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Germany Newsletter From Renting to Ownership
June 2007 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
In this issue you will find:
-- 1) High Confidence & Sustained Growth
-- 2) From Renting to Ownership
-- 3) Wealth of Opportunities
-- 4) Tell Us What You Think!

Welcome to the June issue of our German property newsletter.

Today we take a closer look at the Merkel government's plans to boost owner occupancy in Germany. A gradual shift from renting to ownership is one of the main reasons for strong capital growth expectations, making this topic of interest to all current and future investors in German property.

And, in case you've missed our recent newsletter issues, they are available for you here:
http: //germany.alphare.net/newsletters.php

1) High Confidence & Sustained Growth
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Positive record

With several states elections scheduled for next year Angela Merkel's government is hoping that their economic performance to date will boost their position. Further economic reforms are rumored to be on the cards including a further weakening of the tenant's position and strengthening the drive into ownership to further stimulate economic growth.

Angela Merkel has a lot to be confident about. Delivering the strongest period of economic growth for the last two decades and the lowest unemployment since October 2001 (Federal labor agency). Unemployment figures this month show a further fall by 0.4%, that's another 161,000 people in employment.

It's not only Merkel who's confident on the coming years. The European Central Bank is displaying a hawkish tone on interest rates, which would be suicide for Eurozone's economy without a sustained growth in Germany.

A German think tank announced that the economy could grow by more than 3% this year and they see no end to the trend. "Nearly all indicators paint a very positive picture of the current economic situation," the Kiel-based Institute for the World Economy, or IfW, said in its report.

Businesses in Germany are also understandably confident with the Ifo Institute's gauge of corporate moral remaining close to its highest level since the euphoria of 1990 (reunification). Property market news

This month again - with us risking sounding like a broken record - major investors have been forcefully carving out some very serious positions for themselves in the German market. Detailed below are some of the largest transactions seen this month.

Earlier in the year London & Capital launched a pan- European fund. After quickly deciding there was little point in spreading their capital around they renamed the fund the German Property Fund. Quote: "We had seen economic growth in Europe including the UK, which Germany wasn't participating in. These countries have also had active property markets. Yields in Britain are keen now - we've seen a great deal of compression, as we have in Spain and France. Germany has been the forgotten man in Europe, but now the economy is improving and we're seeing better business conditions."

IVG Immobilien (the largest quoted real estate firm in Germany) announced its launch of a 2 billion euro G-REIT for next year. This is one of ten massive G-REIT funds that should all be launched by the end of 2008 totaling 10 billion euros of assets. That's a lot of property!

Teesland's (UK fund management group) fund raising of 370 million euros for German property is currently under way. The plan is to expand this to 2 billion.

Henderson entered in to a JV with Fuer Immobilien AG; they are currently looking to raise 1 billion euros for acquisitions and development of shopping centres in Germany.

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For the commercial investors amongst you we have an exciting retail complex in the north east of Berlin. With offers expected around 8 million euros and an excellent yield of 8.8% it is certainly worth a look for anyone serious about commercial property. (Email info@alphare.net for details)

* * *

International Investment Bank (Bahrain) announced an acquisition of an entire portfolio of commercial properties for 73 million euros in Munich.

CMC Capital Ireland has invested a further 100 million into Germany.

ING acquired an office building in Frankfurt worth 28.5 million, the third property it has added to its fund portfolio. Axa Property Trust has bought a retail property in southern Germany for 24.7 million euros.

And it's not only Western investors who are seeing the opportunity. Deutsche Bank is now handling around $1 billion of purchases from Arab investors. Jones Lang La Salle went on the record saying they expect a further $20 billion worth of purchases this year.

So it would appear the forgotten man of Europe is forgotten no more!

While all major German cities have been in the focus of international investors, the low prices and high yields in the capital have attracted the most attention. "Demand is huge. More than ten billion euro was invested by foreign buyers in Berlin property last year." (BBC)

The time has never been better to take the plunge and get involved in this rapidly growing market. As always our team here have been working round the clock to source and vet the best possible opportunities in the strongest re- emerging market globally that we know of.

So whether you're looking for a single apartment, apartment block or larger commercial property, contact us now at info@alphare.net detailing your requirements. We will be happy to help you stake your claim on this dynamic market.

2) From Renting to Ownership
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Germany as a country has a rental culture with the national split between renting and owning approximately 60/40. The level of ownership in Berlin is more like 14% at present, and this has grown over the last few years! Without a change of attitude the market would never be as dynamic as the UK's of the last 15 years. So in this edition of our newsletter we're going to look at what's being done in Germany to cause a shift to higher ownership.

Firstly, why change?

The Merkel Government has seen the economic stimulus of having high levels of property ownership in much of the EU (Spain, Ireland, UK, France, Denmark, Holland etc). A higher level of ownership means a greater level of renovations, improvement and furnishings which in turn increases demand for consumer goods. It also results in a greater level of borrowing (mortgages), stimulating the financial sectors (banks, insurance etc).

Of course as people's lives develop they generally earn more and having paid off part of their mortgage they tend to upgrade and move to a larger or nicer property and the process repeats.

Above all else though Germany as a country has the same population dynamic as the UK. With the retired baby boomers soon to outnumber the working population this will put immense strain on the government pension system and pensions will almost certainly be reduced over the coming years. The government recognizes that someone who owns their home outright requires a lot less income to live than one who pays rent!

History repeats itself

As many of us may recall we had a strong rental culture here in the UK until a certain lady changed the face of the country forever. Love her or hate her, Margaret Thatcher changed the property culture here in the UK dramatically. Through the privatisation/sale of social housing, which in turn led to the right to buy (ex-council) she brought people into home ownership from the bottom up.

As you may recall the German government sold billion upon billions of euros worth of property to major institutions (Morgan Stanley, Goldman Sachs, Fortress etc), some of which are already offering tenants the right to buy (of course at a profit). Sounds familiar?

Even the Germans with their strong rental culture don't tend to look a gift horse in the mouth when offered their home at a price that makes owning cheaper than renting.

Many analysts expect a shift from 40% to 60% ownership in the next decade. This effect should be much stronger in Berlin. This of course would have a tremendous effect on the German economy and I think we all know what this will do to the value of properties in the country! Government level intervention

The federal government has been bringing in several pieces of legislation to effect a change in this situation. Some of these are detailed below.

German Retirement Savings Act

Since 2002 the state-sponsored retirement provision (Riester-Rente) has made it possible to draw between 10K to 50K euros from accumulated retirement savings to build or purchase housing to be owner occupied.

KfW subsidies and ownership programs

On 1st January 2005 KfW (Credit Institute for Reconstruction) in conjunction with the federal government initiated a new series of improved programs which allow people numerous subsidised loans either to build new homes or upgrade existing homes. These loans are granted if the purchase and renovation works increase the energy efficiency of the building. Although strict conditions must be met, the KfW loans can be used to finance large parts of a purchase or renovation at more favorable rates than from high street lenders. Creation of owner-occupied property is additionally promoted.

Informing the public

There is now in place an information bank for private individuals (with numerous leaflets and brochures) to educate the German public on the benefits and ways to enter the property market. These are available from various government departments.

Eviction of tenants for owner occupation

There have also been changes to the laws dictating when you (landlord) can evict a tenant if you wish to live in the property. It now only takes a 3 months notice if the tenant has been in the property for less than 5 years, 6 months for 5 to 8 years and 9 months if they have been in the property longer than 8 years.

Development Areas

If you're domiciled in Germany and purchase a listed property or a property in a designated development area that is a recent renovation or new construction you can offset a proportion of the cost against your income tax. This special depreciation allows offsetting 9% of the costs for 8 years and subsequently 7% for a further 4 years. Development areas are all over Germany and large parts of Berlin including in the popular Prenzlauer Berg and Friedrichshain districts.

While it won't be overnight for Germans to realize the full benefits of home ownership, attitudes have already started to change in the last few years. Thanks to government incentives as well as institutional and private investors and landlords offering easy access to ownership, Germany is expected to see a significant shift away from the strong rental culture seen in the country today.

3) Wealth of Opportunities
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Berlin, boasting some of the lowest property prices in Europe, has been the #1 destination in Germany for global property investors and institutions.

This remarkable affordability coupled with a very strong rental market and solid yields, as well as the strong recovery of the German economy, create opportunities that cannot be found in any other European property market.

To help you enter this lucrative market while it still represents exceptional values we have sourced a number of excellent investment opportunities for you.

Apartments in the most sought-after locations of central Berlin, in high quality renovated buildings, starting at as little as 30k GBP for studios, 45k GBP for spacious 1 beds and just over 60k for large 2 bedroom units.

With all apartments let at strong 5% yields and prices remarkably lower than the area's average this is an opportunity to buy quality properties in top Berlin locations at truly bargain values.

To receive a full information pack email us at info@alphare.net. A range of high quality apartment blocks and commercial properties from 300k GBP to 80 million are also on offer.

Please email us your requirements or visit http://www.alphare.net for further details. We will be happy to assist you in taking advantage of this exciting and lucrative market.

4) Tell Us What You Think!
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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,

Andrew Stanley
and your team at Alpha Real Estate Investments
Berlin property, German property, Slovakia Property -


Alpha Real Estate Investments
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email: contact@alphare.net
phone: +44 (0)207 851 3570
web: http://www.alphare.net
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Bob Sheth - Administrator @ TotallyProperty.com
You can contact me by using the Contact Us link at the bottom of the page. Or email me on administrator [at] totallyproperty.com.