in the
property longer than 8 years.
If you’re domiciled in Germany and purchase a listed property
or a property in a designated development area that is a
recent renovation or new construction you can offset a
proportion of the cost against your income tax. This special
depreciation allows offsetting 9% of the costs for 8 years
and subsequently 7% for a further 4 years. Development areas
are all over Germany and large parts of Berlin including in
the popular Prenzlauer Berg and Friedrichshain districts.
While it won't be overnight for Germans to realize the full
benefits of home ownership, attitudes have already started
to change in the last few years. Thanks to government incentives
as well as institutional and private investors and landlords
offering easy access to ownership, Germany is expected to
see a significant shift away from the strong rental culture
seen in the country today.
3) Wealth of Opportunities
Berlin, boasting some of the lowest property prices in
Europe, has been the #1 destination for global property
investors and institutions.
This remarkable affordability coupled with a very strong
rental market and solid yields, as well as the strong recovery
of the German economy, create opportunities that cannot
be found in any other European property market.
To help you enter this lucrative market while it still
represents exceptional values we have sourced a number
of excellent investment opportunities for you.
Apartments in the most sought-after locations of central
Berlin, in high quality renovated buildings, starting at
as little as 30k GBP for studios, 45k GBP for spacious
1 beds and just over 60k for large 2 bedroom apartments.
With all units let at strong 5% yields and prices remarkably
lower than the area's average this is an opportunity to
buy quality properties in a top Berlin location at truly
To receive a full information pack email us at email@example.com.
A range of high quality apartment blocks and commercial
properties from 300k GBP to 80 million are also on offer.
Please email us your requirements or visit http://germany.alphare.net/
for further details. We will be happy to assist you in taking
advantage of this exciting and lucrative market.
4) Tell Us What You Think!
We would love to hear what you think of this issue of our
newsletter. We hope you find the information useful and
wish you best success in your investment activities.
And of course, if you have any suggestions for upcoming
issues that you'd like to share with us, please send them!
Just e-mail us at: firstname.lastname@example.org
We are looking forward to seeing you next month. In the
meantime, if you have any questions or would like to
request further information, please contact us at
email@example.com or at +44 (0)207 851 3570.
Best of success,
Your Team at Alpha Real Estate Investments
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