ProVenture Property - High Yield Property Investments Sourced

Chemnitz – View from the Streets So Far

noreply@blogger.com (Gareth) — Tue, 04 Oct 2011 12:31:02 PDT

Introduction

At ProVenture Property we are always seeking new markets to offer to our clients. A good deal of our investors seek yield, and yield markets do not stay the same forever, we need to continually search property markets around Europe to continue to deliver the service that clients expect. Our most recent foray in 2011 has been to enter the market in Chemnitz, a major city in the state of Saxony, Germany. As we have been working there for around 6 months now, we offer this report “from the streets” and our findings thus far.

Background to the Market

Should you have missed the article we produced on the investment case for Chemnitz, and why we entered the market - you can read our article on investing in Chemnitz property for sale here.

In the article we made the case for a fairly strong economic position for the city, falling unemployment and in certain parts of the city a strong increase in population and tenant demand. We also pointed out the backdrop of falling population across the city as a whole, although stabilised now, which has perhaps fed into the lower investor confidence / higher yields possible there today.

Looking across the city at rent levels, we see a surprisingly flat picture, with only a few districts not falling in the 4.1 to 5.5 Eur per sqm bracket. Whilst the lower level of this range is supported by social housing being paid around the 4 Eur per sqm level, income levels and demand in the more affluent parts of the city would in usual circumstances support a wider range of rents, with perhaps 7 Eur being the price paid in more of the city in prime property.

This flat picture in respect to rents can be seen as an anomoly. As the city develops, a wider range of rents should be expected, like in most cities across the world. This points to some positioning at the current time towards more prime property and the latent increase in rents, commensurate with demand and the purchasing power of tenants in these areas.

Indeed, looking to how rents have developed between 2009-10, we see a general upward picture from the patchwork below across the city with some areas enjoying rental increase in this period of 10-20%, whilst much of the rent of the city is flat or up or down less than 10%. So pressure on rents in some areas is already being felt it can be said.

In terms of purchase prices, it is without question still cheap in this city. The graph below shows that, apart from some small areas [characterized by higher proportion of owner-occupation], property can be had pretty much anywhere for under 1000 Eur per sqm. This figure relates to single apartment sales, multi family apartment houses can often start as low as 350 Eur per sqm for a refurbished and rented property.

This picture of flatish rents, low prices, and higher yields / lower investor confidence is very much a hallmark of the markets ProVenture have entered as investors these past 20 years.

Stop Being Boring Mat

But, I said this was an article “from the streets” and we are in danger of another journey into yield calculations and city statistics with Mat here. Let's share some thoughts from some of the streets we have plodded around so far...

Kassberg

Well, its very nice to walk around here without question. Being the largest area of Art Noveau buildings in Europe, there is a lot to gawp at for those who like gawping at lovely property. The architecture in this district really shows the history here, and it shows that consistently for 100 years and more than the wealthiest residents in the city lived here, and still do. The streets are typically tree-lined with ornate lampposts [why did I notice that??] and coffee shops adorn practically every corner. Indeed, I have been in nearly every coffee shop now, as our friendly banker Markus who is usually with me does like his baked goods and finds a 200m interval between feeds about right for him. He likes Kassberg.

Property here rarely comes to the market, particularly for complete apartment houses. Many apartments are owner-occupied or owned in a fractional arrangement by smaller investors. Occupation is very good here, and rental levels range between 4.8-7 Eur per sqm depending on micro-location and apartment size. In terms of yield for an apartment house, around 8-9% net should be expected, priced around 650-750 Euro per sqm. We have listed 3 units in this area so far, with one on the borders of the area at a slightly higher listing of 10% yield. All units will get the full 80% finance, a sign of bank confidence in this lovely little district. The area will most appeal to longer-view investors who wish to take a smaller initial cash flow from the property but benefit most from rental increases and price rises across the city.

Anexample property in Kassberg for 480.000 Eur in fine condition with 9apartments

Sonneberg

Located just to the east of the main train station is the large district of Sonneberg [translates to Sun Mountain], and an area of great interest to high yield investors. The area has its roots in providing accommodation for working class citizens and this

The area was opened up by the rising housing demand in the wake of industrialization and is characterized by long streets and a dense square buildings. Many houses are listed buildings.

Without much of the charm of areas like the Kassberg, this district has an edgier feel with some attractive streets and nice bars sitting cheek-by-jowl with unrenovated property and 100% social housing blocks. Since 2005, significant government-backed investment has occurred, and some signs of improvement can be seen at street level. The area houses the youngest population in the city, with larger families and the highest incidence of immigrants, and artists working in small workshops and studios.
Apartment houses are in plentiful supply here. For note of the higher yield hunters are the number of recently refurbished property, perhaps tenanted to social tenants to a good level, and being released by banks. These banks have foreclosed on owners who over spent on renovations on projects that did not pay their way. But at a highly reduced price, the investments can work fine with yields between 11-15% being common.
We have had some memorable viewings in this area. None more so than a building, with only one vacant unit and so things looked good. We were able to access the vacant apartment, but really wished we hadn't. The stench of urine that greeted us on opening the door, prevented our brave Deutsche Banker from entering, making some excuse about wanting to make sure there were some local bakeries to the property [this makes a difference to the Loan to value apparently]. So, in I went alone. It was no mystery once inside the hobby of the previous occupants. If in any doubt, they had helpfully spray-canned “meth room” on the door to the lounge and “weed room” on the bedroom door. How ordered the Germans are, zoning off areas strictly for certain hobbies, even if they are off their heads and covered in urine at the time. So, it can be “edgy” here, but as a high yield area to invest, I have not seen such sustainable high yields which can be financed for quite a while.

An Example property, 2 adjoining buildings with 39units and 14% yield, priced at 670.000 Eur

Zentrum

Within the centre of the City, property is in the hands of housing associations, their market share here more than 80 percent. Built in GDR times, high storey buildings are in demand because the apartments were renovated after re-unification and rents are low from 4 to 4.2 euros per square meter being common. Later this year, some signs of new build are occurring with the first town houses to be completed near the municipal swimming pool, the price for this should be around 200,000 euros per house. So some development, but not really an area for yield investors.

But the really interesting part of the city centre, and a “must-see” for all property tourists is the area named the “Bruhl”, and its dilapidated shopping precinct ambitiously called “Bruhl Boulevard”. Sunset Boulevard it is not.

Bruhl Boulevard

I am not sure when the photograph above was taken, it comes from a website promoting the area. The seeming 20 people or so pictured represented the full traffic I saw whilst there for 2 hours. So the above really is a crowded scene, perhaps with “extras” hired in from the new centre with the promise of a free long sausage in a short, hard bun [a delicacy as travellers to East Germany will know].

A more accurate picture is below, showing the many un-refurbished and unused property.

This area, although central and of historic significance, has been forgotten for 20 years by town planners. Indeed, the only shop we could find on the 500m or so stretch of the “Boulevard” was one pictured below.

Adding nicely to the randomness of the area, this sole retail outlet brave enough to open down here sold electric tricycles, built in Denmark and rented out for 9 Eur per hour. I would have liked to be at that business planning meeting when they decided upon this idea / location. Spliffs must have been involved. [ As you see from the picture, I had to jump in to a trike see what it was like, and will be back for a test drive next week]. Just when you thought things could not get any more abstract, the owner of the shop then announced that the whole of the Bruhl Street, lets say 120 houses, was actually for sale and we looked like people who would like to buy it [we had suits on, mine purchased from a supermarket and Markus the banker's suit under strain of the most recent bakery]. I am not sure if I was flattered or not at this point.

But the city has employed a team of architects this year with a remit to develop the area of Bruhl into a lively and youthful part of town, with development of bars, restaurants and facilities to match the new student campus area which will be built nearby. You know when you come back here in 5 years, you will have regretted not taking up the offer of buying the whole street. Very interesting place!

But for investment today, areas of the centre which border the Kassberg for example shows very good signs of investment potential, such as the next property.

An 8-apartment residential blockfor 300.000 Eur with 10% yield now, potential of 11.5%

Summary

We are still to really get to grips with some of the other interesting parts of town, Schloss Chemnitz {Castle Area} being one one them, but we are building a good impression of the city.

We are having real fun on the streets in Chemnitz at the moment, and find ourselves with space in the market to deliver high yield properties with good sustainability and some of the finest period housing in Europe [Kassberg] at still very low prices. With high levels of finance in place, the market should really have some appeal to the range of investors in Germany.

As ever, please don't hesitate to get in touch with us to discuss any aspect of investing in property in Germany, or to find out more about property for sale in Chemnitz.

Our View on Property Prices in Leipzig in 2016

noreply@blogger.com (Gareth) — Thu, 16 Jun 2011 11:44:48 PDT

What will the Property Prices be in Leipzig in 5 Years? We get out the Crystal Ball..

We have written recently of historical house prices in our key markets in Germany, made reference to some of the markets that yield investors are looking at currently and discussed matters of the Euro and the likely effect on values in Germany. In this short article, we will look at the key drivers to property price appreciation and their impact on our key market of Leipzig in Germany.

Some of the key factors which will effect capital values in the next 5 years in the market can be listed as follows:

1 Investor confidence
2 Investor access to finance and finance rates
3 Rental level development
4 Owner-occupation levels
5 Recent capital value trends
6 Affordability

1 – Investor Confidence

One of the hardest factors to pin down and time, but perhaps the biggest factor when it comes to the driving of capital values upwards or downwards. One of the key determinants of confidence within a market is the likely future demand placed for property, and the prime driver for this is a city's population level. Within Leipzig, the population famously fell soon after the wall came down in 1989, but has recovered to a great extend over the past few years. A table of population in Leipzig is given below:

Year	Population
1990	511079
1991	503191
1992	496647
1993	490851
1994	481121
1995	470778
1996	457173
1997	446491
1998	437101
1999	489532
2000	493208
2001	493052
2002	494795
2003	497531
2004	498491
2005	502651
2006	506578
2007	510512
2008	515469
2009	518862
2010	522883

The city has seen a return to growth from 2001, and the rate of increase over the past decade has been one of the highest in Germany. Average estimates are now for 2025 at 538,000 inhabitants, with a high-end estimate of 565,000 by that time. The table below shows the corresponding fall in vacant units in Leipzig, having over the last decade. Investor confidence comes from every one of the following key drivers, but with a strong population growth story in Leipzig, it augers well in terms of under-pinning growth in the coming years.

Right now, an investor feels rightly rewarded with a net yield of between 7-11% in the Leipzig market. With interest rates for 5-10 year fixes at around 4%, there is still room for an increase in confidence pushing yields further down. Yields in a stable market would equate to around 2% over lending-rate, so around 6%. Should yields drop due to this increased buyer confidence, then prices have the capacity to rise by around 40%, should finance remain low.

2 - Investor access to finance and finance rates

Finance is readily available for both international investors and domestic investors, the latter enjoying very high levels of liquidity up to 100% of the property value.
Whilst fixed rates loans are marginally up from their lows of 2009, they are still at near historic low levels for the Euro.

The Table above shows 5 year money for example at an interbank rate of around 3% meaning finance is available to investors for this duration at around 4 to 4.3%. Whilst finance rates may well edge upwards in the coming years, the curve on the above graph, the so-called yield curve, shows interest rate expectations are not showing significant climbs and still below long term norms. In terms of liquidity, bank lending has proved robust through the most significant bank crises for generations, and shows no signs of abating. Current lending levels to foreign investors are around 60-80%, depending on the project and the investor. These levels have remained reasonably intact through the financial crisis, and should remain for investments where rents cover finance payments by at least 125%, so called “rental coverage”. Currently, rental coverage is often 200% or more, so there seems no immediate threat to tightening financial conditions.

3 - Rental level development

Increasing rent levels are the typical trigger for capital appreciation in the more mature markets in Germany. As rents creep up 5% or so per year, so the capital value increases by the same amount, all other things being equal. The current rent levels in Leipzig are very low and have remained so for the last 10 years or so, whilst excess capacity has been worked through with the increase in population or through demolition of unrefurbished stock. The dramatic falls in vacancy levels of apartments is shown below:

This graph shows vacant units falling from a high in 2000 of 69.000 to a level of 35.000 in 2009 and it has continued to fall to 2011.

Rental levels have remained fairly static over this period as tenants have enjoyed competitive pressure on landlords, as the graph below shows:

This graph shows the price per sqm that can be charged for a typical 70 sqm apartment, the blue line showing the price for older period buildings which are typical for our investors. The rate of rent has barely moved in a decade. There is real pressure on this situation, as the German economy improves and net income for Leipzigers increases. A return to a link with rpi for rents shold be expected at the very least. But the big impact of late was the government decision to increase the rate of rent paid for social tenants [those in receipt of income support] by 10% overnight to a level of 4,22 Eur per sqm. This will have a ripple through effect on the whole market and rent will develop across the board, perhaps higher once the latent rental increases of the last decade are increasingly realised.

The effect on capital values will be that sellers will increase prices in line with rents, this being how property is valued by surveyors and banks. A likely increase in capital values of at least 10% due to rent increases over the next 5 years should be experienced.

4 - Owner-occupation levels

Finally, and perhaps of greatest interest, is a fairly unique feature of this market. In 1989, all property was held by the state and before the wall fell every inhabitant of the city was effectively a council tenant. Since that time, owner-occupation has risen steadily to around 15% today in the city of Leipzig. Some may wonder why this has not risen quicker, particularly with the low capital values of recent years. An answer to this lies in the appetite and culture of those with sufficient funds to buy their own home in the last 20 years. Typically, it is those aged around 25 years old or more that aspire to home ownership. It has taken some time for the lack of a housebuying culture to work through the older generation and arrive in a new generation with funds to buy. For sure, many of today's 25-35 year olds aspire to own their own place, much in the same proportion to the rest of Germany where average owner occupation is just below 50%. Today, it is typical for out of town suburbs with new build single family houses or the very best areas of town in apartment houses to support this growing sector. The real point to note is the typical much higher price paid by an owner-occupier to an investor of a complete apartment house. The property is not purchased on a yield-return basis, more on the ability to pay and service the mortgage through income. So, areas in Leipzig where owners occupiers are buying their own apartments are typically paying from 1.200 Eur as a very minimum to 3.000 Eur per sqm or more. This is between 2-3 times investors buying apartment houses alongside them are paying. Quite an odd situation!! The graph below shows pricing history in Leipzig over the last decade for single apartments:

So, as owner-occupation increases to a more mature level towards 40%, so the average to good areas of the city will see viability for investors to divide their apartment houses into individual units and dispose of them, in a good refurbished state, to owner occupiers at a very significant uplift to the original price paid. In some areas, this may take 3-10 years to be a viable option, in other areas such as Gohlis South, Sudvorstadt and Schleussig this is an option to do right now. With current average prices for a multi-family house at around 700 Eur per sqm, the ability to derive capital growth from dividing and selling, where the area supports, is enormous. Right now, this strategy could deliver an uplift in capital value as compared to the purchase price of an apartment house by at least 50%, and often more in the best areas of the city.

5 - Recent capital value trends

Looking at the last decade for pricing of multi-family property, we see a sharp decline and stabilised situation of late:

The blue line shows the average price in sqm of a multifamily house in Leipzig, going from around 1.300 Eur per sqm in 1999 to just over 600 Eur per sqm in 2009. The yellow bars indicate transaction levels, with higher numbers running up to the global financial crisis, but still historic high levels in 2009 which have continued to rise in 2010. Whilst it is foolhardy to claim that capital levels will always return to a a level previously attained, the increased purchasing power a decade on, together with core inflation should drive pressure on multi-family prices in the coming 5 years, seeing perhaps a return to the 900-1100 Eur per sqm level, or around a 30% increase on today's prices.

6 – Affordability

Whilst claims of future increases as we have made are all very well, but the key determinant must be affordability for owner-occupiers to service the debt positions. The collapse in the link with affordability in markets such as USA and UK in 2003-07, and the continued bank lending, was a major factor in the crisis which followed. The chart overleaf is from a Deutsche bank Report in April 2011.

The chart shows that affordability of German property as a whole is actually at its best in recent history. Low finance conditions, and the fact that Germany did not participate in the global property bubble [together with an increase in disposable income] has made German property now the cheapest it has ever been.

By another measure of price-rent ratio, we can see how Germany fares with UK and USA in terms of affordability:

Conclusion

Well, we do not often make claims for future capital prices at ProVenture, but hopefully we had given some kind of idea on the key drivers to prices over the next 5 years. Should the German economy continue to recover as it has done in the last 2 years, the drivers stated will all be well-supported and growth should eminate from all the points listed. So, you want to pin me to the wall I guess and ask me how much property will go up, don't you? Well, to feed our chat in 2016, I will make the following predictions:

C-Grade Property – Location Where Tenants are Predominantly in receipt of “Social” rate

Here, I would expect a 10% increase to be priced in during 2011-2012 due purely to the change in social rent levels. I would expect the increase in population to drive demand for rental in these areas and vacancy to continue to fall. I would therefore expect the pricing due to lower vacancy and more sustained yield increasing by a further 10%. Finally, especially in areas which are on the “fringes” on B locations, I would expect investor confidence to increase such that the yield today of say 11% on purchase dropped to around 9%. All of these factors should combine to around a 40% increase in capital values in these types of areas.

B-Grade Property – A lower Proportion, if any Social Tenants and an “Average” Rental Structure

I would expect the factors above to impact on this sector, with yields today of 9-10% falling to 7-8%. Rental increases could outpace the C-located property after 2-3 years, as rental developments become the norm and supply is outstripped by demand. So overall, I would expect a 50% increase in capital values in these areas.

A-Grade Property – Where a Higher Proportion of Owner-Occupiers Live Now or Are Moving In

In addition to the factors above, I would expect multi-family apartment house buyers to increasingly take advantage of dividing the property into single apartments for onward sale to owner-occupiers or smaller investors. In some parts of the city, this could result in a dramatic uplift in value as the affordability for owner-occupiers is at a historical low, and capacity for prices to return to 1999 levels is very great. But I will err on the side of caution and suggest that investors in these areas will be able to enjoy a 50% uplift in their price if they divide their units on sale. So, combined, investors could achieve up to 100% increase in capital in these locations.

These are the types of increases our investors from 2007-08 have experienced so far, perhaps 40% on average, without many of the upward pressures on values that exist today [they just bought well].

Well, it is an interesting topic to take up over a beer with investors when we meet as the next 5 years unfolds. Wishing you all luck in this period!

Please do get in touch with the team at ProVenture should you wish to discuss the issues in this article a little further.

View Property for Sale in Leipzig with ProVenture Property

Investment property in Bremerhaven, Germany

noreply@blogger.com (Gareth) — Sun, 29 May 2011 07:08:58 PDT

The small multi family house in Bremerhaven, Germany contains 4 apartments in a renovated old building which has a full basement and a renovated attic. A new roof was completed in 2008 . The front and rear façades are plastered and painted with new double glazed plastic windows installed in 2005. The property is heated by gas heating, hot water supply is decentralized with boilers in each of the apartments. All apartments have bathrooms fitted with showers, with three of four bathrooms have been updated about 2006/2007. All apartment s are 3 rooms, and all of which have an attractive layout and floor plan.

A fantastic property investment, available at 100,000€ - at this price, a yield of 11.4% makes this a German property investment well worth investigating.

In addition to the cash flow generated by this fully let building - Condominium prices have already increased an average of 26% across the city since 2009, and with all the fundamentals in place for continued development of the city - we expect a good level of capital growth.

Bremerhaven - A high yielding market in Germany

noreply@blogger.com (Gareth) — Sun, 29 May 2011 06:41:12 PDT

Exploring Yield Markets – The Case for Bremerhaven, Germany

Our job at ProVenture is to find unbeatable property yield markets for our investors, who come from across the world and have often have a global view on making investments which deliver great returns. It is an interesting task, especially in this period of financial uncertainty and rapid asset price movements. We stick mainly to seeking within developed markets, with history of prices and stability of legal process. Our work has taken us over the last 5 years mainly to Germany, as its economy powers forwards out of the global financial crisis as one of the leaders in manufacturing and export of high-end goods. That is not to say we are myopic in our search, we continue to seek markets around Europe and also in the USA, the latter bringing some interesting opportunity of late for cash-driven investments. Perhaps you have caught our property investment articles on this subject?

But we are, now and for the coming years, continually being drawn back to Germany. The high-proportion of tenants has resulted in some great and stable monthly returns for our investors, and many have enjoyed very good capital growth of the last few years. Germany famously did not domestically participate in the credit binge of the last decade and property prices have remained very favourable for investors to buy into, backed by high levels of finance at historically low rates. Our work in Leipzig for example has resulted in the sales to around 50 investors, from small studios to large property property portfolios with all of our earlier investors in the market [say around 2007-08] now sitting on gains of around 20-40%. A very good result, compared to other developed markets in this period of general decline. And lets remember the average yield on purchase price for our investors has been between 10-11% during this period, producing a useful income whether the investments were made in cash or backed by finance during the period of hold.

But we cannot rest on our laurels so to speak, and have to answer the question so many investors ask us “Where is the next place to buy”. In this paper, we will research one such new market, still in Germany, the city of Bremen and its harbour city of Bremerhaven as potential places to invest in the coming years. Lets look at Bremerhaven first.

Overview and Geography

View Larger Map

Bremerhaven is Germany's second biggest port, Hamburg being the biggest, and lies to the north west of the country around 100km east of the Dutch border. The city is located in the state of Bremen, being around 50km north of the city of Bremen, a train ride of around 30 minutes. Passengers by air would usually use the city airport of Bremen, served 2 times per day to London, daily to Edinburgh and numerous flight across Scandinavia, Spain and Italy. Bremerhaven therefore enjoys easy access for investors across Europe, with schedules often allowing for a day inspection trip, without the need for overnight stays, useful whilst researching the market and keeping on top of investments once made.

The City, History and Economy

The town of Bremerhaven was founded in 1827, although there were already settlements, such as Lehe, as early as the 12th century. Bremerhaven was formerly known as one the most important harbours of emigration in Europe to the New World. Located about 50 km north of Bremen along the river Weser, Bremerhaven’s ports and container terminals are deep enough to accommodate large sea-going vessels, a crucial pre-condition for a modern shipping sector. Politically, Bremen and Bremerhaven together form the German federal city-state of ‘Freie Hansestadt Bremen.’ As a key base of the German Navy, most of the city was destroyed in World War II. After being a post-war enclave of the United States within the British zone of northern Germany, the city became part of the Federal State of Bremen in 1947 and received its name Bremerhaven4. Today, Bremerhaven is therefore part of the city-state of Bremen, practically being a state of two cities, while also a city in its own right. This is complicated to the extent that the city of Bremen has owned the “overseas port” within Bremerhaven since 1927. In the 1970s the import and export of car, fruit and containers increased enormously. Due to the global shipbuilding crisis in the 1980s many shipyards and docks closes down. Nevertheless, there was a positive development in the fish processing industry which sustained its position till now.

The separate fishing port is now a major food industry centre and the continent’s largest production location for frozen foods. In addition of late, six wind industry hardware suppliers, as well as two wind industry R&D organizations, have already decided to establish and/or expand their operations in Bremerhaven.

The state of Bremen benefited from assistance from European structural funds in the 2007-2013 funding period. About 142 million Euros have been allocated from the European Regional Development Fund (ERDF) for the two cities of Bremen and Bremerhaven under the “Bremen ERDF Operational Programme 2007 – 2013”. The city has the goal of being one of the top 10 technology centres by 2020 in Germany, and funding has been targetted towards this goal.

Some examples of the planned projects for Bremerhaven:

- Promotion of the Fraunhofer Institute for Wind Energy and Energy System Technology IWES in Bremerhaven

- Future in Work (ZiB) – Careers co-ordination and advice office for women

- Support for the Institute for Marine Resources (imare) – pilot phase

- Offshore wind power development project in Bremerhaven

- Offshore wind power development project in Bremerhaven: 2nd construction phase

- Promotion of the science themes period

- Promoting the "Wissenswelten" (knowledge worlds) campaign

More information: Boomtown Bremerhaven, the offshore wind industry success story

Leisure and Tourism

Benefiting from huge investment from the European and national grants, the city and harbour area in particular have transformed themselves over recent years. The creation of a new museum, shopping complex and climate house tourist centre have brought an influx of visitors to the city.

Last year, the city's hotels registered some 300,000 guests while 1.5 million day-visitors also came. It is scarcely possible to take in all the city's tourism highlights in just a single day. You need more than three hours alone just to calmly enjoy the "Klimahaus Bremerhaven 8 Grad Ost" (climate house 8 degrees east).

Population and Prospects

Bremerhaven is a community of 114,177 inhabitants (2010). Since 1968 when Bremerhaven’s population of 148,931 inhabitants reached its peak, there has been a gradual decline in population. Declines in population have lately been a lot lower than earlier forecasts would suggest and the recent change in law to allow residents from across the EU accession countries to live and work freely across Germany may have a big effect on a city that already has a higher than average migrant population servicing the naval and fishing industry.

The table above makes this point, with Bremerhaven being cited as one of the cities in Germany with the biggest positive swing in population expectations between 2003 as compared to 2009. Based on the apparent population upswing in Bremerhaven, Deutsche Bank specifically includes the city as one of the "hidden jewels" where the yields are now higher than the strong economic and population statistics should be in terms of reward. Looking at recent prices histories for recorded sales, Bremerhaven has topped the table since 2009 in terms of capital increases, coming off a very low level. The table below is taken from the Immowelt.de portal.

Since its constitution, Bremerhaven’s economy has always been linked to its port activities. The city’s port is the sixteenth-largest container port in the world and the fourth-largest in Europe with 5.5 million twenty-foot equivalent units (TEU) of cargo handled in 2008. However, trade and exports depend heavily on external factors, most notably on the global economy. With the economic downturn, the port authority recorded a 20 % decrease (to 4.4 million TEU) in container handling in 2009 compared to the previous year. Car exports in particular fell sharply by 40.8 % comparable to the level of 2006. Due to the German government’s economic stimulus package and the slowly recovering global economy, experts predict a significant positive turnaround for the port 2010.

From 2003 to 2008 the number of full time employees increased from 43,090 to 45,924, outpacing growth in jobs as compared to the picture across Germany. During the same period, the unemployment rate rose from 18 % in 2003 to 23.7 % in 2005 and then declined to 16.7 % in 2008. Today, the number of unemployed stands at 17%, still high by country norms.

In the last 2 years, the improving economic situation in the Bremerhaven economy has translated to the beginnings of a recovery in the property sector. From the table below, complied for Deutsche Bank, Bremerhaven lists at or near the top for value growth in the various sectors of housing in the market.

Whilst still at comparative very low levels to the rest of Germany, the increase in prices together with the improving economic backdrop provide a good reason to look to the market in more detail.

Areas of the City

Rentals are fairly falt across the city, with rents in the range 3,5 Eur to 5 Eur per sqm being typical. Social housing represents a large sector of the tenant market.

The biggest residential districts of the city are Lehe, Geestemünde and Wulsdorf.

Lehe

The district of Lehe is located north of the centre of Bremerhaven, however still central enough that the city is within easy reach with a short walk or bus ride on the city's extensive bus network. Lehe has two distinct halves - you can still see and feel the charm of a working district with more modern and contemporary architecture in the top half of the quarter, in the lower half has quiet tree lined side streets with predominately renovated buildings from the turn of the 19th century. The average rent in this part of the district is about 0.50 Eur/sqm higher than the upper end of the quarter. This is the largest district for yield multi-family houses typical of our product at ProVenture.

Lehe is mainly made up of period stock, from around 1900, and is attractive in look and feel. Most properties of this era are 3-4 levels high with between 3-8 apartments in each. Balconies are favoured by tenants, and found in around 35% of the stock in this area. Property prices are still very favourable in this location, both for apartment houses and single apartments, with around 400-500 Eur per sqm often being needed which makes the market one of the cheapest in Germany, and the cheapest in the old West.

The historic centre of the district Lehe is the Ernst-Reuter-Platz, with a very grand looking church and the district court forming the centrepiece. Hafenstrasse runs north-south through the centre of the district, and due to its extensive shops, restaurants, schools and local amenities, gives an overall community feel – like a city within a city.

Property Example:

PV507 Building in heart of Lehe, Bremerhaven

199,000€ | Bremerhaven

Potential Yield: 11.05%

Type: Residential

Approx. Size: 429 sqm

A solid brick-built, quaint building in the heart of the district of Lehe, close to the city centre. The three-story apartment building contains 7 apartments, with converted basement and attic. A full refurbishment was carried out in 1984 and again in 1994. The house and grounds are maintained regularly and kept in a very neat condition. The building is heated with gas central heating.

View Property Details

Geestemünde

The district Geestemünde is located in the district south of Bremerhaven at the mouth of the Weser Geeste. This very central location is an great advantage to the district, with Bremerhaven's pedestrian shopping zone a 15-20 min walk, and 5 mins by car. Geestemünde has approximately 33,000 inhabitants of the largest populated area of Bremerhaven. The landmark of the district is the water tower built in 1891 at the Konrad-Adenauer-Platz, which twice weekly hosts a large farmer's market, adding to the overall community atmosphere. Due to its proximity to the port area, this district suffered badly during World War II, and as a result, ,much of the housing stock is post 1950's build or re-built period buildings. In Geestemünde there is a good and large selection of retail shops, with kindergartens and four primary schools making this district popular with families. Rents are in the range of 4.1-5.5 Eur/sqm – with new rents starting towards the top of the bracket. The Central Station is located in Geestemünde and there are frequent connections to Hamburg and Bremen, where many of the inhabitants of this district work.

Property Example:

PV524-High yielding property in Bremerhaven

285,000€ | Bremerhaven

Potential Yield: 11.19%

Type: Residential

Approx. Size: 635 sqm

This extremely attractive period property was initially built around 1900, but was re-built after, like much of Bremerhaven, it was damaged in World War II. Despite that, the building still possess most of its original external features of impressive façade and window detail. Situated in the district of Geestemünde 1.5km to the south if the city centre, the property consists of 10 units in the main building with a small single family dwelling to the rear. All apartments have either a terrace or balcony over looking a well landscaped and maintained garden.

View Property Details

Wulsdorf

In the south of the city lies the district Wulsdorf, here the district has preserved its original rural character and now looks a bit like a small town. The growing infrastructure offers all the convenience goods within the district, removing the need to make the short trip into Bremerhaven centre. In the old 'village' of Wulsdorf is the oldest building in the district, the St. Dionysius Church from the 12th Century. The appearance in the old town is the old and typical village characterized by buildings, thatched cottages and craft stores. This social feel is of great importance to the residents, who feel like they are from Wulsdorf rather than Bremerhaven. Tenants living in this area tend to remain in situ for lengthy periods than in other areas of the city, and like in Geestemünde, ther is a train station with a fast connection to Bremen, where many of the inhabitants work. Seen as more of a high-class district, purchase prices here are higher than other areas of the city, impacting on the overall yield picture.

Next month we bring you the lowdown on the city of Bremen itself, a city of 550,000 inhabitants and a different offer for yield investors to nearby Bremerhaven.

View our stock in Bremerhaven

Property investing in Florida - A yield investor's holiday

noreply@blogger.com (German Property) — Sun, 08 May 2011 03:32:37 PDT

Perspectives on the Florida Investment Property Market

A view from a Yield Investor on the market in Orlando

When planning our annual family holiday, my long-suffering wife has to balance her needs for good weather / shopping with my interest in going to somewhere with a yielding property market. This has resulted in a lot of Scottish holidays in the early years of our marriage, followed up by Germany and eastern Europe for the last few years. I have to say, my wife has compromised heavily on holiday weather on occasion. I am not sure how I got away with so many Leipzig 'holidays' in the last few February half-terms, having family fun in minus 20 conditions. I am still unclear why my wife stays with me, she is 10 years in now, I am sure she has her reasons. So it was a pleasant diversion for the family (in particular my wife) this year to go to balmy Florida for Easter for holiday, from where this rambling "postcard" comes.

For the past 20 years Florida has been a part of the world that is very familiar to us to be fair, my brother and sister have lived there since the 1990s and so have my mum and dad on and off (until my dad fell out of a tree, another story). And so, we have visited many times to visit family, and seen the journey my family and friends have had in property over this time and have some perspective on the market. Why I am tapping this away from a cramped economy return seat on Virgin Atlantic is to jot some ideas down, hopefully for some interest to investors looking at the market or just looking how property markets develop in general. I have watched with keen interest the market develop from a relative affordable base in the mid 1990s, through rapid growth each time I revisited until 2006. And this is my 3rd trip back during this financial crises. But the real raison d'etre for looking more deeply into this market was provided by a cockney fellow I overheard on the telephone , apparently to his wife. It was day 2 of the recent London Property Exhibition, and it seems he had made an acquisition:

"You sittin' down luv? Well me and Dave popped into some property thing after going to the body builder show" [The London Excel was hosting 2 exhibitions thus weekend, for what you thought was a mutually exclusive audience]

"Well, guess what I bought today? You're never going to guess"

The poor wife on the other end of the phone was given ample time and chances to guess, although we will never know how close she was to winning the "Mr and Mrs title" for accuracy.. But the next line from the husband leads us to believe she was not bang on:

"no luv, better than that...We just bought a 7 bed villa with a pool in Florida. How much was it Dave? [Dave puts up his five fingers] Yeah, fifty grand."

Now, being a seasoned attendee of exhibitions for the last 10 years, I had heard conversations such as these. But in these more straightened times, it was a conversation that stuck in my mind. I wanted to know if the brand new investor [and perhaps Dave, if he had also gone "shopping"] had got as good value for their investment as their wives were led to believe.

Well, there has been a lot of noise concerning the USA and Florida market of late. Not surprising perhaps, with the effects of the financial crisis playing through in one of the epicentres of the mess. Although much of the developed world has felt the full effects of the crisis, property markets have reacted in different ways perhaps mainly due to foreclosure rules, current financing conditions and the imbalance between supply and demand. And of course the levels of prices that were reached in the peak time of any market, relative to earnings being as good a measure as any. Whilst many European markets have been hit, the fall back so far in prices has been in many cases moderate thus far. In UK for example, the restriction on building keeps the supply down even though it is a safe bet that prices will fall back some more in the short to medium term in most parts. Unless inflation comes to help out. Spain, due to the foreclose restrictions widely in place, has yet to see the large drops that the high-unemployment and ravaged economy demand. More to come perhaps in the next years. Only Ireland has felt perhaps some of the pressures that have been felt in the USA over the last 4 years. So, back to Florida and oh it is a sorry story. Building permits were granted as freely as mortgages in the period 2000-2006, and they did not hold back. Development after development of villas and condos sprawled in increasingly remote locations and the results can be seen on the streets in the city which I will focus on, Orlando. Orlando is a fascinating city to focus on as its population numbers [metro or greater Orlando] 2.1 million and is boosted each year by huge tourist numbers of around. The population in this region has increased by 500,000 in the last 10 years. Add to this the world-beating convention centre and high tech employers like Locheed-Martin, then this city has more to boast about beyond the Disney Theme parks it is so famed for around the world. But with the local economy being hit by lower tourist budgets and the like, unemployment is the high for the US in this city at 10.8%, against an average of 8.8% in the country, although it is starting to fall. Vacant properties number the highest in the USA at around 15% [although this includes second homes]. So, it does not sound too pretty right now. But it never does in a yield market, does it? Let's look at some different types of properties in the city, to see where could be safe for an international client to play right now.

Firstly, lets take the holiday villa and condo market, which dominates the marketing of Florida property to international clients. This was perhaps the most over-built sector and one that has felt the full force of the correction, the properties largely being 'discretionary' that is to say places that folks do not need to live and hunker down in whilst the crisis blows over. They can just lay empty, especially if the owner has decided not to pay the mortgage for the property which is now perhaps worth 25% of what they paid a few years ago. Like all investment for overseas clients right now in the city, new purchases are backed entirely by cash and deals are driven hard typically through the short sale or foreclosure process. As a quick background, a short sale is where the owner is yet to default on their mortgage, and in negotiation with the bank as to a price it can be released for. Foreclosures are properties on the bank's books, and the bank decide how and when to offload the properties themselves.

Popular areas for villas and condos include the areas to the south of Orlando itself, areas like Kissimmee, Davenport and Lake Buena Vista. Celebration is another quite unique community, built by Disney and with all that comes with that including trees that drop leaves automatically during the "fall" and manufactured snow each night in December. Nice. A drive around these areas shows a real mixed picture, some communities have been devastated over the last few years, others show signs of more resilience. For example, the more remote communities in places like Davenport seem largely uninhabited, save a few brave Brits on their cheap holidays. Whole streets, perhaps with 100 villas on, have only 2 or 3 cars parked outside. And communal maintenance, not being paid for by owners under financial distress is going to the wall. Check out the picture below of a "villa with pool" which is under foreclosure. Anyone fancy a dip / dysentery?

Where is Everyone? The Deserted Streets of
Davenport

It is most likely our investors from the London show bought in a community like this. Nice properties, but difficult to see any viability in the investment, with no chance for rental return from either short or longer-term tenants, and a growing problem with community maintenance [grass cutting and the like] when owner do not pay into the community fund. If something seems too cheap, it probably is, goes the old saying.

Other areas nearer to the main resorts of Disney or Universal, or ones that support longer term tenants show more signs of viability and are in a better state. But in this whole sector it is really difficult to pull out any real investments, that is to say something that is going to put regular money in your pocket over and above what you could achieve in a bank account. Taking a look at a typical 3 bed villa with a pool in a better division in Kissimmee, lets break down the investment:

Purchase Price Now - $115,000 [in 2006 - $245,000 ]
Average Rental Price Per Week - $700
Rental / Managing Agent Fees Per Rented Week- $140
Home Owner's Association Per Year - $6,600
Tax Per year - $1,850
Maintenance Per year [fully furnished] - $5,000 [estimate]

So, to break even, the unit would need to be rented for 24 weeks in the year. Perhaps possible in the very best located units, and ones that enjoy the best marketing. But there are a lot of units out there chasing holiday-makers. Perhaps it makes sense if you have intended personal use for 4-6 months of the year, but that is not yield investing and so we will not take this any further. In short, whilst investors have all lost their shirt in this type of market, even before the crash, there are still plenty of ways investors can lose money here. And it is this market that is most heavily promoted to international clients.

The condo market which is zoned for longer term [1 year plus] residents shows more viability, but should be carefully chosen. Condos start at around $10000 for a 1-bed, trading sometimes on E-Bay I notice, but should be avoided for the reason of tenant demand and viability. It is better to look for a better-located unit in a community which is well-maintained and is viable. For example, a well-located one-bed unit in the Sand Lake region, near the Theme Parks but also regular employment and good schools, breaks down as follows:

Purchase Price - $38,000 [Price Paid in 2006 - $135,000]
Rental Per Month - $700
Rental Agent Fees Per Month - $70
Home Owner's Association Per Month - $190
Property Tax Per Month- $40
Estimated Annual Maintenance [unfurnished] - $600
Net Yield - 11.05%

It really pays not to look at the prices which were paid back in the peak of 2006, but how the investment will perform for you today. Well-performing investments today are the ones most likely to attract finance when it returns, and you have an income whilst you wait. It makes little sense in nearly every case to look back to older capital values, apart from for vanity and to say "look how clever I have been". Well, maybe you have, maybe you haven't. I include these old prices as a point of reference on where the market has been.

The really interesting plays at the moment fall in the in-demand area of downtown [or central] Orlando.

These are the streets I have been bravely walking in the 90 degree heat these past 2 weeks, looking what is going on whilst taking the kids to the playground and local coffee shops. We stayed here in one of the area's very well-appointed hotels, and I have to say I really enjoyed the laid-back [dare I say European] feel to this part of the city. The area has been highly developed over the past 20 years, formerly a less-desirable part of town to live, and now attracts young professionals and families, valuing the proximity to work and the superb recreational facilities the downtown area offers. There are great facilities here for professional singles and families alike, concerts and sports games, great bars and clubs and galleries. In the leafy Thornton Park district there are weekly farmer's market, boutique shops and bistros. Just 800m from the very centre of Downtown, [although my brother being American swears it is 3-4 miles]. It really is quite unique, and a story which can only continue to improve over the coming years as the location establishes. And, like in any yield market, it is these areas of unique value that you seek. These downtown areas have been hit by the same lack of confidence and lending as anywhere else in the city. But well-paid folks want to live there, and rents are strong whilst you wait for the confidence and bank lending to return. Which it will here first in this city.

The bulk of the market is represented by condominium buildings, having been erected in the last 10 years and built to the standards usually seen in 5 star hotels. The tenants live well here, perhaps too well. It is typical to be offered a 60-100 sqm 1 bed or 100 – 150 sqm apartment with lake views, balcony, concierge, underground parking, swimming pool, communal bar area, gymnasia, conference facilities. The list goes on and on. The only water features I have seen before in yield property have been through the ceiling and very much unintentional. So this is a little different.

A typical Condominium Building In Orlando

But before hitting the figures, let's give a bit more explanation to the rental concept, which differs to many markets around the world. So the tenants pay a monthly rent, as usual, to the landlord and they stay for a minimum of 1 year and 3-5 years is common. So far, so good. What is different is the cost structure, all those 5-star hotel facilities in the apartment buildings need to be paid for. And these are paid for by the landlord in effect. This is the Home Owner Association, the fund which pays for the facilities and upkeep of any property in the city, but can be astronomical in these developments in comparison to the rent. And then there is the monthly property tax to be covered. So, lets do the sums on a higher end 2 bedroom sqm condo:

Purchase Price - $269,000 [short sale]
Monthly Rent - $2100
Home Owners Association Per Month - $620
Tax Per Month - $450
Yield - 4.6 %

As an alternative, here is a property in the hands of a bank and being released at a better price:

Purchase Price - $149,000 [bank sale, just released and will sell quickly]
Monthly Rent - $1750
Home Owners Association Per Month - $460
Tax Per Month - $170
Yield - 9%

So, whilst these units are simply stunning, it is only the most distressed properties being delivered under foreclosure that will provide a high yield. This occurs when a glut of units are released by the bank in any one development in a short space of time. But put simply, I have never seen property with this yield which is presented to this standard and is frankly remarkable.

Of course, finding these great deals is not a walk in the park. Having invested in the market myself, it can be a long process and one which you really need help on the ground with in order to succeed. And many times, those great deals get outbid at the last minute and you are back to square one. Perhaps a more reliable in this segment of the market are units still in the downtown areas, but not presented to the 5-star standards of the recent builds. These units still often boast swimming pools, gymnasiums and the like, but are done to a lower-key standard and the home owners association fees can be half of the newer units. But due to the location, a steady demand for tenants can be found at the right rental level.

These are the figures of a unit we bought ourselves in December 2010 and ones worth looking for:

Purchase Price - $38,000
Monthly Rent - $700
Letting Agent Fees - $70
Monthly Home Owners Association - $147.50
Monthly Tax - $50
Net Yield - 13.7%

Right now, there are 3-4 such units sitting on the open market, and others underneath the market and waiting to be released over the coming months. One such example, still in the downtown area but in the more lower-rise and fashionable Thornton Park is this 2 bed / 2 bath townhouse:

Purchase Price - $75,000
Monthly Rent - $1100
Letting Agent Fees - $110
Monthly Home Owners Association - $150
Monthly Tax - $110
Net Yield – 11.6%

Perhaps the pick of the yield crop on the market today, and a very in-demand tenant location that should enjoy finance possibilities in the near future, enabling equity withdrawal post purchase.

A typical Family House in Thornton Park

I had the good fortune of being taking around many of these investments by a nice chap called Jason, a local property agent / expert and a dead-ringer for Steve Merchant [co-writer of the Office, for the fans of Ricky Gervais]. Jason has a great insight into the market and has sold property before the boom, during it and now in the aftermath. He has seen it all as agent, and also as owner in the area himself. Rather than throw the towel in as an agent when the times have got tougher, Jason to his credit has kept going, perhaps earning a crust from rentals, until the market recovers. Many agents have gone to the wall, so fair play to him. I spent a happy afternoon with Jason and his colleague [and wife!] Marion looking around all the interesting units in downtown. For fun, and it was fun, they took us upstairs to the penthouse apartment in one of the top-spec developments which overlooks the very popular Lake Eola. This unit, Jason promised, offers the best vista in any property in Orlando. He was not wrong. We arrived on the lift, the penthouse enjoys a lift to its own level. It was massive, and the views were quite something.

Spread over 320 sqm, it boasts 4 bed and 4 baths in its current configuration. Okay, the unit was left in a bit of a state by the old owner who had paid $1.8 million 4 years ago, who can blame the old owner who has lost over $1 million for not hoovering up on the way out, but you could feel you were in one of the very best spaces to live in the city. And Jason let on that it was soon to be marketed by the bank [it is under foreclosure] for $600,000. That is unbelievable for this type of property. Okay the monthly rent will probably "only" be $4000-4500, and we have all the fees to pay, but still a real return and in a unit that will feel Orlando's uptick first and move heavily when it arrives.

Postcard Sign Off

I would sum up my little tour around Orlando by saying that there are indeed some good deals for the cash investors out there. I have been searching the world for yield property for the last 20 years, usually seeking net returns of double-digits and I have never seen property that meets this requirement that frankly looks so spectacular. As usual, homework needs to be done as to which exact area / type of property fits your investment expectations. Most crucially, diligence must be placed on calculating actual monthly returns after the sometimes astronomical monthly fees etc, and also to ensure that you are buying in an area which enjoys high tenant demand. And of course, as a cash investment in another currency, the investment's success could largely be down to timing of currency rates on disposal of the asset.

Perhaps one final point for investors in the US from around the world is that trips to Florida [or indeed anywhere else] to view your investment on a regular basis are tax deductible as allowable expenses. So, that family holiday just became that much cheaper...

Ok, back to the day job in Germany - sourcing quality investment property in Leipzig and Berlin. Good yields, finance in place. Looking forward to it, but will miss the swimming pools.

1.035M€ Property Investment in Leipzig, Germany 8%+ Yield

noreply@blogger.com (Gareth) — Wed, 20 Apr 2011 11:12:31 PDT

Proventure Property are pleased to present this investment object in Leipzig, Germany. Located in the heart of the city in Saxony, this very well presented building of mixed use contains both residential and commercial units and is over 1,000sqm.

The rent list of this Leipzig property is available on request from James at ProVenture Property. In broad terms the property consists of around 870sqm of residential apartments and 190sqm of commercial real estate. The commercial units are currently rented and 85% of residential units are tenanted. Full details are available for inspection during the due diligence process.

The building is in excellent condition, with evidence of good property management in place. The communal areas are spotless and with well cared for plants and decor - a good indicator. We can provide information on property management in Leipzig and give you contacts and companies that we have had dealings with during our time investing in property in Germany - just get in touch with us and we can help.

On full letting, this property will yield over 8.11%. This property is also available in a package of properties with another investment from ProVenture Property - PV341.

Conveniently located for both types of tenants, this property is just a couple of minutes walk from the main shopping areas and the main train station. The area as a whole is smart, and well presented, and due to its close proximity to the centre, enjoys strong tenant demand.

An excellent mixed type property investment opportunity in the very heart of Leipzig. This property would suit an individual that is looking for a prime investment opportunity in the centre of Leipzig, and is looking to maximise the leverage of their capital.

Where are investors in German Property investing?

noreply@blogger.com (Gareth) — Wed, 20 Apr 2011 10:45:28 PDT

Where Are Investors Looking in Germany for the Great Deals?

Munich, Bremerhaven, Berlin, Leipzig & more

The stall is well laid out for Germany to see a strong housing market in the short to medium term. Business and consumer confidence is now higher than it has ever been since re-unification in 1990, interest rates are at record lows and unemployment falling fast in many regions. Against this backdrop, German house prices have been fairly unremarkable, indeed boring, over the last 20 years showing no real appreciable gains in real terms against inflation. Affordability for housing is at record lows, as low as 15% of take home pay needed to service the housing costs, and access to finance for German residents and international investors alike is very good. The German market remains the most under-valued in the world, according to the OECD. This is all quite different to the picture that is other developed countries, who are nursing the direct losses of their nation's wealth, that of their housing stock and banking sectors at least, after the credit binge and subsequent financial collapse. So, it makes you think “what is going to set this market on fire?” and “where will the fire burn the brightest / the longest?”.

Lets take a look a some German cities, and see where advantage lies for investors who have short, medium and long term views on the return of their money.

As the re-unified country develops, it makes good sense to look to the more established markets in the former east of the country, and then turn attention to some markets within the former East. So, lets look at some really contrasting markets in the country, to spark some thought.

Munich

Munich enjoys one of the most prosperous micro-economies in Germany, and indeed has done for centuries. Its dominance in the German economy, being the 3rd largest city at 1,35 million people, is undoubted and is often voted in the top 3 as one of the world's most liveable cities. The economy is set to continue its growth in coming years, with an additional 60,000 inhabitants in the city by 2015. In terms of housing, for a 60 sqm central apartment with a balcony:

Rent Levels – 15 to 30 € per sqm
Single Apartment Prices – 4.000 – 15.000 € per sqm
Typical Yields – 2.5 – 4%

With few apartment houses examples on offer, here is a student building which could be interesting to larger investors:

4.7 Million €o
57 student apartments
270.000 €o per year net income / 5.7% yield

This city will continue to prove attractive to cash investors, looking for alternatives to other asset classes which are delivering lower returns. In terms of capital increases, it is difficult to see the high levels of today being breached anytime soon to any great extent. It is regarded that the city follows 10 year cycles, with the last rise being triggered 2001. Quite different to other parts of Germany, and more like cities in other parts of the developed world. But well worth a visit.

Bremerhaven

Still in the former West, but on the other end of the scale is Bremerhaven. Boy, is it cheap here. The town numbers around 114,000 and is built around a port. The population here has dropped every year since 1960, from 140,000 steadily to its current level. A real concern for an investor, as is its stubbornly high unemployment rate of 16.5%. On the positive side, a lot of development has recently gone into the port, bringing needed tourism, and its traffic as a container port [mainly for cars] is growing and now the 4th largest in Europe. In terms of typical housing, well it is cheap. Rent levels tend to be 4 to 6 € per sqm, and prices can be almost unbelievable:

	A single apartment example here, priced at 11,500 € for a 59 sqm apartment which is rented at 180 € per month, giving a yield of 18%! Due diligence required here, as it is a foreclosure unit.
Here is an apartment house with commercial elements to the ground floor, in the district of Lehe. It has 408 sqm, offered at 115.000 € with a rental of 18.414 € per year in place, or 16% yield.

So, we can certainly say that Bremerhaven is cheap, by any standards, and perhaps prices will recover at some point as the national economy powers on. But like any town or city with a decreasing population, care must be taken to secure the right investment otherwise the attractive yield falls, perhaps down to zero in the wrong building or location. That all said, finance can be had for international clients at 60%, so come confidence is in the market. Somewhere to visit perhaps, for the yield investor weekend away by the sea. Do you do those? Me and my poor wife do. A lot.

Berlin

Poor little "Knut" the polar bear bred in Berlin Zoo, the hero of the city, who died recently.

So, how to summarise such an interesting and diverse market in a few lines. Well, I cant. Perhaps I can point you to this excellent market report on the city, and make a few comments of our own.

Well clearly the city offers excitement, interest and intrigue for tourists, residents and investors alike. The past of the city is scarred by the war and occupations that followed, being divided by the wall for so many years. Berlin took the interest of many international investors around 2002, when their domestic markets got expensive. Around 2005-07, 70% of the investment money into Berlin came from outside Germany. Perhaps this was due to the stigma as a poor city to folk from Munich say, not being translated to international clients. Well the city is still relatively cheap, very cheap in places, but its position as a capital when compared to London or Paris say needs to be considered carefully. The above guide will give better reference to current prices and yields. But the general story is of rapidly rising rents. It is still possible to rent a studio which is 2-3 stops from the Reichstag for around 200 € per month. Sounds cheap? Well, it is. The investment money at the moment tends to follow this trend, and it is a case of picking areas where rental increases will be accepted most easily, and so rental yields will increase. Areas such as Prenzlauer-Berg and parts of Mitte can be argued to be oversold, having increased dramatically in recent years, but great places to live and some solid investments there no doubt, albeit not so “yieldy”. My recommendation would be to include Berlin if possible into any property tour of Germany. Most the aeroplanes land there, so it is easy to access and the nightlife alone will not disappoint, even if the feeling of “I wish I was investing 10 years ago” does.

Leipzig

Just by chance you have a spare half an hour and instead of relaxing or watching TV, you wish to speak to someone at length [to the point of boredom] about the housing market in Leipzig, in the former east of Germany then you must give me a Skype [Skype ID is mountpleasant 4!]. I do not get to talk to people about Leipzig enough, so do call!

I have dedicated the last 4 years of my investment life to this city, and still find it so fascinating, to the point that it is all I talk about. You get the picture, if you buy me a drink in the pub I will drivel on about yield and various streets in Leipzig until the bell goes and the use of legs has become questionable. I do this a lot. So why is it so interesting? Well some big-hitting points:

It is pretty much as cheap as anywhere in Germany per sqm, indeed in Europe, indeed in the world.
Its population has grown quickly during the last 5 years, and is set to grow for the next 20 years.
The city formerly being once of the richest in the world, has some of the finest period housing anywhere.
The city has a buzz, some locals inform me it is what is what like in the 90s in Berlin.
The economy is really motoring, being home to BMW 1 series manufacture, Porsche and a bunch of logistics companies including the huge presence of DHL.

Yields around the city range from 6-12%, with finance up to 80% possible.
Around 85% of the city rent their house, but this is changing rapidly.
Oh, I just love it there.

In terms of property, and why I talk about it so much, well the graph below tells us a lot.

In each of the 3 categories of property, we can see that after the aberrations and exuberance of the mid 90s [a whole story] we are near the start of a cycle which properly took hold 2009-10. The city has taken the eye of investors from all over Germany and indeed all over the world. Additionally, owner-occupiers are taking up residents increasingly in certain parts of the city, pushing values up at an astonishing rate in places. Lets take a couple of examples.

Although most property is still traded as a complete block of apartments, the single apartment market is becoming increasingly interesting. Property such as the unit below are fairly easy to pick up, and are very compelling from a yield perspective:

Leipzig South West

Studio apartment with balcony and parking

Purchase price 25.000 €

Yield – approaching 10%

The market for single apartments is quite immature, with minimum finance levels for Germans and international clients being set at 50.000 €. But it is one that should see great increases, as confidence and rent levels climb away.

In terms of apartment houses, these come as cheap as 180,000 € and go all the way up to millions. The yields range from 6-12%, and here is a typical example:

Leipzig South West

525,000 €o

19 apartments / 2 commercial

Yield 10.7%

With rent levels set to rise in the coming years, great yields and finance in place together with the strategy to divide apartment houses into single units becoming increasingly viable, Leipzig is well worth the 1 hour train journey down from Berlin to take a look. Or just give me a call, always happy to discuss the city at good length!!

Anywhere Else?

Well, there are yield markets all over Germany. Sticking to the knitting of a stable or growing population of a city will be a first good point. In the east, this could lead you to cities such as Dresden, Erfurt or Jena for example. In the west, Bavaria, Frankfurt and Hamburg spring to mind. But there are a host of others around the Rhine-Ruhr, the most populated part of Germany that could be worthy of research.

So, good luck and enjoy this market whilst it is in the early stage of the property cycle in many parts of this booming economy. Just get in touch with the ProVenture team to discuss any areas you have of interest. We like to help, where we can.

Investing in-property-for-cashflow

noreply@blogger.com (Gareth) — Thu, 17 Mar 2011 02:55:27 PDT

Check out this SlideShare Presentation:

Investing in-property-for-cashflow

View more presentations from German_Property.

Property management - continued!

noreply@blogger.com (German Property) — Thu, 02 Dec 2010 04:28:28 PST

For the other 4 points on our list, the manner in which they are managed differs for single apartments and apartment houses. In terms of point 2 and 5, communal repairs and property development and the maintenance fund, with an apartment house this is clearly the gift of the owner of the whole building. Repairs development and maintenance can be planned and budgeted for. It is usual for a letting agent to offer their services in this area, perhaps charging 10% to project manage works, take up quotes and see the job through satisfactorily. For single apartment owners, any works need to be planned and agreed by all owners. This is usually conducted at an annual meeting, or in emergency cases by contacting all owners for agreement. It is normal for a maintenance or “sinking fund” to be established for this purpose, so works can be planned and paid for in an efficient manner. Owners cannot opt out of this arrangement!

Next on the list is the management of the ancillary costs associated with the running of the property and caretaking duties.

This would include items such as:

heating costs, where a shared heating system is in place
Building and liability insurance
Ground Tax [not always included]
Caretaking duties such as bins, sweeping stairs, small repairs such as painting and locks.
Street cleaning
water and sewerage services
boiler maintenance
lift maintenance
Chimney sweeping
Communal lighting
snow clearance to the front of the property

These ancillary costs are in the most cases transferrable to the tenant and called “warm rent”. Cold rents are net of these costs and are what the property yield is based upon. Nice and transparent. In the case of an apartment building, these costs amount to between 1.5 Eur – 3 Eur per sqm, depending on heating arrangement, level of caretaking service etc. Your letting manager will usually take care of all of these aspects. For single apartments, it should be remembered that you will usually have a mix of owner-occupation and renters in the property. For this reason, these costs, and the sinking fund will usually be lumped together and called the “wohngeld”. One further charge unique to single apartments is the cost of managing the co-ownership arrangement, the holding of meetings, communication to owners etc.

More tomorrow, for more information on investing in Germany, go to www.proventureproperty.com

Property Management

noreply@blogger.com (German Property) — Wed, 01 Dec 2010 01:34:07 PST

This is a huge topic, one which I am still learning after 5 years in the market as an investor in both single apartments and also of apartment blocks across different regions of Germany. There are some huge differences in the way property is managed, certainly to my domestic market of the UK, mainly commensurate with the higher level of renters in the sector and longer residence times.

There are 2 distinct markets to cover here, that of single apartment management and that of apartment houses (including commercial offers). The management functions are broadly similar in each of course, it is just how they are controlled:

Tenant Finding, tenant management and rent collection
Communal repairs and property development
Management of ancillary costs such as heating building insurance etc
Caretaking and general maintenance
Establishment and building of maintenance fund.

For point 1, this is generally the same for both apartments and apartment houses. The structure and reward systems vary across regions of the country but it is typical for the following:

Tenant Finding – 0 – 2 month net rent
Tenant management and rent collection – 15 to 25 Eur per month, regardless of unit size

Tenant finding rates differ according to buoyancy of the tenant market and effort required to find and install a tenant. For example, in Dresden it can be common for all marketing fees to be passed to the incoming tenant, such is the demand in the city. In Leipzig and Berlin, 1-2 months net rent is usually charged to reward the marketing and inspection effort needed to find and and reference a tenant. Of all the fees, other things being equal, this is not one to negotiate down. You will put your unit(s) at a distinct disadvantage in doing so, unless you have a large scale of business with one agent. It is quite common however to market a unit with multiple agents to give maximum exposure. Things to check here are what marketing strategy the agent uses. Is he on the major national internet platforms [most successful, but they cost money] or does he rely on local press and banners in the window [effective only in the areas of highest demand]. In terms of the charge for tenant management, these are usually fixed and not proportionate to unit size or level of rent. As long as a unit is renting and paying, the fee is extremely good value and a sign of a competitive and fragmented market.

I will talk about the other two points tomorrow.

www.proventureproperty.com

A historical look at prices in Leipzig

noreply@blogger.com (PT) — Tue, 09 Nov 2010 06:06:19 PST

A common question we get from investors is what has been the price history in the areas in which we operate. Whilst some good data is available in the capital Berlin, finding price history in cities such as Leipzig can be difficult to find in the public domain. During this article, we will try and provide some guidance on price histories since re-unification and of the past 3 years in particular. We will then make some predictions on how prices will develop in the coming years.

It is true to say that a freshly re-unified Germany was somewhat out of sync with the rest of the world in terms of financing policy and the mortgage market. Whilst the former West had an economy and housing market broadly in line with other mature markets, the unique event of re-unification in 1990 brought about changes which make the conditions in the former east completely out of phase with the rest of the developed world to this day.

Between 1990 – 1996, when interest rate policy was restrictive for investment across most markets, a wave of speculation of the real value of property in the former East took hold. With the market in the East effectively held under a social regime and property ownership was not possible, the value of the property was unknown. A common-held view that the re-unified country would equalise in prices to a great extent as the East caught up with the successful development of the West during the period of separation. Investments flowed into the East from domestic and foreign sources and the appetite for investment was increased by high bank lending values and government-backed grants for development of historical property.

What happened as a result is a familiar story of over-exuberance, albeit based on a unique event of the fall of the Berlin Wall. As investments were made through the period to 1996 or so, the performance of those investments became unsupportable. The expectation of rent levels being similar to those in the developed West were unrealistic, population fell in many cities and towns due to the pull of the more affluent West and the ability for free travel and high interest payments of the time began to bite. Many investments failed, or needed to be supported from external income to prevent foreclosure. Think about it, just as the developed world was gearing up for a decade in which property values increased by 200-300% on the back on low inflation and low interest rates, so Germany dropped like a stone. Prices paid for property in this time climbed to 1000 Eur per sqm or more, and often for unrefurbished stock which needed around another 800 Eur per sqm investment to get in a condition for tenanting. It is not uncommon to hear of over-exuberant investments to fall by 50-70% during this period. Despite the prevailing low interest conditions, particularly after joining the Euro, the incentive or ability to support these failed investments waned. Only the very toughest survived the markets of the East.

What happened next? Germany went through a programme of fiscal reform and set a course for low-inflation and increased productivity. Wage bargaining was tough, and output of the prized high-value German goods increased. All parts of Germany stabilised and began the process of reform. In terms of the property market, equilibrium was found in most areas between 2000-2005, with prices in Leipzig around 400-800 Eur per sqm for apartment buildings in the various parts of the city.

So, what about the last 3 years? Well the story has been very interesting for investors in the area. During a period of falling property prices in much of the developed world, the market in Leipzig has held up very well due to the fruits of 20 years of government investment in infrastructure, good capital values recognised by investors and the business climate returning to decade high levels of optimism across Germany. In 2007, it would be typical to conduct a search in the average locations in Leipzig for apartment houses in the price range 450-600 Eur per sqm. Steady increases have been seen since then, with an increase in demand from local buyers with increasing access to bank finance. A typical search of the market today in the same areas of Leipzig will be for property in the 550 – 700 Eur per sqm price bracket. In most cases, property over the last 3 years has seen around a 20% increase in prices which is good going in this climate. There are exceptions to this, depending on sub location. Some of the areas to the east of the city such as Neustadt and Volksmardorf and Sellerhausen have seen little or no capital appreciation, the stock being characterised by inhabitants of working class or non-working people. Banks still find it more difficult to finance to any great degree in these areas. On the other side of the coin, property prices in Schleussig and Plagwitz have really caught investor attention, with increases of between 30-50% being seen.

So, what's ahead of us in terms of capital appreciation? This depends on a number of factors:

Investor confidence
Investor access to finance
Rental level development
Increasing owner-occupation

In turn, investor confidence will be the key to purchase prices increasing with all other factors being equal. Right now, an investor feels rightly rewarded with a net yield of between 7-11%. With interest rates for 5-10 year fixes at around 3-4%, there is still room for an increase in confidence pushing yields further down. Yields in a stable market would equate to around 2% over lending-rate, so around 5-6%. Should yields drop due to this increased buyer confidence, then prices have the capacity to rise by around 40%, should finance remain low.

Access to finance shows now real sign of abating, certainly for local buyers. It is not unusual for projects to be financed to 80% [or even higher] for German nationals, and 60-70% for foreign buyers. These levels have remained reasonably intact through the financial crisis, and should remain for investments where rents cover finance payments by at least 125%, so called “rental coverage”. Currently, rental coverage is often 200% or more, so there seems no immediate threat to tightening financial conditions.

Increasing rent levels are the typical trigger for capital appreciation in the more mature markets in Germany. As rents creep up 5% or so per year, so the capital value increases by the same amount, all other things being equal. The current rent levels in Leipzig are very low and have remained so for the last 10 years or so, whilst excess capacity has been worked through with the increase in population or through demolition of unrefurbished stock. Some real anomalies remain to this day. For example, rental levels across the city for professional tenants lie in a thin range, usually between 4-6 Eur per sqm, a small deviation. As popular areas are developing,, higher rents are now being achieved. For example, in Sudvorstadt and Schleussig and Gohlis South, rents in excess of 7 Eur per sqm are now not uncommon and on the rise. The development is having an effect across the city, with pressures on areas in demand or well-presented units with benefits such as balconies. With wages increasing, the proportion of take home pay used to service rents is now very low, around 20%, and shows capacity for rental increases to be absorbed. Finally, the effect base level for rents, the amount the government pay for unemployed people has not changed in 12 years. The current level of 3.85 Eur per sqm is the lowest in Germany, and is seen as very out of sync with other smaller and less economically vibrant cities. For example, nearby Halle which is half the size of Leipzig has a social tenant rate of 4.35 Eur per sqm. Leipzig must catch up at some point, and when it does the floor on rents will rise over night.

Finally, and perhaps of greatest interest, is a fairly unique feature of this market. In 1989, all property was held by the state and before the wall fell every inhabitant of the city was effectively a council tenant. Since that time, owner-occupation has risen steadily to around 15% today. Some may wonder why this has not risen quicker, particularly with the low capital values of recent years. An answer to this lies in the appetite and culture of those with sufficient funds to buy their own home in the last 20 years. Typically, it is those aged around 25 years old or more that aspire to home ownership. It has taken some time for the lack of a housebuying culture to work through the older generation and arrive in a new generation with funds to buy. For sure, many of today's 25-35 year olds aspire to own their own place, much in the same proportion to the rest of Germany where average owner occupation is just below 50%. Today, it is typical for out of town suburbs with new build single family houses or the very best areas of town in apartment houses to support this growing sector. The real point to note is the typical much higher price paid by an owner-occupier to an investor of a complete apartment house. The property is not purchased on a yield-return basis, more on the ability to pay and service the mortgage through income. So, areas in Leipzig where owners occupiers are buying their own apartments are typically paying from 1.200 Eur as a very minimum to 3.000 Eur per sqm or more. This is between 2-3 times investors buying apartment houses alongside them are paying. Quite an odd situation!! So, as owner-occupation increases to a more mature level towards 50%, so the average to good areas of the city will see viability for investors to divide their apartment houses into individual units and dispose of them, in a good refurbished state, to owner occupiers at a very significant uplift to the original price paid. In some areas, this may take 3-10 years to be a viable option, in other areas such as Gohlis South, Sudvorstadt and Schleussig this is an option to do right now.

Right. And what about the legal side?

noreply@blogger.com (German Property) — Thu, 02 Sep 2010 00:42:50 PDT

It is German law that all property transactions are to be overseen by a Notary, an independent body who overseas the contract and ensures it serves both parties equally and fairly. Of course, you guessed it, the buyer pays. The fees are generally around 1.5% of the purchase price and comprise:

Notary fees to conclude the contract.
Legal searches
Fees to have your name entered on Land Register

Are there any ways out of these fees? Um, no. Can you negotiate? That's a no again. Where some saving can be made is to choose a Notary who can conduct the contracting procedure in English and in German. This way you save the need and cost of a translator which can run to 200 Euro or so. And perhaps you can ensure that the purchase price is paid direct to the seller, avoiding the need to set up a Notary Trust Account. This can cost around 300-1000 Euro, depending on the purchase price.

And what can I expect for the fee?

noreply@blogger.com (German Property) — Thu, 02 Sep 2010 00:46:02 PDT

In the usual case, say for a property of 100,000 – 500,000 € a commission of around 5% will be levied. This still seems a hefty fee for an estate agent. So here's where I defend my fellow agents. Here's what you should expect for the fee:

Marketing of the investments to you, in your language.
Analysis of the investment, and its current and predicted performance.
Analysis and advice on costs associated with the running of the property.
Assistance with the legal process, to ensure the property is delivered in the right way.
Benchmarking other similar investments and highlighting pros and cons.
Selecting investments that fit your objectives well.
Organising the seller, to ensure the property is delivered as agreed and in a timely manner.
Providing general advice on financial matters and putting you in touch with trusted brokers.
Providing guidance on management of the investment and giving you options for safe transfer of management.
General advice with tax matters.
Discussing investment and eventual disposal strategies.
Advice with currency exchange when buying property in Germany, if required.

On hand in the early months of the investment, to ensure all goes smoothly [and get things on track if it does not].

The list could go on a little, depending on the needs and experience levels of the investor. So, a good deal of work and this is often shared by partner agents who take on the different responsibilities. And it is worth remembering that you only pay the fees, like all the fees I will list, on purchase and not on the sale.

Nice one. Right, go on then. What are the inevitable agent fees?

noreply@blogger.com (German Property) — Mon, 23 Aug 2010 06:23:36 PDT

I write this piece in my guise as an investor, but I also run an agency called ProVenture. So I need to justify to some extent the fees charged for transactions in Germany. Depending on the delivery of the property and its size, agents fees tend to range from 0-6% of the purchase price. So, I hear you say, I will just find the deals that are 0%, commission-free. But there is of course no such thing as a free lunch! In this case, the marketing agent will be paid from the seller and the commission is built into the purchase price. Often, but not always, this will mean that the commission charged can be a lot higher than 6% and is levied without you realising. In cases such as this, I would always ask the agent what they are being charged and [cheeky] ask for confirmation of this from the seller. If the commission is reasonable then great. If it is excessive, then you must take a view on how good the commission-free deal really is. In one aspect, this arrangement allows you to mortgage against the purchase price, but in reality this just means you are taking a 20-year loan to pay the agent. You can take a view on that as well.

Okay. Start with a rule-of-thumb

noreply@blogger.com (German Property) — Mon, 23 Aug 2010 06:22:03 PDT

An investor needs to expect to pay around 10% in transaction costs for the various agencies that will deal with the transaction from start to finish. Sounds a lot? It is, particularly if you are accustomed to property transactions in markets such as UK where costs can be as low as 1-2%, if below the stamp duty [land tax] threshold and no finance is taken. Let's look at these costs and see what goes where.

A few posts on the process of investing in Geman property

noreply@blogger.com (German Property) — Thu, 02 Sep 2010 09:57:56 PDT

Well, yes. And without wanting to scare you any more, imagine this non-film related scene: you are a yield investor, looking for value and a safe place to deposit your hard-earned money. You've seen the property prices in Germany on the internet. An apartment in the capital, in good condition, with a tenant paying good rent for 35,000 Euro? Or maybe a complete apartment block, giving a 10% net yield and finance in place. You've heard stories from fellow investors who have dipped their toe. And you want in. But wait, there must be some sort of catch? Looking back to my first investment, as a UK investor, the biggest 'catch' was the transaction costs. Let's look at them in more detail to see if the idea of investing in Germany still works for you.

Viewing Property in Germany...

noreply@blogger.com (German Property) — Thu, 02 Sep 2010 09:55:58 PDT

It's the weekend. It's a hot sunny day outside. Are you on a beach in the south of Europe sunning yourself and toying over the merits of a seventh pina colada before the business of lunch is dealt with? No, you are a property investor in a yield market. So you are in a cold, damp cellar in the old East Germany, trying to get the right german words for “where is the light switch?” to the strange-looking estate agent who followed you down the stairs with an inane grin on his face. You are in a panic, not knowing if the day will turn from a venture to make you profit for years to come, or if you are in some strange Germanic re-make of a particular scene from Pulp Fiction. Welcome to the strange world of viewing property in Germany.

Predictions on the Berlin's Property market

noreply@blogger.com (German Property) — Thu, 02 Sep 2010 09:54:41 PDT

I haven't mastered the knack of crystal-ball gazing...but it is interesting to try and predict where the rental market will go, and how fast any changes will occur. In Berlin this story is unfolding already and the gap between existing rent levels and new rent levels has widened so far that pressure is being felt in all but the lowest grade areas which are over supplied. We work with investors from all over the world who have now become part of the story as the market develops. Do get in touch with one of the ProVenture team if you want to find out if Germany could be a place for you to invest in the coming years.

Is rent low in Berlin?

noreply@blogger.com (German Property) — Thu, 02 Sep 2010 09:52:07 PDT

In Berlin, it is common place for a tenant to pay between 250-300 Euro per month for the net rent of a 50 sqm apartment which leaves the affordability on the average household purchasing power [in Berlin 2,500 Euro per month] very high. Net rents consume only 20% of household income on average in many cities. Around Europe this is typically 35-55%, leaving a very good upside to rents in areas which are in demand. Indeed rent levels are so low, even in some great quality property, that they still languish at or just above the amount paid by the government to those in receipt of income support. Rent reviews have been resisted in part by investors that are fearful of losing tenants if they exercise their ability to increase rents to the market rate, and in parts over supply has suppressed the levels achievable.

Property yields in the German market

noreply@blogger.com (German Property) — Thu, 02 Sep 2010 09:49:35 PDT

From a capital value perspective, yields in the 9-11% range (double the financing rate or more) tend to be unstable. Interest from the full range of investors is increasing as cash held on deposit returns next to nothing and alternatives are sought. As confidence builds, these yields should tend towards a level that should be considered in equilibrium, 5-7% net yield should be expected on this basis although markets tend to over-correct and yields may fall below this level depending on financing policy. The capital value prospects for investments made now are therefore very favourable. The effect of a falling yield / rise in capital values can only be exaggerated as the appetite for owner-occupation increases in the East, from a level or around 15% today to nearer the German norm of 45%. In terms of rental values, you could argue tenants have never had it so good in many cities, including the capital. It will astound investors unfamiliar with the German market to hear of the very low rents paid for high-quality property.

Overview of the German Property market now

noreply@blogger.com (German Property) — Thu, 02 Sep 2010 09:44:48 PDT

Well, banks still have memories of the losses made post-reunification but appetite is returning. Well -structured investments are attracting good financing today, albeit restricted to some extent by bank's over-leveraging in the international markets and the associated credit drought. Whilst many areas are offering quality investments in the 4-7% net yield range, and therefore in broad equilibrium in terms of cashflow, some pockets have emerged as oddities and very interesting for investors. These are the areas in which we operate, namely Leipzig, parts of Berlin, Halle (Saale), Dresden and perhaps Chemnitz. Over the last two years, we have been delivering investments which average 11.2% net yield on delivery and attract finance at an average of 76%. For the cashflow investor, times are good. Currently we are helping mainly private investors secure deals with the yield range of 9-12% net, with finance up to 80% loan to value, with fixed-rate mortages from 4%. As long as the due diligence is carefully conducted to ensure a rental yield is sustainable, and the investment property does not require significant maintenance, a good regular cashflow is assured.

Germany's Property market during stabilisation

noreply@blogger.com (German Property) — Thu, 02 Sep 2010 09:43:01 PDT

Germany went through a programme of fiscal reform and set a course for low-inflation and increased productivity. Wage bargaining was tough, and output of the prized high-value German goods increased. All parts of Germany stabilised and began the process of reform. In terms of the property market, equilibrium was found in most areas between 2000-2005. Only the smaller towns of the East, with still dwindling populations, failed to recover to some extent. The landscape of low prevailing interest rates and double-digit net yields was lade before keen investors. Initially, large institutions were making most of the hay. Firms such as Goldman Sachs bought up huge portfolios, from repossession or direct from the state. Berlin became the buzz in terms of the place to invest. Private investors joined the fray, and Berlin in 2006 saw investment from international sources reach 70% of all property transactions. Was another bubble about to be created, as in the rest of the world? To some extent, things were overdone. Property yields in the West and in the capital dropped to 3-6%, only supportable through low interest rates or demand from owner-occupiers where that demand existed.

The German property market - post Berlin Wall...

noreply@blogger.com (German Property) — Thu, 02 Sep 2010 09:41:24 PDT

What happened as a result is a familiar story of over-exuberance, albeit based on a unique event of the fall of the Berlin Wall. As investments were made through the period to 1996 or so, the performance of those investments became unsupportable. The expectation of rent levels being similar to those in the developed West were unrealistic, population fell in many cities and towns due to the pull of the more affluent West and the ability for free travel and high interest payments of the time began to bite. Many investments failed, or needed to be supported from external income to prevent foreclosure. Think about it, just as the developed world was gearing up for a decade in which property values increased by 200-300% on the back of low inflation and low interest rates, so Germany dropped like a stone. It is not uncommon to hear of over-exuberant investments to fall by 50-70% during this period. Despite the prevailing low interest conditions, particularly after joining the Euro, the incentive or ability to support these failed investments waned. Only the very toughest survived the markets of the East.

Paul is...Moving to Leipzig!

noreply@blogger.com (German Property) — Thu, 02 Sep 2010 09:39:11 PDT

I joined ProVenture Property in January of this year. Since then, I have worked very closely with the other two members of ProVenture Property - James and Mat - to provide advice and consultancy to international investors looking for a closer look at the opportunities in Leipzig and Berlin.

Leipzig is an absolutely fantastic city. The people are friendly, and the city centre itself is really very attractive. Long story short, I decided to move here! I have just spent the weekend just gone making that happen - it took a total of 12 hours to drive from London, take the ferry from Dover to Calais, and make my way through France, Belgium, Holland, and then a few hundred miles across Germany to Leipzig.

The trip itself is a little deceptive. Making your way across three countries pretty quickly, you think you're making pretty good time - but then you realize that Germany is a massive country and you've got a long way to go!

Glad it's over, although I'll be taking the more conventional route of flying next time - as all of our international clients do. Many of them come from the UK - London Stansted to Altenburg is a quick trip and then just a short bus journey from Altenburg into Leipzig City Centre. For our other international clients - (we've recently had visits from Hong Kong, Israel and Australia) then they tend to fly into Frankfurt, and then get the fast and reliable Deutsche Bahn into Leipzig.

Interest in German property during the 1990's

noreply@blogger.com (German Property) — Thu, 02 Sep 2010 09:35:54 PDT