German Property Newsletter
Germany: From Gloom to Boom
January 2007
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In this issue you will find:
-- 1) European Power House in Full Revival
-- 2) Mega Deals & Global Investors
-- 3) Your Turn: 2007, Year of Opportunities
-- 4) Tell Us What You Think!
Thank you for subscribing to our monthly Germany Newsletter. Welcome to the first 2007 issue.

We are happy to report an exciting and successful start into the year for our German operations and investors in the German property market.
Today, and in each following issue, we will bring you economic news, developments in the German property market, as well as a sneak peak of our best upcoming investment opportunities. In short... all the tips, news and factors that can make your investment in Germany more profitable.

So, make yourself comfortable, grab a coffee (or tea) and read on...

1) European Power House in Full Revival
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Strong growth

Germany’s economy had a fantastic finish to 2006. With annual GDP growth coming at 2.5% this was the best year for Germany since 2000 and maintained the country’s position as world’s 3rd largest economic power.
Despite a VAT rise from 16% to 19% business confidence remains high. By the end of 2006 it has reached the highest level since 1991. Private consumption continues very strong as well. Economists expect the January VAT increase to dampen spending for a month or two, after which the confidence of German consumers is to return to the high levels of late 2006.

2006 was a strong year for trade too. Germany presented the highest growth figures among the G-7 countries, with exports increasing by 6.4% and imports by 3.1% (QIII 2006).

Couple this with the coalition government’s success in bringing the deficit under the 3% EU guideline for the first time this decade, drastic cuts in unemployment, and Germany’s six month presidency of the EU with chancellor Angela Merkel emerging as an increasingly strong and respected global leader, it’s easy to see why many observers are starting to speak about a new boom for this power house of Europe.

Remarkable unemployment drop

In line with the economic boom the labour market has also turned spectacularly. German unemployment fell under the 4 million mark in late 2006 (down by over 500,000 y/o/y). This exceptional development has positively shocked analysts – given that in early 2005 unemployment had surpassed 5 million.

The strong job creation is due to economic growth as well as the labour market reforms started by the previous (Schroeder) government. Easier hiring & firing, liberalization of temporary work, and cuts in generous unemployment benefits have all had a positive impact on German companies’ willingness to take on staff and on workers recognizing the advantages of employment over social handouts.

Berlin ahead

While jobs have been created in all German states, the capital Berlin has ranked 2nd best in employment growth. In particular due to its successful switch from an industry based economy to its new reputation as a business services, IT, research and creative industries stronghold. Over 15,000 new jobs were created in Berlin (QIII 2006) and unemployment rate is down by 1.6% y/o/y. (Unemployment numbers are now lowest since 2000.)

2) Mega Deals & Global Investors
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The advantages of the German property market – considered (including by OECD) the world’s most undervalued and, after 13 years of sharp decline, now at a turning point – along with the economic recovery have attracted unprecedented attention of world’s largest investors.

Over the last 18 months we have seen a huge surge in investment into German residential and commercial property. The global players have been paving the way for private investors. Several hundreds of thousands of units have changed hands and the interest shows no signs of slowing. See below details of some of the largest transactions in last 18 months.

• Goldman Sachs – 4.5 billion euros invested in German commercial property (the biggest deal of 2006)
• further five commercial acquisitions of 1+ billion euro each
• Deutsche Annington - purchase of 138,000 housing units
• Fortress - 30,000 housing units (after previous acquisition of 82,000 units)
• Cerberus/Goldman Sachs - 22,800 housing units
• Oaktree - 18,000 housing units

Investment in Germany’s residential and commercial property is at a record high. In 2006 investment in commercial property alone more than doubled to 45 billion euros (figures: Jones Lang LaSalle).

With the positive signs the market is showing, it is no surprise further mega-acquisitions are expected this and next year. Commercial rents have started rising last year - the first increase after five years of sharp decline. A similar development (of increasing rents) is seen in residential property in all larger German cities.

This year has already accounted for several large transactions, the most significant being GE Real Estate’s first German investment, the purchase of a German commercial property fund for 420 million euros.
Among other major acquisitions this month is a 127 million euros investment by Hotel group Accor SA (owners of Sofitel and Novotel brands among others) purchasing 52 hotels across Germany.

Now that the major players have cleared a path for the private investor, many have been waking up to the fantastic potential Germany is presenting; with its rock-bottom prices and strong rental returns.
3) Your Turn: 2007, Year of Opportunities
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So what does all this mean for you as an investor?

With the continuing economic recovery in Germany and more and more major blue chips and global private equity getting involved in the property market, causing a slow awakening of Germans’ interest in home ownership, we should see exceptional capital growth in coming years.

With property values in Berlin and other areas down by up to 60% from their early 1990’s levels, and lower than in larger Central Eastern European cities, the German market presents an unprecedented opportunity in Europe.

But... where to buy for profit?

True, there are still high vacancy rates in some German cities. Many areas, on the other hand, feature a super strong rental demand and increasing rental values. So, picking the right property in the right area has never been more important. As every property investor has ingrained in their mind it still comes down to location, location, location! This is where an incisive understanding and first hand experience in the market are invaluable.

We currently have several opportunities in top areas of the cities tipped to be the best places to invest this year. Individual apartments in desirable neighbourhoods from as little as 30k GBP; apartment blocks in good locations from 250k GBP to several millions and yielding as much as 12% in some cases, as well as various commercial opportunities. Please see Berlin property, German property - for further details.

Alternatively email us at info@alphare.net detailing your requirements and we will be happy to provide you with all the information you need to break into this exciting and lucrative market.

4) Tell Us What You Think!
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We would love to hear what you think of this issue of our newsletter. We hope you find the information useful and wish you best success in your investment activities. And of course, if you have any suggestions for upcoming issues that you'd like to share with us, please send them!
Just e-mail us at: info@alphare.net
We are looking forward to seeing you next month. In the meantime, if you have any questions or would like to request further information, please email or call us at our offices.

Best wishes,
Your team at Alpha Real Estate Investments
Berlin property, German property, Slovakia Property -
81 Oxford Street
London W1D 2EU
Tel: + 44 (0) 207 851 3570
Fax: + 44 (0) 207 851 3571

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Bob Sheth - Administrator @ PropertyCommunity.com
You can contact me by using the Contact Us link at the bottom of the page. Or email me on bob [at] moveforward.com.