Germany. Good overseas investment

kennyFTB

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Just a quick question regarding the german property market. Would it be worth investing in property there. Seems quite cheap, well, relative to here anyway at the moment.
 
Most places seem cheap relative to here .....at the moment anyway !

If you do a search you'll find informative discussions re German property.
 
Just a quick question regarding the german property market. Would it be worth investing in property there. Seems quite cheap, well, relative to here anyway at the moment.

When has cheap ever equalled good value?

Bulgaria is cheap? Does it make it good value because its cheaper than Ireland? No!

If your going to invest in Germany then the place to do it is the South which isnt the cheap area. The east is cheap and for a reason, no one wants to live there!
 
Kenny, if the FTB refers to First Time Buyer, remember that if you buy abroad you will lose your FTB status in Ireland also.
 
Germany is undervalued because property prices haven't risen there in ten years, a lot of which is to do with overseas investors' money has been flowing into risky emerging which simply do not have the economic fundamentals to support the investment. It also because Germans haven't opened their market enough to overseas investors, and rightly so as they have wanted to avoid the hype that is causing problems in emerging markets. However, the aging population there and low level of home ownership has led to Chancellor Merkel to open up the market there so that home ownership can help ease the country's pension burden, in doing so she has been compared to what Thatcher did in the Uk in the 1980s.

When thinking of Germany you should view east and west as very different animals. The former East Germany, including Berlin, is more risky and akin to an emerging market; the capital doesn not have the corporate markets that cities like Frankfurt, Hamburg and Munich have, because when the country was split the major financial services and industry grew up in these cities. Berlin is €60bn in bebt and as such as been selling of its assets including housing, however, major investors there such as Goldman Sachs and other US hedge funds have started to pull out of Berlin because they are not making the returns thex expected. Elsewhere in the east of the country there is huge levels of depopulation happening due to high levels of unemployment. It's true yields of 10% are possible in places like Dresden becuause property is cheap, but to me this is a false prophet because people fail to remember that yields are only temporary and if a tenant moves out in these locations then the property is going to be harder to fill than in cities in the west that have large numbers of young professionals due to the corporate employers based there. Thankfuly the west of Germany hasn't suffered from the hype and bull that has surrounded less mature markets. Go for property that is fully tenanted to reduce your risk.

Geordie
 
Germany is undervalued because property prices haven't risen there in ten years, a lot of which is to do with overseas investors' money has been flowing into risky emerging which simply do not have the economic fundamentals to support the investment.

Geordie is crying in his (German) beer.

He's blaming (a lot of) the lack of a rise in German property prices on "overseas investors money ..flowing into risky emerging" markets.

That's like blaming the low value of Skodas on the fact that people want to buy other cars.

The lack of a rise is due to more basic fundamentals, such as low GDP growth, slowly rising wages, etc
 
I know that Germany has been seen as the best destination for European property investment for several years now but there is mounting evidence that the economy is beginning to slow. Moreover, a quoted German residential mortgage lender (Interhyp) shocked the stock market last week when it warned of a sharp drop in demand for residential mortgages.

Do your research.
 
I know that Germany has been seen as the best destination for European property investment for several years now


??

That one passed me by in that case.

Yes - it has been hyped - but what market hasn't ??
 
Sorry, that is what I should have written. I am by no means a fan of direct investment overseas but ff all the great overseas property destinations, it seemed to me that Germany was touted as being a relatively 'safe' place to buy property.
 
Yes - ou are correct there.

Recently it was considered to be the safest place to invest by some economic bosy.

THat said - what does safe mean?

If it means you won't lose money then i would guess that is correct.

Like - prices can't reallyfall much more given they have been static for the last decade.
Although the property in some western cities such s frankfutry isn't nearly as cheap as the east.
It's still pretty cheap though.

I viewed one recently in a very good area of frankfurt (Bonheim ??).

It was a gorgeous 3-bed - very spacious - really reall nice and it cost €300k.

You wouldn't get it the sticks here in ireland !!
 
geordie, when you advise to go for fully tenented property, I assume that the idea is to benefit from the good rental returns. the figures in the ads look good; and they are good.
however you can't avoid paying the german tax-man 25 % of you net-income as non-natiunal and after that comes the irish tax-man. the idea of the "double taxation agreement" is misleading because you will not be exempted from the irish income tax for the german rental income but you will get a relief.this relief is computercalculated and turns out to be very minimal against the tax that you have already paid.
so this is very painful and I have shed many tears over this. if you or anybody else has an answer to this dilemma I would be very grateful indeed.
 
geordie, when you advise to go for fully tenented property, I assume that the idea is to benefit from the good rental returns. the figures in the ads look good; and they are good.
however you can't avoid paying the german tax-man 25 % of you net-income as non-natiunal and after that comes the irish tax-man. the idea of the "double taxation agreement" is misleading because you will not be exempted from the irish income tax for the german rental income but you will get a relief.this relief is computercalculated and turns out to be very minimal against the tax that you have already paid.
so this is very painful and I have shed many tears over this. if you or anybody else has an answer to this dilemma I would be very grateful indeed.

Yes you are right about the tax situation but if setup a LuxCO this will offset these irritations. Qwertyuiop is correct (major respect), the market has a huge choice at considerably cheaper rates, again as mentioned the country must be split in two, East and West. Commercial property is the best bet as residential has strict tenancy laws however on the upside, returns can be great and tenants tend to be as good as gold. If buying a block of apartments, make sure to see the minutes from tenants association meeting etc to be sure you are not inheriting a couple of mad tenants with out of control children or cats – you have a right to see these (all blocks have associations with regular meeting).

The view on German property should be a no brainier as REIT's are set to be introduced from 2009 forward and this will add stimulus to the market. Coupled to this both government and other large German companies are now restricting or terminating rent subsidisations to employees and again this will inevitably led to greater liquidity and demand too. Also the banking system is very regimented at present and not liberal like the UK and Ireland, although moves are in motion to open up the banking system to the ordinary citizen for mortgage access etc. This will however take a few years to fully filter through.

Geordie (I think) mentioned Goldman Sachs plus Hedge Funds pulling out of German property; I never heard about this, although I stand to be corrected. Many banks or Hedge Funds are having problems completing deals due to the liquidity crisis but this is a short lived phenomenon see http://www.forbes.com/markets/feeds/afx/2007/09/17/afx4122853.html . As far as the German economy being in bad shape I would say it is one of the best placed in Europe at present. It has a strong manufacturing base with cheap relative wages and high productivity. Its goods are known for quality and will therefore take advantage of the growth story in China and India that has serious legs. It is responsible for over 10% of the world trade export market whilst not being reliant on the American economy and has the 5th highest global GDP at $2.6trillion (not bad for 84m people). It is the financial centre of Europe with one based on sound principles and although London who has surprised many in the last number of years (on some counts has overtaken New York as the financial centre) its market is going to suffer big time with any credit fall out, as its market is so reliant on credit derivatives for Hedge Funds and Buyout Firms. The latest IFO Institute monthly confidence index for Germany dropped last month for the fourth consecutive month but this is due to many factors, primarily amongst others, worries in Global markets about the subprime debacle in America (how big is the toxic debt) and the follow on credit squeeze (which will last another 6 to 10 months) – but like all countries this is an issue for any companies’ liquidity etc and things will eventually ease.

People mention de-population, that is a fact but like Ireland it attracts loads of immigrants from Poland etc. Finally do not write off the East entirely, Dresden was one of the most beautiful cities in Germany in the 1930’s (plus one of the richest - Saxony region once prosperous), it still has a lot of its attractiveness and is having major monies spent on improvement. It is 75 miles from Prague and is a heck of a lot cheaper with similar fundamentals – there are areas to buy that are stable with middle class incomes to back security of rent etc. The question you have to ask about a lot of these areas is. Will it be the same in 15 years or will they be better or worse? I have my mind made up on where it‘s going, but everyone is entitled to an opinion.
 
Isn't Germany the most productive nation on earth (despite China taking the throne for a while)?
 
Great post Michael.

In relation to the above...

I assume from your post that you have a financial stake in commercial property in Germany and possibly thru a syndicate. (If you do then i am in the same situation as you) I understand too the upside to the introduction of REITs in Germany (in 2009 i think ?) but can't quantify it. If you have any insights or links to what benefits the introduction of REITs may bring i'd be grateful if yuo could post them.

Yes it has helped add stimulus and large injections of liquidity (to you and me cash cash cash) into the market through Private Equity Firms and Financial institutions and is running in a number of countries such as the UK, Australian and Japanese market (Japan Reits trade at a P/e of 30 so that shows you the levels of cash). For more general information see http://en.wikipedia.org/wiki/Reit or for specific information on German Reits http://www.moneyweek.com/file/12060/should-you-buy-into-european-property.html . I have a financial stake in Germany through syndicates. Germany introducing the G-Reit, tax efficient way for large companies to control their property portfolio, such as Siemens, Bose etc.
 
Will they definitely introduce REITs or is it still a bit up in the air ?

Nothing is certain but it is a distinct possibility. Many other countries are introducing same to increase liquidity in its property market and help large companies maximise the tax efficiencies of their working portfolio.
 
Hi Michaeldes:

Am interested to hear your opinions on Germany as you have first hand experience there.

Can you comment on the management companies operating there. I recently sold an apartment in Budapest (at a loss) primarily because there were no reliable management companies to look after the property. I am looking at Germany and feel this factor should be different there as renting is wide spread and part of the culture. Also people tend to rent for long periods and to treat the apartment as their own home. Are you happy with the management of your property(s)? Do you find their approach professional?

I don't want to get burned again and want to check this out as much as possible so any information would be gratefully appreciated.

Frank
 
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