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Citywire Selector (Video):

Why Germany is Still a Hot Real Estate Play

(With Transcript Below)

 

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Citywire Selector (video):  Why Germany is Still a Hot Real Estate Play

(Transcript Below)

Citywire Selector: The biggest holding in your fund is in German real estate - what’s so special about Germany at the moment?

Rogier Quirijns: I think a couple of things in Germany - first of all, the economy has been strong for many years, recently it might be weakening a little bit but if you look at both the office market and the residential sector it’s also still very affordable from a European point of view. We think it has a good growth prospect and it’s very affordable, both from a housing perspective and an office market perspective.

Citywire Selector: Are you looking at Germany as a whole or are you more focused in on Berlin?

Rogier Quirijns: For residential mostly, Berlin which has been in the news recently a bit more, on the affordability probably but more from a tenant point of view, but for residential it’s very Berlin focused and for offices it’s more the whole of Europe, Frankfurt, Munich and Berlin also.

Citywire Selector: Are there any other hot cities in Europe? Where should I be buying a flat across the continent?

Rogier Quirijns: Berlin is maybe an interesting discussion now because it’s in the news a lot, there’s a lot of protests from tenants going on about the affordability. I think if you look at the affordability in Berlin, it’s still relatively affordable. You talk about rents of €10 per square meter, where if you look at other cities – Paris, Amsterdam, you move up to €25 per square meter, London is even higher. So, we think that there is still rental growth potential in Berlin. From a yield perspective it’s not cheap, so you have yield of 3.5% to 4%, which is no different to London. From the long-term growth potential, it’s still relatively attractive, you can buy in Berlin on the listed market at around €2,500 per square meter, I think that’s still relatively affordable for the long run. Berlin, coming back to those protests, has growing pains, we don’t expect the Berlin local government or the German government to nationalist those units which people would like them to but ultimately you need those rents to grow, the value to grow to also make development possible in those cities. That’s where Berlin should be having the discussion, how should we build more units in the cities that are underdeveloped?      

Other cities that I would say are attractive from a residential point of view is Spain. If you look at Madrid, Barcelona, the prices are still relatively low, you can argue affordability might be a little bit stressed but if you look at the demand/supply, they haven’t been building in Spain since the crisis. So, they were overbuilding before the crisis but there were a lot of units around the coast, but they haven’t been building in Madrid, Barcelona, any meaningful houses over the last ten years. So those cities are now growing again, the economy is a bit better, so if that continues, we think Spain would be a good market to buy an apartment and benefit from further growth.    

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