The bad news is that property prices in Germany are high. The good news is that they are set to go even higher, panellists agreed at the PropertyEU Germany Investment Briefing, which was held in London this week.
'Pricing is expensive but there is still plenty of recovery room,' said Simon Mallinson, executive managing director, EMEA & APAC at Real Capital Analytics. 'We are just back at pre-crisis levels and prices will rise further. There is still a huge amount of capital out there, and target allocations from the US, Europe and Asia are all set to increase. Germany is riding the wave because it offers opportunities.'
Video highlights from the Germany Investment Briefing
Excess money trying to find a home will zoom in on Germany as the country is recognised as Europe's economic powerhouse and a haven of stability. 'Not only is the environment stable in Germany but realistically there is nothing but stability ahead,' said Stefan Schramm, partner at Simmons & Simmons. 'Change, if and when it comes, will be determined by an external factor.' Even the upcoming elections are not causing any flutters, because whatever the outcome, political stability is guaranteed, as well as a positive economic backdrop.
Most foreign investors tend to focus on the top seven cities, braving intense competition in order to secure a deal. 'The A cities are growing: that is where people are moving to from abroad and from the German countryside too,' said Marius Schoner, country head for Germany at CBRE Global Investors. 'B cities offer more stability, but if it is growth and dynamism you want, then you have to go to the A cities.'
Other investors who are looking for smaller assets find better opportunities away from the top cities. 'Our investors are more into active value creation rather than betting on future growth, so they opt for cash flow,’ said Alexander Fischbaum, managing director of AF Advisory. ‘They cannot find value in the A cities, so they go to B and C cities and, provided they have a good asset management team on the ground, they find that value-add is a very attractive play, especially with funding costs so low.'
Another positive for Germany is the financing environment, said Schoner: 'If you prove you can execute the plan, then financing will become available. Banks only get cautious when it comes to development finance.' Speculative financing is not easy to come by, which is why there is no strong pipeline in Germany, but otherwise capital is available for investments in A, B and C cities.
'There is a lot of money to be lent, and banks are very keen to lend for the right projects,' said Fischbaum. 'My advice would be to approach the bank early, because the underwriting processes are now longer and more detailed, and to explain your business plan in detail. If you make a strong case, then you will be surprised at how easy it is to get financing.'
