Buy Munich Property

[MunichBuyer]

"Does anyone know about Buy Munich Property (http://www.buymunichproperty.com)? The German property market now
appears to be well priced, with Munich particularly being an attractive proposition. However, speaking German is not my forte, and I'd still like to get exposure to the investment opportunities in Munich. Buy Munich Property is offering regular information just about the Munich property scene, and I was
wondering if anyone is subscribing and give me some feedback."

 

[GermanJohn]

I've just noticed, while browsing around, that Buy Munich Property is offering a free 2-week trial subscription to their weekly newsletter. You also get access to their research archive. I've just taken out the free trial - just need to supply your email address - and newsletter seems to offer a mix of news, info and tips to the German, Munich property scene. Seems more aimed at the BTL type investor.

 

[deutschinvest]

I noticed an interesting report in this week's Buy Munich Property newsletter, Sept 18th 2007, regarding the current state of the German property market:

" The German institute of town planners (Institut für Städtebau) has recently reported on house price trends in Germany (Der Spiegel, August'07). In particular, it reports that house prices are continuing to see upward pressure, particularly in the cities, due to a general housing shortage. On average, the cost of a house in the west is €173k (+1.2% increase over the year),whilst in the east the average price of a house is only €100k (+1.4%). Due to the VAT hike earlier in the year, as well as the recent high price rises in raw materials, construction machinery and energy costs, even fewer houses are now being built currently. In Q1 of 2007, planning applications were down by 44%, with applications for the building of detached and semi-detached houses reducing by 55%. The result is that about 100,000 too few housing units are now being built each year. Munich is by far the most expensive city in Germany: the average price for a detached house is €379,800 with a modest increase of 4.3% over the year. This compares with an average price of €249,300 (+8.6%) in Berlin and €295,100 (+9.1%) in Hamburg. If the German economy continues to pick up, these upward pressures on house prices can only increase. "

Does anyone have any comments on the reported relative house price rises in Berlin & Hamburg, as compared with Munich, whether these are likely to be sustainable, and whether Munich prices are likely to see similar higher growth rates in the future?

 

[Lewis]

I noticed an interesting report in this week's Buy Munich Property newsletter, Sept 18th 2007, regarding the current state of the German property market:

" The German institute of town planners (Institut für Städtebau) has recently reported on house price trends in Germany (Der Spiegel, August'07). In particular, it reports that house prices are continuing to see upward pressure, particularly in the cities, due to a general housing shortage. On average, the cost of a house in the west is €173k (+1.2% increase over the year),whilst in the east the average price of a house is only €100k (+1.4%). Due to the VAT hike earlier in the year, as well as the recent high price rises in raw materials, construction machinery and energy costs, even fewer houses are now being built currently. In Q1 of 2007, planning applications were down by 44%, with applications for the building of detached and semi-detached houses reducing by 55%. The result is that about 100,000 too few housing units are now being built each year. Munich is by far the most expensive city in Germany: the average price for a detached house is €379,800 with a modest increase of 4.3% over the year. This compares with an average price of €249,300 (+8.6%) in Berlin and €295,100 (+9.1%) in Hamburg. If the German economy continues to pick up, these upward pressures on house prices can only increase. "

Does anyone have any comments on the reported relative house price rises in Berlin & Hamburg, as compared with Munich, whether these are likely to be sustainable, and whether Munich prices are likely to see similar higher growth rates in the future?

This comparison is not as easy as it sounds or as easy as some would like you to think.
I'll try to keep my answer simple and brief.
Comparing Berlin/Dresden/Leipzig/Rostock with the likes of Hamburg and Munich is like comparing the home counties to say Newcastle and Sunderland ten years ago.
It could be pointed out to you that maybe you should check how much ground the north east has made up on the home counties in the interim period.
This may be an indicator of how you could expect these eastern cities to rise in comparison to the western cities.
Now Germany may follow in the pattern of the UK or it may all fizzle out.
If I had a crystal ball I'd supply you with the answer right now - but I don't and neither has anyone else.
What do you think is likely to happen given what you already know?
I have made my decision not just by listening to analysts and statisticians but by going to the places in question, viewing, listening, looking at the job ads in the local papers (sometimes tells a different story to the one you will hear from Snodgrass, Smyth and De-Humidifier, the world famous economic forecast experts.
Most analysts would have had Whitehaven, Cumbria as an absolute basket case location twenty years ago. A forward thinking local council, some good marketing men and a marina later - What do we have? Go and take a look!

 

[MunichBuyer]

With the competitive devaluation of major currencies, high levels of major stock markets, and problems in many real estate markets, it's not too clear where to put your wealth. The German property market has been in the doldrums for so long now, that wealth risk seems minimal. A recent Buy Munich Property article said something along the same lines:

QUOTE
It’s good to read with stock markets gyrating
that German housing continues to offer the best form of
wealth guarantee apart from cash itself, according to the
Hamburg Institute of World Economy. In a recent report,
it states that for the past 16 years, German property has
offered a 2.57% year-on-year increase in both rent and
property values. Also, according to a recent (Oct’07) Die
Welt survey of 60 foreign investors in German property,
two-thirds still consider the German property market
undervalued, 55% expect rents to continue increasing,
and 97% intend to increase their investments. Munich
remains at the top of the tables in terms of attractive
investment areas, with the Institute of Wealth Creation
predicting property prices rising by at least 70% through
to 2020
UNQUOTE

 

[moluet]

BEST PROPERTY - MUNICH - TOP LOCATION -
For further information don't hesitate to contact:

[email protected]
+49 - 171 - 5085186

 

[MunichBuyer]

Buy Munich Property seems to have re-invented itself as Invest German Property, but anyway still have interest in Munich - just like me

Their recent market update on May 6th indicated overall 2% mkt rise, which was actually less than I'd like, but seems reasonable given the price falls and poor sentiment in most of W.Europe.

Since we last looked at the Munich market, overall
sentiment remains positive, but some concerns due to the
credit crunch and lower Euro-zone growth rate have
emerged. The latest housing price guide for 2008 from
the IVD (Immobilienverband Deutschlands) claims that
German-wide price gains of 2% will be visible, with a
new assurance that housing prices have stabilized and
have re-reached the level of 10 years ago. Munich
maintains its status as Germany’s most expensive city
with average square metre prices of €2,010, and in
common with larger cities, rent levels increasing in those
areas closest to the city centre. The average rent level in
Munich has now reached almost €11 per square metre.
An April’08 article in Munich’s daily paper, Die
Tageszeitung, also claims consistent price increases,
although again specific inner city areas are enjoying the
best gains

 

[neustria]

The German institute of town planners (Institut für Städtebau) has recently reported on house price trends in Germany (Der Spiegel, August'07). In particular, it reports that house prices are continuing to see upward pressure, particularly in the cities, due to a general housing shortage. On average, the cost of a house in the west is €173k (+1.2% increase over the year),whilst in the east the average price of a house is only €100k (+1.4%). Deutschinvest
******************************************************************

The figures that you give here are well under German inflation for the last 12 months, and so certainly DO NOT constitute 'upward pressure'.
Prices considered to be stable over the last 12 months in Germany...at best.

Neustria

 

[MunichBuyer]

Yes 2% is below inflation. I suppose the point is that the 2% figure is an overall German average, and hides hot spots (as well as the very weak areas). Much of rural Germany (esp. in the East) must be seeing negative growth (poor demographics and also movement of people to employment centres),which means the hot spots are working hard to give an overall positive result. Due to poor reporting it's tough to get good and reliable localised mkt price data, but German cities, such as Munich/Berlin, tick all the right boxes and in the long run look a very good buy at the moment.

 

[neustria]

Yes, for the most part I agree with you Munich Buyer, and in the current international context, an overall market which is holding steady is doing alright. Germany should fare better than others in a downturn because prices have not risen nationally as much as in other nearby markets (UK, France, Spain, etc.),and the economy is holding up pretty well also, despite the strong euro. I still think though that it is too early to step in now, because there are many uncertainties still out there and some could lead to unpleasant surprises. The exchange risk for those outside of the eurozone is one of several.

Neustria

 

[MunichBuyer]

Interesting article in the FT.com about the relative sentiments in the European property markets. Germany holding up well - mainly due to the fact that it's not gone up in 10 years. This poor performance obviously puts the dampener on any expectation for future rises, ie past performance is a "good" indicator of future performance... I suspect the German property market (Munich and other cities) will surprise, and revert to the mean performance, ie go up significantly.

QUOTE
German house prices have remained flat or fallen over the past 15 years or so. Unsurprisingly, almost half of German owners expected the price of their house to remain unchanged over the next five years. Nevertheless, 40 per cent of Germans surveyed expected an increase over the same period
UNQUOTE

Europeans optimistic on property prices

FT.com / World - Europeans optimistic on property prices

 

[Nest Egg]

MunichbBuyer, your points about the market being very poor for the past 10 years are correct although I believe we are close to the point of change of this property market compared to the rest of Europe.

The macro economic factors suggest the German economy is just starting to warm up after many years of regeneration due to the reunification. With property markets espeacially in the former East, such as Magdeburg and Leipzig at such low prices compared to the former West, these are hot spots ready for the taking. Yields are great and it's always important to rememeber that property is always in the main going to be driven by this factor.

Investors want to see the asset can manage itself... with yields at 4.5% in Berlin with no real industry surrounding it, I would question but don't discount other locations as every property market is local. It's the local economic drivers, infrastructure, amenities etc that will have a long term impact on the growth and prosperity of your investment.

 

[neustria]

Re. If the German economy continues to pick up, these upward pressures on house prices can only increase. " Deutsch Invest
************************************************************************
Actually recent news from Germany suggests that the country is indeed being affected by the credit crisis which originated in the US last year. It is now thought by commentators that the German economy has tipped into recession. From now all, all bets are off concerning German real estate. It will be best, I believe, to wait until the full amplitude of the crisis is known, before taking new positions in this market. This may well take another 12 months.

Suggestions that housing starts have dropped in the country, leading to an increased housing shortage and therefore to higher prices are misguided. For why should builders pull back when the market is booming, and prices are rising? The answer is that the economic slowdown is now here, are its effects are now directly affecting housing. Be prudent!

 

[Lewis]

Re. If the German economy continues to pick up, these upward pressures on house prices can only increase. " Deutsch Invest
************************************************************************
Actually recent news from Germany suggests that the country is indeed being affected by the credit crisis which originated in the US last year. It is now thought by commentators that the German economy has tipped into recession. From now all, all bets are off concerning German real estate. It will be best, I believe, to wait until the full amplitude of the crisis is known, before taking new positions in this market. This may well take another 12 months.

Suggestions that housing starts have dropped in the country, leading to an increased housing shortage and therefore to higher prices are misguided. For why should builders pull back when the market is booming, and prices are rising? The answer is that the economic slowdown is now here, are its effects are now directly affecting housing. Be prudent!

Be prudent is a valid warning for all investors in all markets anywhere in the world,it is not something just to be dragged out because some areas of Germany are not as good as others and the fact that the economy has slowed somewhat in Germany.

A couple of months ago there seemed to be a general and steady rise throughout Germany. There has been an undeniable blip. My feelings are this is not merely a temporary blip - Germany will not be immune to the world malaise.

It will, almost certainly, however ride out the storm in better condition than the likes of the the UK, I would be surprised if the bottom in Germany is as deep as most of the industrialized world or as prolonged.

The recovery when it comes is likely to outpace the recovery elsewhere in Europe.

Of course - I don't have a crystal ball and may well end up with egg on my face.

This year I have travelled to Italy, Germany, USA, France and Poland talking to top people in their fields. I have been visited by same from Canada, Germany, Croatia and Eire seeking my input.

I have found confidence (with some justification) to be the lowest in Italy. The consensus amongst all was that Germany was best placed to weather the storm.

Where I disagree with neustria is whether or not to continue to purchase property in Germany.

My company has taken on other developments/areas due to localized economic factors even though the nations are suffering.

Some areas of Germany still feature highly because the value for money in those areas still surpasses most.

The greatest factor inhibiting my activities in Germany has been the inability to find the level of finance I was able to find clients 3 months ago. Germany had only just started to explore the levels of finance taken for granted throughout the world when the brakes were re-applied by the banking world.
The demand from my client base has not diminished - my ability to find the sort of finance they have come to expect has. Maybe never to return - as I said at the start - crystal balls are in short supply

 

[neustria]

14 December 2008

Hello Teepeeseller,

I saw a recent map of Germany with projected property pricing and in most all areas prices were falling, except notably in the southernmost Länder (Bavaria, Baden-Würtemmburg). I recently saw also that CONSUMER confidence was very low in Germany compared to the other European countries. This last point might or might not spill over into real estate sentiment but it certainly can't help things.
Europeans everywhere are feeling poorer these days as the equity markets have cut their savings by 50% or more. If I could afford to invest now - I would still be very wary. The effects of future severe economic disorder in the USA - and here I am alluding to projections of a total collapse of the US currency - would have unfathomable effects in the whole of Europe, Germany included.

All this said, I read your post with interest and generally agree with it. Since Germany has not had a nationwide run-up in the prices of property, there is no bubble to burst here. This fact alone should instill a certain degree of confidence, compared especially to other neighbouring European economies (France, Spain, UK - just to name a few that I am somewhat familiar with). Property prices in these countires have taken a severe beating and no letup appears to be in sight.

 

[Lewis]

14 December 2008

Hello Teepeeseller,

I saw a recent map of Germany with projected property pricing and in most all areas prices were falling, except notably in the southernmost Länder (Bavaria, Baden-Würtemmburg). I recently saw also that CONSUMER confidence was very low in Germany compared to the other European countries. This last point might or might not spill over into real estate sentiment but it certainly can't help things.
Europeans everywhere are feeling poorer these days as the equity markets have cut their savings by 50% or more. If I could afford to invest now - I would still be very wary. The effects of future severe economic disorder in the USA - and here I am alluding to projections of a total collapse of the US currency - would have unfathomable effects in the whole of Europe, Germany included.

All this said, I read your post with interest and generally agree with it. Since Germany has not had a nationwide run-up in the prices of property, there is no bubble to burst here. This fact alone should instill a certain degree of confidence, compared especially to other neighbouring European economies (France, Spain, UK - just to name a few that I am somewhat familiar with). Property prices in these countires have taken a severe beating and no letup appears to be in sight.

Absolutely correct - where there is no bubble it cannot be burst. For those willing to negotiate hard, be patient, be clear what they want and do not want Germany is still the best all round location (safety is important) I currently deal in.
You know I don't think I can remember the last time I spoke to an upbeat, optimistic German (Their pessimistic humour is very funny)
I heard on the news last night that at Heathrow airport the pound had actually dropped below the Euro - Who could have foreseen that a year ago!?

A year ago my German friends were complaining the Euro was slipping against Sterling and now they are complaining the the Euro is too strong and the British tourists will not be coming to Germany next summer. Some people are difficult to please.


For my part the further the German prices fall the more I like it. I will buy another couple of houses near Berlin in January and a small block of flats in Leipzig which will come onto the market in February (If the owner is not too greedy).

I only have one property in the UK and would not consider it as a viable investment option especially as one of the major banks announced its findings that we are only half way through the downslide and can expect another 15% loss in the next 12 months as job losses beging to accelerate.

I have invested in shares of blue chip companies that have nose-dived in recent months but which show the chance of eventual recovery. A small gamble (I don't take too many risks) which I think will pay off in the next ten years.

I have contacts in the right places in the USA - Not one feels the USA is going to bounce back quickly from this problem. There are localized conditions which make certain areas worth considering for investment but most cities are suffering very badly and there is no end in sight. Total collapse of the US economy is possible (anything is I guess) but unlikely. The world cannot afford to let the USA backslide too far and the internal market of the USA is immense and has the ability to self heal. I'm sure there will be a lot of pain in the USA but they will climb out of this mess eventually. This eventual climb out will produce some extremely wealthy individuals who have seen opportunities where most of us do not see or are too scared to go - this has always been so.
The next five years will be scary and exciting - I will be content with being safe and not losing sleep.

 

[neustria]

Recent figures published in the Daily Telegraph.

Average housing prices in the UK 2008 to date: -13.9%
Average housing prices in Germany 2008 to date: -1.4%

 

[neustria]

I read recently (see above) that overall prices for real estate in Germany had fallen by 1.4% year on year. In the present context this is a good result even if it does confirm that Germany is not being spared in the current economic downturn.

 

[mart123]

I read recently (see above) that overall prices for real estate in Germany had fallen by 1.4% year on year. In the present context this is a good result even if it does confirm that Germany is not being spared in the current economic downturn.

Wonder how that breaks down the former i.e. is the former East decreasing and hiding stability in prosperous cities e.g. Munich, Frankfurt, Hamburg and Stuttgart.

I am still positive on Munich, population is growing and the city believes that some 7000 new apartments are required per year. Before the crash some 4000 were being built, now developers can't get money and even less are being built.
Interest rates are now at a level where the rental price and Mortage + a small repayment are the same. With decreasing interest rates even more people will be able to buy their own home.

Finally rents in Munich haven't decreased as yet.

A theory for discussion:

Western Germany will not see price decreases of more than 7% and this will be recovered quickly ( by 2010). 60% of people rent, and the German investors who own the majority of these properties are patient and have them as a long term investment. (If you hold the property for 10 years and sell there is no capital gains tax on the profits). Even a reduction in rent can be set against tax. Only where an investor has lost his job and run out of savings will their be pressure to sell. The owners of flats on Germany tend to be companies or high net individuals who use the depreciation 2% per year as a tax reduction strategy.

comments?

 

[neustria]

Good reading, this is definitely one of the better threads on this forum...