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Really, the collapse of Lehman Brothers in September of 2008 was the start of all this, but credit warnings and bank failures were happening around the world from 2007. We’ve been in this now for 5 years, and still searching for a way out in Europe. Whilst the USA in trademark style has got on with the job of wiping off the bad loans from their books [and printing a lot of money as the same time…] the Eurozone has really been in denial for many years you could argue. OK, the member states are more disparate in their economies and the cycle than say the states of America, but an acceptance of a problem and solutions to those problems have been very slow in coming due to the various vested interests. It seems now that as lending and national banks need to re-finance their loans taken on in the dubious times of the credit binge of the noughties, the boil is finally having to be lanced and we could be in for some imminent “solutions” such as a re-shaping of the Eurozone or a tighter fiscal and political union between the Eurozone member states. Things are moving fast now, and perhaps as you read this then a solution has already been found. Well, that would be good news, but I expect more muddling on will occur for some time yet until the markets have enough of it all.
In this article, we will look at some of the various scenarios which could play out in the coming months, and how these could affect investment in German real estate.
Review of Last Forecast
It was exactly 12 months since we wrote the last article on the subject of the Euro crisis, and I reference that article here (follow this link to read it)
Our key points in that article in June 2011 were:
Inflation – Inflation is a likely outcome in Germany in the coming years, to balance competitiveness and pricing across the Eurozone. Perhaps 3-4% will be the new norm.
Property Prices – prices are likely to increase in the short to medium term, perhaps becoming “golden age” for property investment.
Interest Rates – Germany needs higher base interest rates, perhaps 3-4%, but will not get them.
So, how accurate were our predictions 12 months ago, against those points?…and where do we see the next developments…
Finance Update
With the German bond rates reaching record lows, mortgage rates for investors continues to come down which is great news when looking to securing a record low rate and controlling cash flow. According to our finance expert based in Leipzig, Herr Markus Ponitka, today’s rates are at a 5-year rate of 2,68% p.a. and 10-year fix rate of 3,23%. This compares against rates 12 months ago of 5-year fixes at 4,45% p.a. and 10-year of 4,94%. Loan to Values [LTVs], for international clients are still in the range of 60% for standard-property and/or average location up to 80% for good properties in good location. Markus reports that the domestic mortgage market, like the international market, is much busier in the last 12 months as the market in Germany continues to develop. German Tax residents get loaned in line with the above, although 90% LTV can sometimes be possible in some cases. This shows there is very low cost liquidity in the market, a pre-cursor of continued prices support or growth
Busy in Leipzig this month
Leipzig on the web…
– New air routes between Leipzig and Turkey
– 21st AUTO MOBIL INTERNATIONAL Car show in Leipzig 2-10th June in Leipzig
– Leipzig Bach Festival – June 7 to 17, 2012
Latest Property Offers
Leipzig
545,000€ | Leipzig
Potential Yield: 9%
Type: Residential
Approx. Size: 940 sqm
Located in the “up-and-coming” district of Plagwitz to the west of Leipzig is this large apartment house with 1 commercial unit [Insurance agent] and 18 apartments.
The area of Plagwitz is formerly the industrial heart of the city, and now is undergoing regeneration of its warehouses and canal system into some of the most demanded residential property in the city. The property was built in 1902 and refurbished fully with new roof, windows, heating and electrics in 1995. The property has been steadily maintained since. The property has a generous ground and garden area, with 3 parking spaces to the rear of the property. Currently, 18 out of the 19 units are let.
180,000€ | Leipzig
Potential Yield: 12.35%
Type: Residential
Approx. Size: 436 sqm
Given the Stadt’s increase in social rent levels in 2011 to 4.22 EUR psm, this property is under-rented, showing an average level of
3.63 EUR psm. With close tenant management in the initial period of ownership, rent levels can be raised, achieving a yield of
approaching 12%.
Magdeburg
1,150,000€ | Madgeburg
Potential Yield: 8.3%
Type: Residential
Approx. Size: 1249 sqm
This investment opportunity is a mixture of commercial and residential units located in Stadtfeld Ost, a popular and highly desirable area at the heart of the city.
850,000€ | Madgeburg
Potential Yield: 8.42%
Type: Residential
Approx. Size: 1053 sqm
This property is mainly a residential offering – constituting two separate buildings – located in Stadtfeld-Ost, a highly desirable area, well sought after by both residential and commercial tenants. The front building is made up of ten units, which includes two taken by the commercial tenant, and the remainder are all residential sized between 39-67 sqm. The rear building house eight residential units, sized between 43-53 sqm. All units are let, the majority at above 5 EUR psm. The building also houses four garages and nine car parking spaces, all of which are let.
Wuppertal
240,000€ |
Potential Yield: 8.24%
Type: Residential
Approx. Size: 304 sqm
Situated in the bustling city of Wuppertal, this residential property, set over 4 floors, contains 5 apartments. is located on the border of Wuppertal’s most affluent neighbourhood, Brill. Built circa 1910, this apartment building is the perfect example of an old Wilhelmina style property, renovated to modern living stands, whilst keeping its original features.
316,000€ |
Potential Yield: 9.27%
Type: Residential
Approx. Size: 374 sqm
Situated in the bustling city of Wuppertal, this residential property, set over 5 floors, contains 7 apartments. is located on the border of Wuppertal’s most affluent neighbourhood, Brill. Built in 1910, this apartment building is the perfect example of an old Wilhelmina style property, renovated to modern living stands, whilst keeping its original features. Over the last 5 years, this building has never had any extended void periods
935,000€ | Wuppertal
Potential Yield: 8.73%
Type: Residential
Approx. Size: 1911 sqm
Situated in the bustling city of Wuppertal, this large residential and commercial property, set across 3 adjacent buildings, with 26 residential and 6 commercial units is located close to the famous cable car, numerous green areas and in the central location of Wuppertal-Oberbarman..
Built in 1957 it underwent renovations to the façade and balconies in 2011. The apartments all have decentralised gas heating. Currently there are 7 vacant apartments and a vacant commercial unit in the rear building. In addition, the are 11 parking places, 8 of which are vacant.
368,500€ | Wuppertal
Potential Yield: 10.21%
Type: Residential
Approx. Size: 739 sqm
Situated in the bustling city of Wuppertal, this property contains 7 residential and 2 commercial units is located close to the famous cable car, numerous green areas and in the central location of Wuppertal-Langerfeld. Built in 1909, it is in need of some renovation to modernise the apartments are tenants leave, but the structure and façade are very sound. The heating is presently gas centralised and the windows are PVC double glazing.
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