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Bide your time – learning from Charlie Munger
By Dr. Rainer Zitelmann
A few months ago in this same commentary, I wrote that private investors have the privilege of biding their time, waiting and doing nothing. With asset prices so overinflated right now, the ability to watch and wait is more important than ever. Having just read Charlie Munger’s new book on investment strategies (Tren Griffin, Charlie Munger: The Complete Investor, Columbia Business School Publishing, Columbia University Press, New York 2015), my views have been entirely confirmed.
For decades, Charlie Munger has been the partner of Warren Buffett, possibly the most successful investor of all time. Munger describes his and Buffet’s approach as follows: “We both insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think. So Warren and I do more reading and thinking and less doing than most people in business.” (p. 94)
It requires a great deal of discipline to do nothing, especially when everyone else is taking action. But it is often better to do nothing than to do something foolish. “We’ve got great flexibility and a certain discipline in terms of not doing some foolish thing just to be active – discipline in avoiding just doing any damn thing just because you can’t stand inactivity.” (p. 93 onwards)
We have all learned that people who do more and work harder will achieve more. “No sweat, no glory” is a saying that we are all familiar with, but it is one that often causes more harm than good. Inactivity leads many people to have a guilty conscience. In the case of athletes, it can actually lead to over-training – experienced sportsmen and women have learned that more training doesn’t necessarily mean better results; more intelligent training does. And the same applied to investing. The author of the book about Munger writes that “doing nothing” can be very difficult indeed, “as there is a tendency to think that the level of activity is somehow correlated with value” (p. 91).
Munger admits that it would be great if, “finding great investments happened all the time. Unfortunately, it doesn’t”. He describes his and Buffet’s approach: “We’re perfectly willing to wait for something decent to come along. In certain periods, we have a hell of a time finding places to invest our money.” (p. 91)
All of this applies equally to investors who, just like Buffett and Munger, are working with extended investment horizons. Short-term speculators can be active in any situation. All they are really interested in is finding someone, quickly, who is willing to buy their asset – shares, real estate or other assets – at a higher price than the speculator originally paid. These methods are no different to “chain letters” or other pyramid schemes, and can deliver short-term “successes” (which in cases means nothing more than: being lucky). I certainly wouldn’t rely on “luck”. These methods are also a world away from Buffett and Munger, who normally hold onto their investments for the long haul.
Doing nothing can also sometimes mean turning down opportunities to make short-term profits. Many people find this especially difficult, worrying that apparently more successful investors will make fun of them. Buffett and Munger were ridiculed in the late 1990s, when they stood back and didn’t get sucked into the excesses of the “New Economy”. A major financial magazine even ran the headline: “What’s wrong, Warren?”.
The situation was similar on the overheated U.S. real estate markets between 2006 and 2008, when so-called “flippers” made massive profits, buying houses before they were even completed in order to sell them almost immediately for more. In my opinion, such strategies do not count as investing.
You are at most risk of succumbing to ill-advised temptation just after you have made a lot of money from a successful investment. That is when you are most likely to over-estimate your own abilities. These are the moments when you have the least chance of duplicating your successes. After all, if you have sold at a high price, the chances are that the market is bullish, which makes it even more difficult for you to extract any value when reinvesting. In terms of self-protection, these are the moments when you are better advised to do nothing. Of course your advisors, who only earn when you are active, will tell you to do the opposite. Or have you ever met a hairdresser who has told your wife to leave her hair as it is rather than suggesting a new style, colour or other expensive treatment?
So what are my current strategies?
Residential real estate: Sell, provided you are outside the capital gains speculation period. Alternatively, convert rental units into condominiums, selling them successively as they become vacant. For real estate still covered by the speculation period: Hold.
Shares: I have instructed my bank to buy a fixed value of shares in an MSCI World ETF each month. The shares are bought automatically, irrespective of share price movements. I will only invest more if there is a stock market crash.
Gold: Hold, do nothing. This merely serves as insurance in the event of a serious financial collapse.
Liquidity: Park funds in short-term (!) German and American government bonds.
Read also Rainer Zitelmanns Finance Blog.
Game Over
By a majority of almost four percent, Britain’s voters decided to leave the European Union in a historic referendum last Thursday. The result was reported on by FAZ.DE, SÜDDEUTSCHE.DE, WELT.DE and SPIEGEL ONLINE on 24.06.2016. It is already clear that a prolonged period of increased economic and political uncertainty is likely to have a significant negative impact on British real estate markets. This is in part demonstrated by figures released by the Bank of England in April, showing the lowest level of new mortgage business in the last eleven months. This was revealed by DIE WELT on 22.06.2016. George Osborne, Britain’s Chancellor of the Exchequer, predicted back in May that UK house prices could potentially fall by between 10 and 18 percent in the event of a victory for the leave campaign. The case for commercial real estate is similar. According to CBRE, only GBP 14 billion, or EUR 17.68 billion, was invested in British commercial properties during Q1 2016 – 21 percent less than the prior year’s opening quarter. “73 percent of commercial real estate investors believe that Great Britain will become a less attractive investment destination in the event of Brexit,” said CBRE’s Simon Barrowcliff. Now that the Brexit decision has been confirmed, this trend could easily gain in momentum.
Representatives of Germany’s real estate industry expressed their concerns for the British market, while also now expecting German property values to increase substantially. “It’s too early for anyone to seriously predict the consequences of this Brexit decision. Nevertheless, as an investment safe haven, Great Britain has definitely been rattled and is now down for the count. This could certainly further enhance the attractiveness of the German real estate market. Investors who have tended towards London in the past are going to be giving more serious consideration to Berlin now that the referendum results are in,” commented Jakob Mähren of the Mähren Gruppe. Jacopo Mingazzini from Accentro Real Estate AG takes a similar view: “This decision won’t just have a massive impact on the stock markets, it is also going to have far-reaching consequences for the real estate markets. I expect that the demand for residential real estate, especially in Berlin, will continue to rise.” Manfred Binsfeld from FERI EuroRating Services cautioned against over-dramatising the situation. He believes that there is still plenty of life left in London: “Of course, the Brexit vote is going to put the brakes on the London property market. Cities such as Frankfurt, Düsseldorf and Paris are likely to benefit. This will primarily provide a boost to office markets, but residential markets will receive a secondary boost. However, it is important not to overstate the positive impacts of Brexit on Germany’s real estate markets. London will still be playing in the champions’ league as a global financial centre. In the long-term, demand for housing in London will remain high, and the imbalance between supply and demand will continue to put pressure on the market. International investors will soon realise this, especially once the markets have absorbed the shock and returned to some semblance of normality in a few weeks’ time.” Wertgrund’s Thomas Meyer does not believe that the referendum result will have immediate negative consequences for Germany – as long as Brexit doesn’t start a chain reaction across the EU: “In the short-term, we don’t believe that Brexit is going to have any serious negative impact on Germany’s property markets. Our major cities are still growing, which means that demand for housing will remain stable. It is also quite unlikely that British investors will withdraw their capital from Germany. In actual fact, their German investments are now even more valuable in terms of portfolio and currency diversification. Still, if more European countries jump on the EU-exit bandwagon, Germany’s housing market would face serious long-term risks.” Ulrich Jacke from Dr. Lübke & Kelber takes an optimistic view of events: “Early this morning (24.06.2016, editor’s note), just a few hours after the Brexit announcement, we had already brokered a EUR 10 million deal for a vacant office building in Frankfurt. The buyer’s decision was explicitly based on their expectation of significant growth in demand for office space in Frankfurt following the UK’s decision to leave the European Union.” Jacke went on to add: “The only real and relevant risk to Germany’s real estate markets continues to be the low-interest rate climate.”
Brexit has already given a boost to Berlin’s condominium market
Brexit is already having an impact on Berlin’s condominium market. This was revealed by DER TAGESSPIEGEL on 21.06.2016. “Berlin has become the market of choice as an alternative to London. Not just because residential property offers relatively good value here, but also because the threat of Brexit has unsettled investors. Over the last eighteen months we have observed growing international interest in Berlin, especially from buyers ready to invest between EUR 500,000 to EUR 700,000 Euro in a condominium in the city,” commented Thomas Zabel of Zabel Property AG. Many investors are also responsible for creating new jobs in Berlin, as they bring part or all of their businesses to the city with them. The luxury segment of the market is particularly sensitive to international developments, especially as wealthy international buyers invest in the relatively young market for condominiums of EUR 5,000 to EUR 6,000 per square metre. The company also believes that the Brexit effect will be felt beyond Berlin and will soon spread across the whole of Germany. “Brexit will cause demand for residential real estate in Germany to pick up, which will also result in higher prices. Those international buyers who have been waiting for the final result will now turn their backs on London,” believes Zabel.
Fewer new apartments than expected
As reported by the IMMOBILIEN ZEITUNG on 23.06.2016, around 247,700 new apartments were completed across Germany in 2015, an increase of around one percent compared to 2014. These new figures are the result of a survey carried out by the Federal Statistical Office and are markedly lower than the 265,000 new apartments announced by the federal government just two weeks ago. The biggest growth was reported in the construction of apartment buildings (+8.1%) and multi-family houses (+4%). At the same time, the statistical office registered declines in the construction of apartments in one-family (-3.7%) and two-family houses (-4.6%).
Federations and experts criticised the fact that, despite high levels of demand and the ready availability of cheap financing, new construction activity once again failed to meet expectations. “The volume of newbuild housing is nowhere near close to satisfying current levels of demand,” complained Sun Jensch from the IVD. She was more positive recognising that 90 percent of building applications now result in completed apartments within 18 months. Just one year earlier, the figure stood at 80 percent.
Industrial nations facing greater risk of financial bubble
18.06.2016, the BÖRSEN ZEITUNG revealed that the share of household debt, especially mortgage lending, in industrial nations’ GDP has been growing sharply since 1960. This has led to a significant increase in undiversified risk across the financial industries of the world’s major economies. This is the assessment of a University of Bonn study presented at a recent conference, jointly organised by Goethe University’s House of Finance, the Research Centre SAFE and the Institute for Banking and Financial History. The study focussed on changes in the financial system that make it more vulnerable to crises and analysed 25 variables in a newly constructed dataset comprising 17 advanced economies for the period from 1870 to 2012. From this data it was shown that as banks increase their lending – especially mortgage lending – in relation to GDP, the risk of a financial bubble increases. The major factor in this development is that property prices increasingly decouple from rental incomes. The effects are most felt in countries with high ownership rates, such as the U.S.A., Great Britain and Italy. The risk of a house price bubble in Germany are comparatively low. On the question of the benefits of increased mortgage lending for banks, the study provided no definitive answers.
Berlin wants tighter rent controls
As reported by the FAZ and DIE WELT on 15.06.2016, and the IMMOBILIEN ZEITUNG on 23.06.2016, Berlin’s authorities have launched an initiative in Germany’s legislative body, the Bundesrat, with the aim of tightening the country’s rent control laws. According to Berlin’s governing mayor, Michael Müller (SPD), current rent control and stabilisation legislation is not working as envisioned. The new proposals would require landlords to disclose all information that has a bearing on determining a property’s valid rental price, such as the rent paid by a previous tenant. In order to more accurately determine local comparable rents, the initiative is pushing for the reference period for new rental contracts to be extended from four years to six. The period during which rents are permitted to increase by a maximum of 20% (in Berlin 15%) would also be extended from three years to four. The national real estate association IVD has dismissed the proposals, with its president Michael Schick responding: “we need to step up the construction of new housing; rent controls are counterproductive.” In contrast, the German tenants’ association welcome the proposed changes.
The secondary cities with the best risk-return profiles
In terms of existing residential property, Bonn, Wolfsburg and Osnabrück currently offer investors the most attractive investment conditions in Germany. For newly constructed housing, this is the case in Wolfsburg, Bremen and Mannheim. Yields can be achieved in each of this cities that are substantially over and above the minimum return level, taking respective location risks into account and increased by the risk-free interest rate account. These are the conclusions drawn by the latest Risk-Return Ranking published by Dr. Lübke & Kelber, which was reported on in the IMMOBILIEN ZEITUNG and SPIEGEL ONLINE on 23.06.2016. A total of 110 German towns and cities were included in the study. The ranking is based on the assumption of an investment with an equity ratio of 40 percent and a ten-year fixed interest rate of 1.15% on the loan capital. For the very first time, this year’s ranking also includes the impact of rent control laws on actually attainable returns on equity. In the existing property segment, almost all of the 110 towns and cities offer returns on equity of well above four percent – with the newbuild segment offering respectable returns in excess of three percent. As the ranking shows, there are plenty of attractive investment destinations outside Germany’s seven biggest cities. “Lots of investors shy away from investments in such B cities because they perceived as more difficult to manage,” said Ulrich Jacke of Dr. Lübke & Kelber. “However, with the support and services of qualified asset managers, investors can achieve specific, long-term benefits,” continued Jacke.
Extremely buoyant mood in the real estate industry
According to the Institute for Economic Research (IW) in Cologne, sentiment across Germany’s real estate industry has hit a new high, reported the HANDELSBLATT on 17.06.2016. The buoyant mood was picked up by the IW’s latest survey of sentiment among German real estate companies. According to the survey, 96.8% of respondents assessed their situation as good. Not a single respondent described the current situation as bad. The only time that sentiment within the residential property sector was even more optimistic than in mid-2016 back in Q1 2015. Despite the prospect of tighter tenancy and rent control laws, nearly three-quarters of participants are confident that rents will continue to climb.
Federal construction minister, Barbara Hendricks, confident about special tax depreciation
According to the IMMOBILIEN ZEITUNG on 16.06.2016, the federal construction minister, Barbara Hendricks, expects parliamentary wrangling over special tax depreciation allowances for newbuild rental apartments to end soon, and for an agreement to be reached before the summer. This was the assessment she delivered during the Wohnungsbautag, a housing construction event in Berlin. Hendricks has asked her SPD party colleagues to drop plans for a rent cap. At the same time, she has asked the CDU and CSU to support calls for greater support for the housing construction industry. The HANDELSBLATT on 16.06.2016 took a much more pessimistic view, believing that special tax depreciation allowances are about to be taken off the table, because the coalition government’s various factions cannot reach an agreement, with Hendricks alone in her optimism. ZIA has also registered its doubts that we will ever see the special tax depreciation legislation, wrote DIE WELT on 11.06.2016. The IMMOBILIEN ZEITUNG also revealed on 16.06.2016 that Hendricks wants to create a new “Urbanized Zone” designation in planning and zoning law. Such zones would enable denser housing construction, higher buildings and somewhat elevated noise emissions by industries and traffic. Hendricks hopes this would allow increased housing construction in urban centres. She is also open to relaxing energy-related building regulations, EnEV, and to look to attain emissions reduction targets in other areas. She said that she is looking forward to hearing the climate protection proposals from ZIA’s Andreas Mattner, which he has said will be released in a matter of months. Hendricks again called for greater cooperation between federal and state authorities in delivering what she views as an essential offensive on the country’s housing shortage. The Wohnungsbautag event saw a range of proposals made by a special Institute for Housing, Real Estate, Urban and Regional Development (inWIS) study. These included raising the linear depreciation permitted for newbuild apartments from 2% to 3% per annum. A key argument is that close to three-quarters of apartment construction in Germany is funded by private investors and such an added incentive would do much to promote the annual construction of 400,000 new apartments that are needed over the next few years. InWIS also suggested that property transfer taxes should be limited to a maximum of 3.5%
Federal government to step up investment in social infrastructure
Germany’s federal government has announced that it plans to invest €200 million per year in social infrastructure from 2017, reported the FAZ on 16.06.2016. The money is being earmarked for district and community centres. An additional €100 million of investment is to be funded via the federal construction ministry’s urban redevelopment and “Social Cities” programmes. The programmes are intended to prevent competition for housing between immigrants and established local communities. CBRE’s Konstantin Lüttger believes that the pace of rent increases will slow, but doesn’t think rents will stop increasing as a result. The current rate of rent increases is within the range of the ECB’s expected inflation rate of 2%.
Series construction as housing shortage silver bullet
247,700 apartments were completed in Germany last year, revealed both DIE WELT and the FAZ on 14.06.2016. According to the Federal Statistical Office, this represents a year-on-year increase of 1% and is the highest figure since 2006. Nevertheless, the number would need to be significantly higher to satisfy demand for new housing. Market commentators and economic institutes were expecting a figure of at least 260,000. The pace has already picked up and new housing construction is experiencing double-digit growth. Revenues grew by 12.6% in Q1 2016 compared to the same quarter in 2015, and demand was up by 18% over the same period. In order to further boost the pace of housing construction, the industry has called for the introduction of series construction. The industry claims that standardisation and industrial manufacturing processes could cut costs, thereby helping to deliver desperately needed affordable housing in key urban areas.
Bestellerprinzip delivers blow to rental market
As reported by the IMMOBILIEN ZEITUNG on 16.06.2016, an Immowelt survey has revealed that the number of estate agents negatively affected by the Betsellerprinzip is less than originally thought. Of 710 randomly selected real estate professionals surveyed between late January and early February this year, only 19% said that they were “heavily affected” by the law that regulates who pays their commissions. The figure was significantly higher just six months earlier, with 37% of agents complaining that they were suffering as a result. The report concludes that there are nowhere near enough reliable figures on the impact of the Bestellerprinzip. The IVD says that it has not noticed a significant rise in the number of agents leaving the profession over the twelve months since the law came into force. A number of agencies have shut their doors, citing the increasingly competitive market environment as a reason to retire earlier than originally planned, but, “they can be counted on the fingers of one hand,” said the IVD’s managing director, Sun Jensch. Having said that, the IVD does concede that agencies with a major focus on the rental market are having to provide a more extensive range of services in order to earn their commissions. The market for rental apartments has contracted sharply as a result of the 2015 law, said the IVD’s president, Jürgen Michael Schick. This is demonstrated by a survey of 6,000 IVD members into their experiences over the last twelve months. The study shows that they sold and rented roughly equal numbers of properties before the law was introduced. One year later and almost 70% of their business involves the sale of condominiums and only 30% is attributable to the rental market. 70% of those surveyed admitted that they have realigned their businesses to concentrate on property sales. In its online edition on 16.06.2016, the IMMOBILIEN ZEITUNG reported that, in a decision announced on 15.06.2016, Stuttgart’s district court had banned estate agents from charging prospective tenants a fee to view a rental apartment.
Berlin the top expansion target in Germany
According to the new CBRE “How global is the Business of Retail” study, Berlin is Germany’s top expansion target for international retailers, revealed the IMMOBILIEN ZEITUNG on 16.06.2016. Of the 334 international retail and restaurant chains questioned as part of the survey, 42.7% already have a presence in Berlin. This is one percent up on the previous year’s survey. In a ranking of 190 cities across the globe, Berlin occupied tenth place. Within Germany, 40.1% of the international retail and restaurant chains said that they are active in Munich. Next came Frankfurt and Hamburg (tied on 37.2%), Düsseldorf (33.7%), Cologne (32%) and Stuttgart (25.2%). The study shows that globalisation is not just restricted to the retail industry, as an increasing number of coffee and restaurant chains are also operating across national and regional borders. CBRE’s analysis of 190 global cities reveals that 20% of the international companies entering new city markets for the first time in 2015 were coffee and restaurant businesses. The strongest growth in new cross-border retail activity was registered in the value & denim clothing sector (22%), followed by shoes, underwear etc. at 21% and luxury and business fashion at 16%.
Frankfurt is Europe’s most dynamic data centre hub
In its 17.06.2016 edition, the FAZ reported that Frankfurt has been enjoying particularly strong growth as one of Europe’s major data centre hubs. According to CBRE, take-up in Frankfurt during Q1 2016 amounted to 8.3 MW, which represented a 40% of total take-up in London, Frankfurt, Amsterdam and Paris. This result ensured that Frankfurt topped the latest European ranking. In terms of overall supply, London is still way ahead, offering a total of 354 MW. Frankfurt is Europe’s second largest data centre market, with 184 MW of available capacity. Over the next few years, as cloud-based services continue to expand, data centres are forecast to enjoy steadily increasing levels of demand.
GERMAN REAL ESTATE NEWS
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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 Cologne
Cologne is one of Germany’s most important trade and service centers. The service sector, especially in the fields of communication, information technology, and media, is the most important driver of the regional economy. Several major insurance firms are also located in Cologne. Cologne has a high concentration of public and private broadcasting and television corporations, film production companies, and numerous enterprises supplying this media cluster. With more than 200 companies in this sector, Cologne is Germany’s largest media city. The manufacturing production share, by contrast, is below the German average. In the last decade, the region’s key manufacturing segments – mechanical and electrical engineering, vehicle assembly, chemicals, and food processing – exhibited faltering growth.
Feri rates Cologne as a business location “B”, which is unchanged compared to the 1th quarter 2014. It translates into “above average potential, below average risk”. With this rating result the city ranks 10th in the comparison of German A-Centers.
Office Real Estate
Regarding office real estate Feri rates Cologne “C”, which is unchanged compared to the 1st quarter 2014. The city ranks 15th among office locations of German A-Centers. Feri awards the office top locations “C” and the side locations “C”
Cologne’s office market contains about 7.3 million m² of office stock. Taken its size into account, it ranks sixths, even before Stuttgart, among German office markets. Demand is well diversified on the rental market. The main demand comes frominsurance companies, public authorities, the business related service sector as well as media enterprises. The financial district and the “Rheinauhafen” belong to Cologne´s top office locations. On the right side of the river Rhine the Deutz area has established itself as a top location.
Cologne´s office space take-up reached 62,000 sqm (according to BNP Real Estate) by the end of the first quarter 2016. It exceeded last year´s result by 9%. Due to the low level of building activity in the past six years, there is a shortage of new and modern space. Currently the vacancy rate of 5.8% has reached its lowest level since 2002. Due to the moderate and less speculative building activity and the rapid absorption of new office spaces, we expect the vacancy rate to decline further in the year 2016 and rents to rise.
At the end of the first quarter 2016, the investment volume for commercial real estate totaled 170 million € (according to JLL). This corresponds to the very good last year’s result. Office real estate investments count more than 80% on the whole investment volume. The shortage of properties in prime city location has lead to the fact that City fringe locations where more demanded. The net initial yields for class A office investments fell in the competitive market environment to 4.8%. By 2016 we expect yields to stabilize. Indeed a moderate further compression of yields in 2016 represents a possibility.
The net initial yields for class a offices are since 2009 in a phase of the compression. For 2016 a slowing down of the decline draws itself in. On account of the high demand pressure for Core Properties, the investors make way in City fringe locations. We expected fair rental yield is at 5.5 %, 65 basis points above the current market yield. Therefore we assume that Cologne’s office market to be above its fair value.
Retail Real Estate
In the comparison of German A-Centers regarding retail real estate Cologne placed 4th with a rating result of “A”, which is unchanged compared to the 1st quarter 2014. Feri awards the retail top locations “A” and the side locations “A”.
Cologne is still among the most attractive retail locations in Germany. The “Schildergasse” is one of the most frequented shopping streets in the country with the highest rents. In inner city areas, demand for retail space continues to be high. Demand for large retail units, in particular, exceeds the available supply. After its redevelopment the “Neumarkt Galerie”, Cologne´s largest innercity shopping centre has reopened which increases the attractiveness of cologne’s inner city. Retail rents at both top and secondary locations are expected to develop positively in coming years.
Residential Real Estate
When it comes to residential real estate, Cologne placed 9th among German A-Centers with a rating result of “B”, unchanged compared to the 1st quarter 2014.
Cologne is highly demanded as a place for living. A combination of factors – a trend towards smaller average household size, rising demand from students, and the low building activity of many years – has resulted in that demand has outpaced supply on Cologne’s residential rental market. This tightening of the rental housing market is similar to the outlook for many of Germany’s highest-profile urban areas: rising demand is reflected in a positive rent performance. In Cologne, rents for both existing and new apartments are expected to continue rising over the forecast horizon. The market active vacancy rate stands in accordance with Empirica by only 1.1%. The outlook for Cologne is especially favorable because of the region’s projection for above average population growth, including the addition of many new single-person households.
Demand on Cologne’s market for purchase of residential real estate is strong. Since the financial crisis a shift towards real wealth has taken place. This is supported by historically low mortgage rates. Popular locations for condominiums are central locations near the Rhine and southern parts of the city. Here demand exceeds supply. Cologne’s “Wohnungsgesamtplan” (housing plan), meant to curtail a patternof families out-migrating to surrounding areas, should help bolster demand for single-family houses and town houses in urban locales. Low new building activity and expected above-average increases in Cologne’s total population and number of households, support a forecast for rising sale prices for detached single-family houses, town houses, and condominiums during the years ahead.
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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