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Frankfurt: Where Rent Takes the Biggest Chunk out of Your Paycheck
According to an analysis conducted by the software company Classmarkets, no other town in Germany requires as big a share of your income to pay the rent as Frankfurt am Main, the FRANKFURTER ALLGEMEINE ZEITUNG reported on 24 April. Next in line are the cities of Munich, Stuttgart, Mainz, Berlin, Wolfsburg, Freiburg, and Hamburg. According to the article, Frankfurt ranks ahead of Munich because income levels in Germany’s financial metropolis are markedly lower. Among the cities with the lowest income-to-rent ratio are the East German cities of Chemnitz and Cottbus, as well as six cities in North Rhine-Westphalia. The mean German income-to-rent ratio of 33% compares to just 22% in that state, North Rhine-Westphalia. For the purpose of the survey, Classmarkets studied net rents for apartments of 60 sqm in 70 German cities.
Stuttgart: Steep Price Hike for New-Build Flats
On 23 April, the IMMOBILIEN ZEITUNG carried an item about soaring condominium prices in Stuttgart. The sustained incoming migration, combined with the low floor space supply is driving prices up, as the real estate market report compiled by private bank Bankhaus Ellwanger & Geiger reveals. “Top prices for condominiums in Stuttgart have just about doubled over the past fifteen years,” said Dr. Volker Gerstenmaier of Ellwanger & Geiger, predicting that the price performance will continue at a rate between 2% and 5%. The current price tag for a new-build flat in downtown Stuttgart shows between 4,500 and 7,500 euros/sqm, going as high as 6,500 to 11,500 euros/sqm in locations with a view. Ellwanger & Geiger expects the positive performance to continue across segments. Despite the high price level, the bank sees nothing wrong with investing in real estate. “Practice Seminar: The Best Condo-Selling Strategies (New-Build and Existing)”: This will be the subject of an event hosted by the BERLINER IMMOBILIENRUNDE panel on 6 May. Request your copy of the program e-mailing us at: info@immobilienrunde.de.
Munich: Germany’s Lowest Office Investment Yields
As the IMMOBILIEN ZEITUNG reported on 23 April, office investors committing themselves in Munich pay the highest prices and reap the lowest yields anywhere in the republic, motivated by the prospects of long-term security and stability. During Q1, approximately 1.2 billion euros worth of commercial real estate changed hands, which implies a growth in the double-digit percentage range year on year, according to virtually all major estate agencies. The estate agencies were said to see a very real chance that the record-breaking year-end figure of 2014 – 5 billion euros – could be matched again this year. Savills diagnosed net initial yields of just 3.9% for the prime office segment. According to Stefan Striedl of CBRE, the net initial yield gap between Grade A and Grade B locations has narrowed to less than two percentage points. Bulwiengesa was quoted with the assessment that the growth in office prices over the past decade has clearly outpaced rental growth. Especially investment funds, insurance companies, pension funds, and family offices are injecting cash into the market. “Current Investment Criteria of Family Offices”: This will be the subject of an event hosted by the BERLINER IMMOBILIENRUNDE panel on 16 June. Request your copy of the program e-mailing us at: info@immobilienrunde.de.
Prices and Rents Perk up in Q1
On 17 April, the SÜDDEUTSCHE ZEITUNG discussed real estate price and rent hikes in Q1 2015. Figures released by Empirica suggest that condominium became 2.6% more expensive since Q4 2014, while prices for detached and semi-detached homes rose by 3.1%. Asking rents advertised for new-build flats in corporate cities reportedly went up by 2.1%. According to the LBS state building and loan associations and Sparkassen-Immobilien-Vermittlungs-GmbH, the price growth for residential real estate was moderate in 2014. Prices for pre-used condominiums reportedly rose by 3% year on year, while prices for detached homes went up by 5%. Over the past two years, prices in this segment increased by another 6% each. “Practice Seminar: The Best Condo-Selling Strategies (New-Build and Existing)”: This will be the subject of an event hosted by the BERLINER IMMOBILIENRUNDE panel on 6 May. Request your copy of the program e-mailing us at: info@immobilienrunde.de.
Demand for German Commercial Real Estate Remains as High as Ever
As the IMMOBILIEN ZEITUNG reported on 16 April, the transaction revenue from German commercial real estate will probably go up by 10% in the course of the ongoing year. Revenues in Q1 2015 were said to have been close to ten billion euros. With the exception of logistics, all asset classes saw increased sales volumes year on year. Foreign investors accounted for almost half of the total. Analogously, business on the office rental market was brisk in Q1 2015, according to Carsten Ape of CBRE, who predicted that it will gain further momentum as the year progresses. By the end of the year, Fabian Klein of CBRE expects to see a commercial transaction revenue of to 45 billion euros. Demand appears to be particularly keen for large-volume assets. “Especially high net worth investors from North America, Asia and Germany are desperately looking for big-ticket investments worth between 250 and 500 million euros,” said Klein. Assets of inferior standards outside the core category are also likely to meet with increased investor interest. “A shift in trend on the capital markets is not in sight, and real property pays rather tidy returns,” argued Jan Linsin of CBRE optimistically.
“Contracting-Party-Pays Principle”: IVD to Support Legal Action Estate Agents may Wish to Take
According to a report the IMMOBILIEN ZEITUNG carried on 16 April, the IVD Federal Investment and Asset Management Association will back members taking the so-called contracting-party-pays principle to Germany’s Constitutional Court of Justice. The interest group cannot take legal action in its own right. At the moment, IVD is still looking for estate agents planning to sue. IVD will cover whatever costs a law suit may involve. The IMMOBILIEN ZEITUNG also reported as part of its wider coverage that estate agents face losses in revenues by up to 30%, according to Sun Jensch of the IVD. Estate agents have responded to the situation by offering detailed drilldowns of their service packages and discounts in order to win over owners as new clientele. Marketing professionals assume that the contracting-party-pays principle will trigger a market shake-out from which well-established estate agencies stand to benefit.
Many German Cities Lack a Rental Index
On 15 April, DIE WELT reported that rental indices were available in nine out of ten major cities and three out of four larger mid-size cities (population between 50,000 and 100,000) in 2014. However, only 47% of the indices in the major cities represented qualified rental indices, while 41% were simple ones. The larger mid-size cities showed a ratio of 20% (qualified) to 55% (simple).
Keen Demand for Student Accommodation
Having analysed 100,000 ads for rooms in flat shares in 121 German campus towns, Empirica found that rent rates are highest in Munich, as the HANDELSBLATT wrote in its 13 April issue. Here, the average rate for a room in a flat share is 503 euros per month. Next in line are Stuttgart, Frankfurt and Hamburg with 400 euros each. In response to the situation, companies like Bauer-Gruppe have started fund-raising for investments in student accommodation. Bauer-Gruppe predicts that the student housing shortage will intensify because the number of first-semester students in Germany will rise to 500,000 by 2019. But even if the available housing supply falls short of demand at the moment, professional investors are cautioning against investing in non-sustainable concepts. They also recommend bearing in mind that the supply in student accommodation is now expanding.
Nursing Care Property an Attractive Investment
DIE WELT wrote on 15 April that nursing care property and senior living residences are emerging as an increasingly attractive investment. At 811 million euros, the transaction volume of 2014 saw a one-year increase of 24%, making it the sixth consecutive year of growth. According to Jan Linsin of CBRE, the total could reach the mark of one billion euros. By year-end 2014, the prime yield for high-end care homes stood at 6.25%, which represents a decline by around 75 basis points year on year. Linsin was also quoted with the observation that the trend reflects the interest in social real estate that investors have been showing, and the concomitant price growth. “Among real estate investors who have the proper know-how in this asset class, the demand for German care homes remains as high as ever because of the higher yield potential when compared to classic property segments such as office or retail,” observed Dirk Richolt, Head of Real Estate Finance at CBRE Germany. “The boom triggered by the demographic trend is […] yet to come,” Jan-Hendril Jessen of Patrizia was quoted to have said. Over the past twelve months alone, Patrizia invested more than 80 million euros in seven different care facilities.
Frankfurt’s Investment Market Reports Record Quarter
As the IMMOBILIEN ZEITUNG reported on 16 April, 1.1 billion euros worth of real estate was sold in Frankfurt during Q1 2015. The total was said to have exceeded the average of the past ten years by 89%. This puts Frankfurt closely behind Munich (1.2 billion euros) and Berlin (1.3 billion euros). The five largest transactions alone accounted for more than 50% of the total volume. Office real estate had a share of 916 million euros in the transaction volume of Q1. Next in line, hotel property accounted for 79 million euros, and retail property for 45 million euros. This contrasts with the occupier market, which has experienced a decline. At around 86,000 sqm let, the take-up was 6% lower than it was in Q1 2014. It also fell short of the five- or ten-year average. Many occupiers prefer to renew their lease contracts, or opt for owner-occupier deals. Carsten Ape of CBRE was quoted with a statement confirming the trend.
Hamburg’s Office Market: Rise in Take-up and Turnover Value in Q1 2015
Depending on which estate agency you ask, the office take-up in Hamburg during Q1 2015 experienced a year-on-year increase by anywhere between 15% and 20%. This was reported by the IMMOBILIEN ZEITUNG on 16 April. The growth in turnover was largely attributable to the acquisition of a 45,000 sqm cluster of buildings that is part of the Axel-Springer compound by the City of Hamburg. Heiko Fischer of CBRE expects to see a total take-up of 500,000 sqm by the end of 2015. Take-up figures quoted by estate agencies differ, ranging from 750 million to 850 million euros and thus implying a year-on-year growth of 33% or 60%, respectively. Demand far exceeds supply, especially in the inner city and in the core segment. According to JLL, prime yields for office property dropped to 4.3%, the lowest rate ever registered. A further decline down to 4.2% is expected before the end of 2015. Prime rents in the office segment were quoted at 24.50 euros/sqm, average rents at 14.50 euros/sqm (Savills) to 14.81 euros/sqm (CBRE).
Stuttgart Office Market Starts into 2015 at Record Pace
According to Colliers, Ellwanger & Geiger and JLL, the office rental market of Stuttgart including Leinfelden-Echterdingen approached record-breaking levels in Q1 2015. This was reported by the IMMOBILIEN ZEITUNG on 16 April. JLL quoted a take-up of 72,000 sqm, which would make it the highest of any first quarter since Q1 2007. Ellwanger & Geiger and Colliers were said to have arrived at a different figure, quoting 70,000 sqm. Compared to Q1 2014, this means an increase by about 23%. The stats released by Colliers suggest that the vacancy rate dropped to 4% (2014: 4.6%). Equally promising was the way 2015 started for the investment market. Around 220 million euros were already invested in Stuttgart, which is 40 million euros more than was committed in Q1 2014, according to Colliers and Ellwanger & Geiger. JLL quoted a transaction volume of 230 million euros. 60% of all transactions closed in Q1 2015 – altogether 15 – reportedly ran in the single-digit million range. Investors appear to have focused on the retail property segment, which thus accounted for 49% of the transaction volume, office property being next in line with 27%.
Rising Turnover Value from German Retail Real Estate Sales
As the IMMOBILIEN ZEITUNG reported on 16 April, CBRE expects to see a turnover value of up to 12 billion euros in German retail real estate by the end of 2015 (2014: 9.2 billion euros). The year’s opening quarter already grossed 3.7 billion euros, one billion euros more than Q1 2014. The difference equals the sum total of the acquisition of Corio by Klépierre. The biggest retail warehouse deal this year to date involved a string of 107 supermarkets bought by Patrizia for 268 million euros. With a view to the devaluation of the euro against the dollar, CBRE predicts an inflow of capital from the United States in 2015. Matthias Pink of Savills moreover expects to see the first direct acquisitions of German retail properties by Asian investors this year. Lacking the required know-how and a local presence, these used to invest mainly through investment funds.
Germany’s Hotel Investment Market off to a Brisk Start to the Year
The trading volume of hotel real estate more or less tripled in Q1 2015 year on year, as the IMMOBILIEN ZEITUNG reported on 16 April. CBRE determined a volume of 643 million euros, compared to the figures of 590 million euros and 617 million euros quoted by JLL and Colliers, respectively. The article attributes a major share of the total to just five portfolio transactions, complemented by a number of single transactions such as the Hotel Super8 in Munich, which was acquired by Patrizia. Hotel real estate has gained in attractiveness, as Olivia Kaussen of CBRE said. She added that the trend is clearly driven by pent-up demand.
Slow Start to the Year for Warehousing and Logistics Property
As the IMMOBILIEN ZEITUNG reported on 16 April, the transaction volume on the market for warehousing and logistics property has taken a nosedive from its prior-year peak value in Q1 2015. The reason quoted by the paper is low supply, especially in the core segment. According to the paper, CBRE identified a transaction volume of 430 million euros for Q1 2015, which would imply a drop by roughly two thirds compared to the total of 1.3 billion euros reported at the end of Q1 2014. The drop was particularly drastic for portfolio sales, which declined from 731 million euros in Q1 2014 to just 88 million euros in Q1 2015, as Colliers reported. At the same time, the average gross initial yield rate dropped by 58 basis points to 6.4% year on year, according the Colliers. The low supply appears to have prompted some investors to accept higher risks. Meanwhile, the share of foreign investors remains high: According to CBRE, foreign players were responsible for 56% of the transaction volume, whereas Colliers and BNPP RE quoted a foreign share of 43%, and JLL put it as high as 72%. Despite the lull, all estate agencies expect the market to pick up steam as the year progresses.
Berlin Introduces Mandatory Council Housing Share of 25 Percent
Going forward, anyone buying land from the State of Berlin for housing developments will be obliged to accept rent control and tenant selection requirements for 25% of all flats, as DIE WELT reported on 16 April. The new rule also applies to plots that require a local development plan, regardless of whether they are privately or publicly owned. In the context of cooperative site development, investors have actually been obliged since fall 2014 to shoulder the costs not just of the site development but also of the construction of schools and preschools legally required in conjunction with housing construction. “Special Event: Berlin’s Residential Property Market – which Locations Present Opportunities, and which are Overpriced?” This will be the subject of a special event hosted by the BERLINER IMMOBILIENRUNDE panel at the Maritim proArte Hotel in Berlin on 15 June. Request your copy of the program e-mailing us at: info@immobilienrunde.de
Misguided Legislation Prevents Affordable Housing
According to an analysis conducted by an alliance of trade associations and the DMB German Tenant Union, regulatory constraints and provisions are driving up the development costs for new housing and with it the rent rates. This was reported by the FRANKFURTER ALLGEMEINE ZEITUNG, DIE WELT and the HANDELSBLATT on 24 April. The alliance reportedly polled 370 housing companies for the survey. The findings reveal that the housing development costs for a block of flats averaged 3,080 euros per square metre last year, an increase by 40% since the year 2000. As pure construction costs increased by only 27%, the cost hike is mainly attributable to excessive government regulation. The over-regulation has hit the market at a time of strong demand for new flats: Provisional stats put the number of apartments completed last year at 240,000 only, which falls short of demand. Hardest hit by the resulting rent increases are the low- and medium-income groups.
They survey identified fiscal law and building code requirements, the prices of zoned land, municipal constraints, and the building and planning costs for enhanced energy efficiency, handicap accessibility, fire safety and noise insulation, along with mandatory systems against snow build-up and earthquake protection. As recently as the year 2000, shell and core accounted for 55% of the total costs while M&E engineering and interior fit-out made up 45% of the costs. Today, the ratio has apparently reversed.
The alliance called on the Federal Government to change tax laws to raise capital allowances on a straight-line basis from 2% to 4%, and to reintroduce special depreciations for public housing construction. It also recommended that the German states reintroduce funding programs in conurbations and growth regions, and to quit raising the real estate transfer tax rates. Finally, the alliance called on municipalities to roll back the number of constraints, and to make affordable building land available. “Investors’ Purchase Criteria for New Housing Property Developments”: This will be the subject of an event hosted by the BERLINER IMMOBILIENRUNDE panel on 24 June. Request your copy of the program e-mailing us at: info@immobilienrunde.de).
Recommended Reading – by Dr. Rainer Zitelmann
On Creativity and Self-Esteem
David and Tom Kelley, Creative Confidence: Unleashing the Creative Potential Within Us All, New York: Crown Business, 2013, 304 pages
Creativity is often – erroneously – assumed to come naturally, the exclusive domain of gifted artists, musicians, graphic designers or bright minds in the advertising business. Yet creativity happens to be one of the most important prerequisites of professional success, and not just for artists but for entrepreneurs, product developers, PR experts and many others as well. This is why I highly recommend this book to any entrepreneur or manager!
It was written by the founders of a company called Ideo that was formed in Palo Alto (located in the Silicon Valley and home to Stanford University) in 1991. This is the company that developed the first Apple mouse, for instance. One of the authors doubles as head of the Hasso Plattner Institute of Design (“d.school”), which has become one of Stanford’s innovation hubs.
The book keeps returning to the importance of being willing to try out new ways rather than trying to be perfectionist. The key to success, according to the authors, is to dare take a “quick and dirty” approach, to test out a large number of ideas instead of wasting too much time on any single one of them.
So what is the proper mind set for stimulating creativity? Let me summarise the key insights I personally gained from this book:
The first and foremost requirement is to adjust your self-image. Those who say they lack creativity are unlikely to become creative minds. The thing is: creativity as such requires no rare skills or talents. Rather, it depends on how much confidence you have in your own talent. So for starters, you should simply quit saying you are not creative!
A good way to dispel any doubt about your own creativity is by taking on minor challenges and becoming more confident as you go along.
Dare to tinker a little, and do not be afraid to “fail”! It is a popular myth that creative geniuses rarely ever fail in their lives. The history of science provides ample evidence that the opposite is true. If you wish to become more successful, you better brace yourself for plenty of trial & error on the way.
Put the original ideas you had when trying to solve a particular problem on the back burner, and dig deeper. Hunt for alternative ways. Cast doubt on arrived wisdom. As Mark Twain once said: “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”
Conversely, it is safe to say: Don’t be quick to judge, and to cast aside any solution because it seems to make no sense right away. One of the secrets of successful experimentation is to give every idea enough time to evolve before it is evaluated.
Keep searching for new sources of information in order to keep your thinking crisp. Be sure to collect new impressions, and stray into unfamiliar terrain to stimulate your imagination.
Relaxation and exercise have been known to enhance creativity. Studies on brain activity found that our consciousness establishes surprising connections between ideas, memories and experiences when we are at ease and not busy focusing on a given problem or a specific project. You would be amazed how many brilliant ideas are conceived in the shower or out on a walk.
You should always have a little note pad on hand for your brain flashes, for they may be just as quickly lost if you do not write them down at once.
Whether you are talking to people or just observing a given situation, be sure to keep wondering “Why?” Here is some hands-on advice: Respond to the first five answers someone gives you by asking “Why?”
Keep engaging things in your day-to-day life that just do not work and that get on your nerves. Many quotidian issues present an opportunity for a new business idea.
Get going as soon as you can, this instant. Do not waste time planning ahead. It is always better to get a move on rather than waiting until you fixed all the glitches. Excessive planning, procrastinating and talking is always a sign of anxiety and of concern not to be properly prepared. And do stop telling yourself things like “Well, I could at least give it a try.” When saying this sort of thing you seem to be subtly apologizing for the fact that your heart is not in it.
Put the pressure on. Give yourself interim deadlines. Many of Silicon Valley’s inventions were born on the spur of the moment with time running out – evolving much faster than they would have in a firmly established business or institution.
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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Dr. ZitelmannPB. GmbH is Germany’s leading consulting company for the positioning and communication of real estate companies and fund companies. It advises national and international clients in the areas of strategic press and public relations work, capital market communication, and positioning. Other spheres of activity include the compilation of track records and statements of account, surveys and research documents, as well as the conceptualising of, and copywriting for, customer newspapers, newsletters, Internet presentations, and brochures. Dr. ZitelmannPB. GmbH supports the market entry of foreign companies in Germany, and brokers collaborations for real estate and fund companies. For detailed information about service spectrum and reference customers of Dr. ZitelmannPB. GmbH, please visit www.zitelmann.com or send an inquiry directly to info@zitelmann.com.
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 Luxembourg
Luxembourg is a center of international finance and an administrative headquarter for the EU. Moreover, the successful expansion of CLT-Ufa (“RTL”) made Luxembourg one of Europe’s most important locations for the TV industry. All this results in a significantly above-average share for service industries in total regional production. Within manufacturing, which accounts for just a small share of regional output, steel-producing industries play the most important role. In contrast to other steel-producing locations, Luxembourg’s steel industry succeeded in insuring its international competitiveness by specializing, at an early date, in sophisticated high-tech steels. Considered as a whole, Luxembourg’s economy displays a modern structure that should ensure regional production growth at a rate above the average for European metropolitan areas during the upcoming years.
Feri rates Luxembourg as a business location “AAA”, which is upgraded to the 1st quarter 2014. It translates into “high potential, low risk”. With this rating result the city ranks 1st in the comparison of European Metropolises.
Office Real Estate
Regarding office real estate Feri rates Luxembourg “C”, which is downgraded to the 1st quarter 2014. The city ranks 15th among office locations of European Metropolises. Feri awards the office top locations “C” and the side locations “C”
Luxembourg is one of Europe’s smaller office space markets, with around 3 million square meters total volume. The prime locations, where the highest rents are charged, are in the central business district in the city center and near the train station. The largest sub-market in terms of floor space is Kirchberg. This location is preferred by EU organizations and the international financial sector. The investment market is quite transparent, but the liquidity risk is relatively high.
The latest financial crisis had a comparatively moderate effect on office rents in Luxembourg, resulting in reductions of around five percent. Because of incentives offered to encourage the leasing of better-quality space, rents have remained stable last year, despite a decreasing vacancy rate. From the supply side, the market should see further relief from its past looseness – new office completions are set to drop below the long-term average. In 2014 Luxembourg’s economy will grow better than in 2013, which will support demand for office space. We anticipate office rents to rise by around 2 percent per year over the forecast horizon, slightly above the long-term trend.
The price correction on Luxembourg’s investment market has been – analogous to rental price development – relatively moderate. Since 2007 until the low point, rental yields have increased by only 80 basis points. Last year, the market remained stable, thanks in large measure to the great restraint shown by German openended real estate funds. Transaction volume has picked up significantly during 2014 and let initial yields decrease further with a tight supply of high-quality objects. Over the year, we expect a further slight compression of rental yields. It is not until later in the forecast period created pressure on yields from rising interest rates.
Initial yields on Luxembourg’s office market have risen by about 80 basis points since 2007. Since then the compression of initial yields is decreasing very moderate, matching the long-term average mostly. There is no significant gap between fair value and initial yields. Thus, current price levels offer opportunities for entering the market, particularly with reference to the positive outlook concerning the occupier market. However, the availability of properties on offer in the prime segment, especially top-tier core properties, is very limited. For the years to come prices will significantly determined by rising rents.
Retail Real Estate
In the comparison of European Metropolises regarding retail real estate Luxembourg placed 15th with a rating result of “A”, which is upgraded to the 1st quarter 2014. Feri awards the retail top locations “B” and the side locations “AA”.
Luxembourg is a popular shopping destination for people from neighboring countries. This pattern is supported by a large share of foreign commuters in the local workforce, as well as by the fact that local consumption taxes are low. Given Luxembourg’s good prospects for income growth along with easier shopping possibilities thanks to the introduction of the euro, chances are good that retail sales and hence retail rents, at both top and secondary locations will rise further in the coming years after a short break from 2009 until early 2010. Dramatically high price jumps will not occur.
Residential Real Estate
When it comes to residential real estate, Luxembourg placed 10th among European Metropolises with a rating result of “A”, upgraded to the 1st quarter 2014.
Since the late 1990s both a positive economic performance and a rising population have helped to induce rising rents on Luxembourg’s apartment market. Yet no really dramatic price leaps is recorded. During the coming years, continuing albeit relatively moderate rent increases are expected, supported by Luxembourg’s good performance with respect to disposable incomes and thus ongoing solid demand, in conjunction with low new building activity. Among other things, enlargement of the EU provided a good boost for demand. However, because rents in the city of Luxembourg are enormously higher than those in surrounding areas, more activity in the rental housing market will shift outside the city.
Sale prices for residential real estate rose steadily through much of the last decade. However, the financial crisis caused a mild dip in the market in 2009. Since buildable land is both scarce and expensive, market activity concentrates on existing residences. Demand for condominiums – particularly new, well-equipped condominiums as well as nicely renovated existing ones – has been notably high. Luxembourg’s favorable outlook for strongly rising disposable incomes – especially since these are already relatively high – supports an expectation for an upcoming increase in the region’s rate of home ownership.
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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