Saxony, East German Dynamo - Jully 2007

totallyproperty · #1 09-08-2007, 01:49 PM

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Germany Newsletter Saxony, East German Dynamo
July 2007
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In this issue you will find:
-- 1) German Economy Surprises Again
-- 2) Saxony - East German Dynamo
-- 3) Hidden Gems in Untapped Markets
-- 4) Tell Us What You Think!

Despite a few negative comments by British financial press German growth positively surprises world's economists once again. You can read this and more in our monthly news roundup. In today's special feature we will look at the top performer among east German states - Saxony, with its world famous capital Dresden and second city Leipzig.

And, in case you've missed our recent newsletter issues, they are available for you here:
http://www.totallyproperty.com/german-property-news/

1) German Economy Surprises Again
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With huge losses on the London stock markets this month we have seen some very creative reporting on German economy. While world's economists have praised Germany and upped the country's growth forecasts for 2007, we have seen some of the British financial press reporting as negatively as possible. So to begin with, in this section of our newsletter we're going to dispel some derisions.

First up is the fantastic news that GDP forecasts for 2007 are up dramatically this month. Yet, oddly, this tremendous 50% increase in the estimate for the year has been seen by certain media as an indication of an economic slowdown!

Now let's not forget that 2007 GDP growth forecasts for Germany stood in January at only 1.7%. Today most analysts expect the figures to come in at 2.6%, almost rivaling last year's fantastic growth of 2.8%. So why have some British sources called this a plateauing of growth... possibly trying to steer capital away from foreign markets and bolster the flagging London exchanges (400 points down in July so far)?

Judge for yourself:

The International Monetary Fund (IMF) announced Germany to be one of the countries with the highest increase in economic growth prospects. Compared to April, IMF has increased its forecast for German GDP growth by 0.8%, to a strong 2.6%.

German economists also also joining in the euphory and seeing the economy in far more positive terms at last. German Institute of Economic Research (DIW) is now predicting a 2.6% GDP growth in 2007 (up from earlier estimate of 1.7%) and a similarly strong 2.5% increase in 2008. DIW sees domestic consumption as increasingly strong factor in German growth, as well as forecasting a further sharp drop in unemployment below the 10% mark, down to 8.8% in 2007 and 7.9% in 2008.

IfW (Institut fuer Weltwirtschaft) sees the German economy even more rosy and predicts a spectacular 3.2% growth for this year. Finally, OECD's forecast for Germany comes at excellent 2.9% for 2007.

So, with world's economists seeing another strong growth year for Germany, EU's largest economy looks to become one of the fastest growing in Western Europe once again.

The positive economic development is having a significant impact on the labour market, seeing unemployment drop to 8.9% (July 2007), down from 10.5% a year ago. (2007 has so far seen 671,000 less unemployed than the previous year.)

Let's not forget that at the beginning of this year the German rate of VAT increased to 19% (from 16%) which effectively made all German goods 3% more expensive overnight. This was expected to slow economic growth temporarily. The VAT was raised in part to fund a scheduled 10% drop in corporation taxes for the end of the year.

So for this year to come in, unexpectedly, with such a strong economic growth is certainly not bad news. In fact the Germans are over the moon with their current economic position knowing that next year the country is going to be even more competitive in terms of international business.

Industrial production has also seen a 1.9% increase this month, despite a record breaking Euro/$ exchange rate.

Meanwhile, GfK (Gesellschaft für Konsumforschung) announced an increase in its consumer climate index for August from 8.5 to 8.7 points. The traditionally cautious German consumers are on a spending spree thanks to a favourable development of the labour market and growing employment, according to GfK researchers. Property market news

Regardless of what the broad sheets have been saying here in the UK, the world's major blue chip investors have been showing no signs that they agree. Most notably we have seen the eruption of a frenzy after Allianz announced that it is selling a portfolio worth nearly four billion euros of German real estate. This is currently being marketed by Rothschild and firms like Goldman Sachs, Morgan Stanley and Tishman Speyer are among those vying to acquire the $4.8 billion portfolio.

And this is not an isolated deal...

Develica Deutschland announced that it had added a portfolio worth 270 million euros to its 1+ billion euros worth of current holdings.

A property fund of Deutsche Bank in conjunction with italian investor Pirelli Re have acquired the property holding company BauBeCon (Berlin, Hannover and Kiel flats) from Cerberus. The buyers have announced plans of renovation and redevelopment of the portfolio.

DIC Asset AG has bought commercial real estate worth 155 million euros.

Gagfah SA moved on a portfolio of residential property in Berlin (1,700 apartments) worth 90 million euros.

Quinlan Private acquired 50% of a 60 million euro office and hotel complex in Frankfurt.

The Ascott Group signed a sale and purchase agreement with GBI Gesellschaft für Beteiligungen und Immobilien- Projektwicklung to develop and sell a 146 unit serviced residence property in Munich for of 21.78 million euros.

Overall total transaction in German property came to a massive 26.4 billion euros in the first six months of this year, a whopping 34% up on the same six months last year. 72% of this came from foreign sources who obviously agree with us that the market is showing a potentially explosive value.

So to get involved with this market for the first time or to develop your exposure to some of the exciting German opportunities, don't hold back and contact us today!

2) Saxony - East German Dynamo
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Up until recently all investors' eyes have been on Berlin. However, Germany is a big place and apart from the capital several other areas are appearing as potential lucrative investment destinations. After many months of research it is Sachsen (Saxony) that, in our view, is ticking all the right boxes.

Saxony, and in particular its capital Dresden and second city Leipzig, is a true economic dynamo among the east German states.

Several hundred miles south of Berlin and benefiting from very similar conditions, Dresden's (and in the longer term Leipzig's) property market should be poised for a very lucrative future.

Leipzig

The second city of Saxony has benefited greatly over the course of the last 5 years. With many manufacturing and industrial based businesses basing themselves in the area, Leipzig has seen good economic migration and along with Dresden and Berlin is one of the few cities in Germany to have a growing population.

Recently firms such as BMW, Amazon and Porsche have moved manufacturing and distribution centres to Leipzig. The city boast Germany's second largest rail hub (after Berlin) and along with Dresden sits almost in the centre point of Europe.

There are certainly opportunities in Leipzig, but investors have to be careful of where to buy (more so than normal) with still very high levels of vacancies in particular in less sought-after locations and across unrenovated or lower standard properties. Leipzig's tenants are selective and demand higher quality, and investors should focus on fully renovated buildings with modern layouts, balconies (where possible) and good to very good locations.

Dresden

The capital of the federal state of Saxony and economic, cultural and tourist centre of the region, Dresden is benefiting from the same factors as Leipzig but with a decidedly different twist. Dresden is now seen as the Silicon Valley of Germany after having attracted numerous high tech and innovative businesses. AMD, GlaxoSmithKline, ABB, Infineon Technologies, Alstom and many more have made Dresden their base of operations for Germany and Central Europe.

Unlike Leipzig its not only raw business conditions that have attracted these companies into the area. With its nearly Mediterranean climate, centuries old history and high quality (yet low cost) of living Dresden is rated as being one of the best places to live in Germany. Importantly for incoming investors, Dresden also offers a highly skilled population, in particular thanks to its renowned University of Technology with nearly 40,000 students.

This of course combined with the rapid influx of highly paid jobs has led to a rapid increase in population (apx 10% in last 5 years) that is expected to continue until 2030.

So with prices significantly below the construction costs we have the same situation as seen in Berlin, with ever increasing demand and no new supply. This has been exacerbated by the ongoing demolition of the communist panel blocks (Plattenbau), and should be a good recipe for a strong price appreciation. Importantly for investors, Dresden's rental market is remarkably strong in all segments.

Even though there has been little margin for the residential developers in recent years, commercial construction is booming with the increasingly wealthier Dresdners demanding new shopping centers, hotels, business parks and leisure facilities.

Financially the governance of Dresden is in a very advantageous and unique situation for Germany. Dresden sold much of its social housing to Fortress in 2004, completely freeing itself of all debt. This has led Dresden to have greater flexibility to improve the city without having to meet interest payments etc. That of course can only be of benefit to the prosperity of the city, which in turn is an ideal backdrop to a strong property market.

Fortress hasn't been alone in their drive into Dresden's property market. Other large into investors in Dresden are: Conwert Immobilien AG (from Vienna), Patrizia Immobilien AG, TLG Immobilien (both German),fund manager Inovalis (France), Mitco Estate (global investment firm), and many more.

So while the Dresden market is relatively untapped and hence offering unrivalled opportunities at present, the early investors are already starting to take advantage of these favourable conditions. Billions of euros of investment capital are now pouring into this exciting city.

All in all, the outlook for Dresden is very positive for the next decade. This we feel should reflect very well on a property market that is displaying tremendous value and capital growth potential, paired with stronger yields than those found in Berlin and other German cities.
3) Hidden Gems in Untapped Markets
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After thorough research and assessment of numerous property deals in Saxony's main cities, we will soon be launching a range of exceptional investment opportunities in what has been fast developing into East Germany's top performing region. Apartments in highest quality buildings and most sought- after locations, benefiting from rock-bottom prices and high yields will be offered exclusively to our clients in the coming weeks.

To register your interest and receive a full information pack email us at info@alphare.net. A range of high quality apartment blocks and commercial properties from 350k GBP to 300 million are also on offer in main German cities.

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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