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Survey: Residential Real Estate Beats DAX and REX
Over the past 22 years, residential real estate has proven an attractive and non-volatile investment for private and institutional investors. In its 25 June issue, the BÖRSEN ZEITUNG discussed a survey about returns on residential property investments in Germany (“Wohnimmobilienrenditen in Deutschland”) that bulwiengesa conducted on behalf of the German property company Wertgrund Immobilien AG. The survey juxtaposed total returns on real estate investments in 127 German cities with the stock exchange indices DAX, REX (German bonds) and MSCI (stocks from 23 industrialised countries) for the years between 1992 or 1999, respectively, and 2014. “In recent years, the favourable funding environment has hugely increased the relevance of residential real estate for investors. Yet the purpose of our survey was to undertake a long-term analysis and identify the ways investment opportunities performed across several cycles,” as Thomas Meyer of Wertgrund explained.
He added that a look at the analysis findings highlights the widening gap between rental yields and the returns of ten-year bunds (German government bonds). While the rate of return on ten-year bunds was 4.49% in 1999, subscribers were paid no more than 0.39% by the end of 2014. During the same period of time, the average rental yield paid by residential real estate in Class A cities manifested a much less steeper decline, dropping from 4.32% to 3.45%. “German bunds are considered a risk-free investment. So the risk associated with residential real estate needs to be compensated by a higher rate of return. It is this risk premium that has grown at an accelerating rate in recent years. By late 2014, the returns paid by residential real estate investments were already 3.06 percentage points higher, which is an unambiguous result,” Meyer was quoted to have said. Simultaneously, he added, the risk associated with residential real estate has barely shifted. “In 1999, residential real estate in the largest German cities was more or less as attractive as they are today. Even during the crisis years of 2008 and 2009, rental yields stayed above 4%,” said Meyer.
Between 1992 and 2014, residential real estate generated a total return of 7.9% p.a. in Class A cities and 8.3% p.a. in Class B cities, whereas the MSCI World yielded a total return of 6.9% p.a. and the REX 6.3% p.a. Only the DAX was about two percentage points higher at 10% p.a. “The 22-year synopsis also highlights another forte of directly held residential real estate. In addition to the long-term market rent, the investment was subject to steady appreciation,” according to Meyer. For instance, the capital growth for residential real estate over the above period equalled 3.63% p.a. in Class A cities and 2.93% p.a. in Class B cities.
Ernst & Young: German Insurance Companies to Raise Real Estate Ratio
German insurance companies intend to raise their portfolio allocation for real estate. This was reported by the BÖRSEN ZEITUNG on 24 June and by the FRANKFURTER ALLGEMEINE ZEITUNG on 26 June, citing the latest Trend Barometer for Real Estate Investments by EY Real Estate. The idea is to raise the real estate ratio from a current average of 7.6% to 8.2% in 2015. It was already raised from 7.3% to 7.6% in 2014. Insurance companies plan to use real estate to ensure their continued ability to honour their long-term warranty commitments to the insured despite the low rates of interest paid on their investments. Notwithstanding a slight recent resurgence in interest rates, the majority of investment companies do not expect the low-interest cycle to end in the foreseeable future. The real estate category topping the shopping list was said to be retail, followed by residential, office and logistics. Dietmar Fischer of EY Real Estate cited the sound consumer economy and the success of big retail multiples to explain the fact that the interest in retail real estate in the insurance industry has noticeably increased over the past three years. The office segment, by contrast, is associated with a particularly high tenant default risk or difficulties with subsequent lettings, even though it has been the leading segment of the overall investment market for many years. Investment vehicles still show the highest share of directly held property among their portfolio assets at 55%, followed by closed-end funds with a 50% share, and open-ended institutional funds under the German Investment Act at 45%.
German HNWI Raise Real Estate Share of their Portfolios
According to the Capgemini World Wealth Report, German high net worth individuals expanded their real estate commitments last year, whereas the real estate ratio of the portfolios of the wealthy elsewhere in the world declined. This was reported by the IMMOBILIEN ZEITUNG on 25 June. Wealthy Germans now keep 25% of their investment assets in the form of real estate, implying a year-on-year increase by three percentage points. This would mean that real estate has passed equities as class of investments. Inversely, the real estate share of HNWI portfolios worldwide has slipped from 18.7% to 17.6%, compared to an equities share of 26.8%.
Rent Freeze Introduced in North Rhine-Westphalia
As DIE WELT (24 June) and the SÜDDEUTSCHE ZEITUNG (26 June) reported, the rent freeze was to become effective in 22 municipalities with strained housing markets in the German state of North Rhine-Westphalia on 01 July. The rent control law is to apply primarily in the cities of the Rhine valley and in major campus towns. By contrast, it does not apply to the housing market in the Ruhr which is plagued by massive voids. “A Hands-on Approach to the Rent Freeze – Handling Open Issues”: This will be the subject of a special event hosted by the BERLINER IMMOBILIENRUNDE panel on 14 September. Request your copy of the program by e-mailing us at: info@immobilienrunde.de.
IW German Economic Institute: Rent Freeze Should be Limited to Certain City Districts
On 25 June, the IMMOBILIEN ZEITUNG covered the latest symposium hosted in Berlin by the IW German Economic Institute. IW reportedly seized the occasion to suggest that the rent control measure commonly referred to as “rent freeze” be introduced for relevant urban districts only, rather than for entire cities. The divergence of rent performance among the various districts of Berlin and Cologne, for instance, is too great to qualify for a catch-all approach, or so the argument went. Dr. Philipp Deschermeier of the IW was quoted with the proposal to use rental indices with more recent data than currently used, and to differentiate beyond the breakdown into simple, medium and good locations. According to his analysis, asking rents increased by 58.4% in Berlin-Neukölln but only by 8.1% in Berlin-Buch.
Condos in Germany’s “Big Seven” Cities Subject to Strong Price Growth
As the FRANKFURTER ALLGEMEINE ZEITUNG reported on 23 June, condominium prices in Germany’s seven largest municipalities rose by more than 40% over the past five years, according to a survey by DZ Bank. The average price hike in these cities – these being Berlin, Düsseldorf, Frankfurt, Hamburg, Munich, Cologne and Stuttgart – was 25%, or so the paper wrote. The steepest rental uplift since 2010 was registered in Berlin at 32%, followed by Frankfurt with 26%, then Munich and Düsseldorf with 23% each. However, it was only during the past five years that rents clearly outpaced consumer prices. For 20 years prior to that period, rents lagged behind.
Trendy Districts in 2015: Hamburg, Stuttgart, Frankfurt, Dresden
In a series called “Trendy Districts 2015,” the HANDELSBLATT profiles the most dynamic residential areas in Germany. On 22 June and 26 June, it covered the real estate markets in Hamburg, Stuttgart, Frankfurt and Dresden. The articles reported that rents rose by an average of 16% over the past five years. According to a survey by JLL and Westgrund, the purchasing power increased by 24% whereas rent rates grew by 42%. Condominium prices were said to have gone up by 86% since 2006. The paper went on to say that new flats are needed to ease the strain on the housing market, but also acknowledged that nearly 7,000 units had come on-stream in 2014, the highest completions rate in years. Prices also went up in Stuttgart. The previous week, as the paper wrote, Deutsche Annington paid 1.9 billion euros to a syndicate led by Patrizia for a portfolio of 20,000 flats in Stuttgart and its greater metro area. The priciest German city for tenants, according to the HANDELSBLATT, is Frankfurt am Main. Here, the average household spends 28% of its net income on rent, more than in any other of the 15 cities whose trendy districts were discussed. Dresden was presented as a city of model character, boasting demographic growth, rental uplift and even a housing construction boom. CG Gruppe, for instance, is developing 520 flats in two downtown projects, one being the estate “Residenz am Postplatz” on the eponymous square in Dresden, the other the “Mary Ann Apartments” complex. The paper also wrote that Christoph Gröner had been awarded the last vacant plot next to Frauenkirche the previous week, and intends to develop it at a cost of 115 million euros. Surveys conducted by Dr. Lübke & Kelber were cited with the assessment that Dresden is one of the locations with the lowest risk in the East German states, second only to Potsdam. “Housing Construction in Hamburg -Latest Market Figures, and the 10 Most Interesting Development Projects”: This will be the subject of a special event hosted at the Hotel Le Méridien in Hamburg on 02 December 2015. Request your copy of the program by e-mailing us at: info@immobilienrunde.de.
Precautions against Real Estate Bubble: BaFin to Set Lending Benchmarks
The Financial Stability Committee of the Federal Ministry of Finance has recommended that the Federal Government create “national macro-prudential instruments for the residential property market” as a precautionary measure designed to deflect certain risks inherent in the low-interest cycle. To this end, it was suggested that additional rights of intervention be vested in the Federal Financial Supervisory Authority (BaFin), as both the BÖRSEN ZEITUNG and the HANDELSBLATT reported on 01 July. Specifically at issue is the creation of legal bases the BaFin may use to introduce minimum requirements for the debt funding of residential real estate. Options considered by the Financial Stability Committee include a minimum equity stake or a minimum repayment rate. It is planned to have the necessary legal bases in place by the end of 2016. According to the papers, the experts believe this to be a robust safeguard to curb the risk of excessive indebtedness and of price bubbles on the real estate market so as to limit financial stability threats.
Many Landlords Ignore Rent Freeze
According to a report the FRANKFURTER ALLGEMEINE ZEITUNG carried on 03 July, few landlords in Berlin pay the rent freeze any mind. This is the reported outcome of a survey the BMV Berlin Tenant Association conducted by sampling internet portals and polling its members. The findings appear to suggest that three out of four quotes exceeds the cap of 10%. This is explained not by exemption clauses built into the law but by an absence of punitive action in case of non-compliance. After all, landlords need not worry about being fine if in breach, but merely face the risk of a confrontation with individual tenants. “A Hands-on Approach to the Rent Freeze – Handling Open Issues”: This will be the subject of a special event hosted by the BERLINER IMMOBILIENRUNDE panel on 14 September. Request your copy of the program by e-mailing us at: info@immobilienrunde.de.
Munich: Short Supply in Logistics Real Estate
As the IMMOBILIEN ZEITUNG reported on 02 July, the short supply in floor plate in the Munich metro area caused warehouse and industrial property lettings to take a dip of around 6.5% down to 120,000 sqm in H1. At the same time, prime rents even in the suburbs climbed to 6.50 euros/sqm, according to figures released by Realogis. The floor space shortage is expected to persist, the paper added. Realogis was said to assume that the year-end take-up will total between 230,000 sqm and 250,000 sqm.
Foreign Investors Attracted by German Retail Real Estate
The FRANKFURTER ALLGEMEINE ZEITUNG wrote on 01 July that foreign buyers spent nearly six billion euros on German retail property during H1. This is roughly three times the amount invested during the same semester in 2014, and the highest mid-year figure since 2007. The paper cited an estimate by BNP Paribas Real Estate. It went on to report that buyers of German retail property are realising an initial yield rate of 3.5% at the moment, compared to just 2% in the United Kingdom.
Persistent Misjudgement
by Dr. Rainer Zitelmann
Angela Merkel and the other EU policymakers were in for a big surprise or indeed in for a shock that last Friday in June. Sigmar Gabriel said he was “appalled” by the behaviour of Tsipras. No one had expected anything like it, the media said unanimously. But the amazement only reflects the colossal prior error in judging the Greek Government. The FRANKFURTER ALLGEMEINE SONNTAGSZEITUNG got it quite right when writing on 28 June:
“Rarely ever have governments and political observers been as fundamentally misguided as with their judgement of the incumbent Greek Government. Following the general election on 25 January, the majority of them expected the incoming Prime Minister to tone down soon enough and forget about the bulk of his campaign rhetoric. But that is not what happened.” Thus wrote the FRANKFURTER ALLGEMEINE SONNTAGSZEITUNG on page 26.
On 02 February, right after Tsipras’ victory at the ballot box, I included an emphatic warning in this very newsletter not to misjudge the incoming government. Here is what I wrote at the time:
“Moderate politicians across the ages have always underestimated the irrational momentum of ideologists. For one thing, this is because they themselves are used to thinking along more or less rational lines. Secondly, it is quite normal for them to ignore their campaign promises once they are in office. So they project their own behaviour – mistakenly so – onto ideologists like Alexis Tsipras and his economics professor from the radical-left. History teaches us: Whenever extreme ideologists were about to seize power, moderate politicians always calmed their nerves by arguing that ‘things won’t be as bad as they sound now’. Once in power, or so they hoped naively, the extremists would come to their senses and back away from their twisted theories. They expected realistic policies to take the place of campaign-trail bombast. For European policymakers, the time has come to wake from their daydreams.”
This is what I had to say in February 2015 – and I’m sorry to say that events have borne me out. It is terrible to realise that any sensible person could have known five years ago, at the outset of the “Greece bailout,” how this thing would end. At the time, EU policymakers believed temporary financial aid would soon fix the problem. It proved to be another colossal error. Was there no way to tell what would happen? Oh yes, there was. More than five years ago, in February 2010, I wrote verbatim in this newsletter:
“Since the bailout will be associated with painful stipulations for Greece, it is easy to see how the Greek people will respond: Nationalist and socialist resentments against Europe and particularly against Germany will be fuelled. The blame for the necessary austerity measures will be put on others – although Greece has long lived above its means, and cheated its way into the Eurozone – meaning that other European countries, specifically Germany, will get the blame. While the Euro was actually meant to expedite the political unification of Europe, the path currently pursued will result in the division of Europe and in massive domestic strife in the Eurozone. So the bailout of Greece is just another one of these ‘unavoidable’ measures that contains the germ of future crises and calamities in it.”
Sad to say, everything I wrote in February 2010 came to pass in the exact same way during the five years since. Let me recall what Angela Merkel promised on 28 February 2010: “We have an agreement that rules out the option of bailing out other nations.” Quite right, so we do. But the agreement was broken. In the intervening years, the EU member states or the ECB spent several hundred billion euros on “Greece’s bailout”, more than has ever been spent on a debtor bailout in the annals of mankind.
Why go to such trouble? Why spend thousands of hours negotiating? Why earmark billions in aid money? Greece is worse off today than it used to be. Economically and politically, Greece is a failed state. There is no positive outlook – neither with the euro nor with the drachma.
For the sake of comparison: How would you rate the prospects of a company with the following characteristics:
The company no longer has a viable business model.
It lags hopelessly behind its competitors.
Rather than blaming itself for the situation, it squarely lays the blame on others.
It consistently refuses to cut costs.
It hasn’t got a single idea for a new product.
It is over its ears in debt.
The management has delayed filing for insolvency for years.
The management has repeatedly cooked the books.
The management is inexperienced and completely out of touch with reality in its actions.
The management pours abuse on the company’s noteholders.
Would you keep lending money to such a company or guarantee its debt?
But actually, Greece is not even the problem. On the contrary: The euro would be much, much weaker if the eyes of the market players were not collectively trained on Greece. The true issues involve Italy and France. As soon as market players become aware of the fact, the euro will take a nosedive. Accordingly, I remain as convinced as ever that it is a good idea to keep a major part of your money in US dollars.
Read also Rainer Zitelmanns Finance Blog.
Recommended Reading – by Dr. Rainer Zitelmann
New Developments in Goal Setting and Task Performance
Locke, Edwin A.; Latham, Gary P., New Developments in Goal Setting and Task Performance, Routledge, New York / London 2013, 664 pages.
This is the finest scientific book on goal setting that I have read to date. Its subject is the connection between setting challenging objectives and goal attainment. Of enormous significance in this context is the goal setting theory developed by the work’s editors, Edwin A. Locke (University of Maryland) and Gary P. Latham (University of Toronto). The goal setting theory is, in a nutshell, a motivation theory that is supposed to explain “what causes some people to perform better on work-related tasks than others” (p. 3).
In their introduction to this monumental anthology, Locke and Latham summarise the findings of a large number of studies conducted on the subject during the 1980s. About 400 empirical studies that were done before 1990 confirmed two findings above all:
There is a linear relationship between the degree of goal difficulty and performance.” Locke found that the performance of people with the highest goals exceeded that of people with the easiest goals by more than 250 percent (p. 5).
Specific, difficult goals lead to higher performance than no goals as well as vague, abstract goals such as ‘do your best’.” 51 out of 53 studies conducted up to 1990 demonstrated “the benefit of setting a specific, high goal” (p. 5).
The basis underlying this insight was highly plausible even in 1990 – the goal setting theory was developed inductively through studies involving 40,000 participants in eight countries, both through field studies and experiments (p. 11).
High and specific goals are so important because they focus the individual’s attention on “goal-relevant activities” and because they enhance the intensity and temporal duration of the effort the individual will make to attain it. People with high specific goals work harder and longer to accomplish them than those who work without such goals (p. 6).
In their anthology of 37 essays, Locke and Latham document the progress that science has made on the subject in the years between 1990 and 2010. During this time period, another 600 studies were done that confirmed the key assumptions of the goal setting theory and showed its usefulness in a larger number of domains (p. xi).
In their chapter on “stretch goals,” Steve Kerr and Douglas LePelley discuss the question how difficult the goals should be in order to achieve optimal results. “Compared to easy goals, difficult goals are far more likely to generate sustained enthusiasm and higher levels of performance. However, this finding comes with an important caveat, namely, that the goals, though difficult, must be seen to be achievable by those who are supposed to attain them” (p. 21).
On the one hand, they argue that high, meaning unattainable goals could have the opposite effect because they result in frustrating experiences if people repeatedly fall short of the mark. On the other hand, the example of General Electric where Jack Welch applied the strategy of “stretch goals” goes to show that it can be quite stimulating to set “impossible” goals. The authors cite Welch who concluded “we have found that by reaching for what appears to be impossible, we often actually do the impossible; and even when we don’t quite make it, we inevitably wind up doing much better than we would have done” (p. 29).
Albert Bandura is the founder of the “self-efficacy” theory, and contributed a chapter on the subject to the book. He points to the connection between self-efficacy and the magnitude of the goal that people set for themselves: “Those who were dissatisfied with the substandard performance but judged themselves efficacious to meet the challenge redoubled their efforts… Those who judged themselves inefficacious to meet the challenging goal and couldn’t care less about their mediocre performance slackened their effort and just coasted along apathetically” (pp. 149-50).
“People who are beset with self-doubts about their capabilities do not go around setting challenging goals for themselves and sticking for long in the face of difficulties to the goals adopted. People’s beliefs in their capabilities influence the level of goals they set for themselves. The stronger the self-efficacy, the higher the goals people set for themselves” (p. 151).
An approach labelled “mental contrasting” by Gabriele Oettingen, Marion Wittchen and Peter M. Gollwitzer has proven particularly effective in attaining lofty goals. “Mental contrasting of a desired future with obstacles of present reality” is an effective self-regulation strategy for attaining goals, as a number of psychological experiments is said to have shown (p. 523). The authors cite evidence proving that “mentally contrasting a desired future with the reality that impedes its realization will create selective, that is, expectancy-dependent goal commitments with subsequent goal striving and goal attainment” (p. 524).
J. Robert Baum, one of the leading representatives of entrepreneurship research in the Unites States contributed a chapter on “goals and entrepreneurship” to the volume. The goal setting theory is particularly well suited for researching entrepreneurship “because it covers self-set goals and involves explicit, consciously chosen targets that are usually focused on performance” (p. 462). Early-stage financiers confirm that most successful entrepreneurs “begin with goals that are beyond normal conceptions of the possible” (p. 463). Baum cites numerous surveys which show that goal-setting theory prediction that challenging goals are associable with superior performance, was supported by empirical evidence in entrepreneurship research (p. 463). “Multiple entrepreneurship studies support the view that entrepreneurs who set their own goals are motivated to attain higher performance than if they had no goals” (p. 464).
Entrepreneurs, according to Baum, are visionaries who have the ability “to see beyond the immediate moment, to see past what is working now, to see what will work in future” (p. 468). He cautions, however, that the business vision should not be confused with the official “vision statements” whose purpose is rather to inspire staff or to be communicated to outsiders. “The full vision, however, is inside the entrepreneur’s head and is much more detailed than any one statement or slogan” (p. 468).
I admit that I was unaware of the American goal-setting theory when writing my own book “Dare to be Different and Grow Rich,” published in 2011. However, when reading this anthology, I found everything confirmed that I had developed into a hypothesis in my own right after analysing around 50 biographies of successful individuals: The questions of how big (and how specific) the goals are that people set for themselves, and how seriously they strive to attain them, are key factors when explaining success in any walk of life.
For more reviews of interesting business books, see
Zitelmanns Book Reviews
GERMAN REAL ESTATE NEWS
Only the contributions titled “Commentary – by Dr. Rainer Zitelmann” reflect the editor’s opinion. Responsible: Dr. Rainer Zitelmann. The facts represented in press items are not checked for accuracy. Copyright for GERMAN REAL ESTATE NEWS: Dr.ZitelmannPB.GmbH, Rankestr.17, 10789 Berlin, Germany. Copying or electronic forwarding of the newsletter, except by contractual agreement with Dr.ZitelmannPB.GmbH, constitutes a violation of applicable copyright laws.
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Feri Real Estate Market Rating
The Feri Real Estate Market Rating provides a forward-looking assessment of potentials and risks for investment return on regional real estate markets. Ratings are based on detailed econometric forecasts of regional real estate markets including regional economic development. The rating currently includes more than 150 cities in Europe, in the United States and in Asia.
In this issue:
Real Estate Market Rating for Wiesbaden
Wiesbaden, capital of the federal state of Hesse, is an administrative and services center at the western edge of the Rhine-Main urban agglomeration area. In recent years, the service sector, in particular, has gained additional importance, although its share of regional output was already above average. Today the service sector contributes almost 50% of regional production. Its strongest focus is on financial services, followed by legal and financial consulting and the media industry. The city is one of the leading insurance locations in Germany. Wiesbaden is also the seat of some important federal institutions – for instance, the German federal police and the federal statistical office. The output share of the manufacturing sector, which specializes in chemicals and mechanical engineering, is below average.
Feri rates Wiesbaden as a business location “B”, which is downgraded to the 1st quarter 2014. It translates into “above average potential, below average risk”. With this rating result the city ranks 5th in the comparison of German B-Centers.
Office Real Estate
Regarding office real estate Feri rates Wiesbaden “B+”, which is unchanged compared to the 1st quarter 2014. The city ranks 4th among office locations of German B-Centers. Feri awards the office top locations “B+” and the side locations “B+”
Wiesbaden experienced stable demand for office space in recent years. Primarily modern offices in the high-quality segment are preferred. Especially law-or business consultants have a huge demand for small office units in prestigious, older midtown buildings, which is barely covered by existing supply. The inner city rent performance was relatively good too, especially at prime locations, compared to other cities. Due to Wiesbaden’s bright economical look-out and being an attractive location for service sectors or residence, demand will stay unsatisfied. Thus rents will continue to increase over the forecast horizon.
Retail Real Estate
In the comparison of German B-Centers regarding retail real estate Wiesbaden placed 3rd with a rating result of “B+”, which is downgraded to the 1st quarter 2014. Feri awards the retail top locations “A” and the side locations “B+”.
Wiesbaden has an attractive city center, with very highvalue retail stores. While shops in the top locations, which are most sought after by retailers, attract customers even from other cities in the Rhine-Main area, shops in secondary locations have seen purchasing power siphoned off to peripheral shopping centers and to the neighboring city of Mainz. Despite Wiesbaden’s good base of affluent customers with high purchasing power, and the region’s generally strong income performance, rents for retail space will increase only moderately during the coming years. Extension of retail space, like the new “Louisenforum” shopping center are expanding supply and dampening the rental development. In addition, retail trade in the city faces ongoing competition from surrounding areas.
Residential Real Estate
When it comes to residential real estate, Wiesbaden placed 2nd among German B-Centers with a rating result of “B”, unchanged compared to the 1st quarter 2014.
High-quality rental apartments in Wiesbaden’s good and best locations are still in great demand. Wiesbaden’s attractiveness as a place to live and its location in the populous Rhine-Main metropolitan area virtually assure consistently solid demand. The most sought-after apartment types are renovated residences in villas and high-quality modern units. The available supply of such residences is distinctly short. In other locations and market segments, demand is lower and the supply is looser. However, low new building activity in the multifamily housing segment, together with the region’s long term good income performance, make further rent increases likely.
An increasing number of households comprised of only one or two persons, is pushing up demand for condominiums. Condominiums in the sought after inner city locations, are scarce. However, Wiesbaden’s market for single-family homes is under some competitive pressure from surrounding regions, where prices are lower. In these areas supply cannot meet demand either. In the immediate future, prices may stagnate. Low new building activity, Wiesbaden’s excellent long-term income prospects, and the area’s large share of high-income households, all support the expectation for rising residential property sale prices, especially in central city locations.
Contact:
Franz Wolfgang Kubatzki, wolfgang.kubatzki@feri.de, phone +49 (0) 6172 916-38 11
Feri Real Estate Market Rating
The “Feri Real Estate Market Ratings” issued by Feri appraise the value potential of regional real estate markets, taking into account the attendant risks. The methodological approach underlying Feri Real Estate Market Ratings is rooted in the empirical observation that the performance of a given real estate market depends essentially on the economic power of the respective city. Before this background, Feri develops a separate prognostic model for each city, mapping the regional economy as a system of independent equations.
For the purpose of compiling its ratings, Feri uses a detailed regional forecast to analyse the socio-economic development, the economic structure, as well as the ten-year indicators specific to the respective real estate market. The forecast findings are evaluated using a mathematical rating algorithm.
The objective behind the ratings is to make the markets more transparent, and thereby to support pending investment decisions of private and institutional investors. Feri ratings are updated on a quarterly basis, and are currently available for 67 German cities and counties, as well as for 60 European cities outside Germany, and 45 cities in the United States.
Feri EuroRating Services AG
Feri EuroRating Services AG is a leading European rating agency, specializing in the analysis and valuation of investment markets and investment products. Feri is also a major economic research and forecasting institute. At present, Feri employs a staff of around 60 professionals to manage about 1000 customer accounts. The company is headquartered in Bad Homburg near Frankfurt, Germany, with sales offices in the United Kingdom, France, and the United States. In addition to its global industry analyses and ratings of companies, countries, capital and real estate markets, Feri regularly appraises the investment funds registered in each country. Annual market surveys on institutional and mutual funds as well as on closed-end participations provide an overview of the perspectives and actions of institutional investors. In the real estate sector, Feri conducts global real estate research, performs real estate valuations, and provides ratings of companies, REITs, real estate, real estate portfolios, and indirect real estate investments (open-end and closed-end real estate funds).
For more information on Feri EuroRating Services, please go to http://fer.feri.de/en/about-us/portrait/.
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