The real estate in Germany: a safe investment for the serious capital

According to the statistics of the requests in search systems and portal ee24.com, interest of the Russians in real estate investment in Germany significantly increased in 2013. This country is the powerhouse of the EU economy, and investment in German housing is considered to be one of the most reliable. The portal ee24.com had interviewed Harald Panzer, CEO of Wohninvest GmbH, the company that is engaged in realization of exclusive projects in sphere of German investment property and which loudly declare itself in autumn, 2013 in Russia. German partner of the portal ee24.com told about the investment opportunities in real estate in Germany, which are hidden from the broad audience, also he told about their major projects and a completely different approach to the work that is not typical for most companies.

– Tell us about your company, please. In which German cities do you sell the real estate?

– We are located in Stuttgart, Baden-Württemberg. We are primarily a service company that provides a wide range of services related to real estate. In addition, we have our own projects in Hamburg, Cologne, Leipzig, Stuttgart, and Munich – that are mostly exclusive objects. This is one of our major advantages - we do not sell the air, we sell the real estate, which we know very well, because it belongs to our company. German real estate market - is not the only market for us. For instance, during the crisis of 2008, we were interested in real estate, which was previously owned by the bankrupt U.S. bank Lehman Brothers. If there is an interesting project, which we can purchase and increase its value primarily by means of competent marketing and management, we just do that.

For example, we purchased a building of the Telecommunications University from the Luxembourg fund in Stuttgart, brought it to the desired condition, and now we are renting it out to the city authorities. And just recently we bought a real estate portfolio, consisting of approximately 100 apartments. Hereby, we work with objects wholesale and retail as well. For example, we "split" the portfolio and offer for the purchase to our partners in different countries (United Kingdom, Italy, etc.).

– In Russia, you first appeared in the autumn of 2013 and immediately amazed the audience by virtue of the scale of your booth at the show in St. Petersburg Lenexpo Fairgrounds. How interesting is Russian buyer for you?

– Our position is following: there are many investors and large companies in Russia who may be interested in projects in this closed market where we operate. Berlin, Hamburg and Munich are known to foreign investors, and, on the contrary, smaller German cities such as Stuttgart and other towns of Baden-Württemberg are less popular. That's why we came to Russia to participate in the autumn exhibitions. (The interview took place during the exhibition Real Estate Fair in Lenexpo, 1-3 November, 2013.)

We offer large objects costing €2 million or more. The focus of our enterprise is not only real estate, which is our property, but also the provision of services for buying and selling and renting, banking and legal support. We tell our clients: "You will not stay alone, so we will support you at all the stages of processing the transaction."

Yes, we came to Russia for the first time. Our main goal now is not to sell a particular object, but to declare ourselves. Municipality of the city, supporting our company, gave us to present the pennant of our city to the authorities of St. Petersburg.

– How had the crisis affected the private real estate market, where you operate?

– The financial crisis did not affect Germany as much, as other countries. The seriousness of the situation is much more felt in Spain, Portugal, Italy... In Germany, over the past five years, rates on mortgage loans have fallen significantly - to 2.5%, which is very advantageous for the Germans. Furthermore, the urbanization in our country played its unique role, due to which the crisis was overcome even much faster. In the region of Stuttgart there are no any problems with jobs; there are located the major enterprises of auto giants like Daimler AG (Mercedes-Benz) and Porsche, as well as Robert Bosch and IBM, and workers veritably need accommodation. The urbanization, one of the problems in Germany, affects the choice of objects that we sell. For example, our company has been offering commercial apartment buildings, the popularity of which does not drop even during the crisis.

– You work with rather expensive objects. Can a foreign investor rely on a mortgage loan in Germany?

– Russian investors actually should not worry, because we work with various banks that can provide mortgage loans to foreigners. Our partners are Deutsche Bank, Volksbank, Kreissparkasse. Germans work accurately because of the precise legal basis, so that problems with the registration of transactions do not arise. Our partners are also notary and legal companies, such as law firm Thümmel, Schutze & Partner, which is one of the most respected legal companies in our region, and one of the senior partners of the firm is the member of our Consultative Council. We know very well what difficulties may arise in the process of working with the real estate and virtually anticipate them.

– How attractive are your objects in terms of investment? What is their actual profitability?

– Let’s take as an example the already mentioned building of the University in Stuttgart – the contract signed for 20 years with the city, therefore the issue of rent and income resolved here permanently. Or let us consider the building of the shopping center – how can we calculate the profitability? This question is from the category, how much gasoline is necessary for a car? There are no accurate answers in the process of investment. There is such an opinion in Germany: the more reliable investment in the real estate, the fewer rendite (yield). In Stuttgart, the risk is minimal, because there are a lot of commercial enterprises, automobile and engineering plants work here, so you can make a profit of about 4-5% per annum. In very large cities residential buildings generate revenue of 6% or more, but there are very few objects with such profitability. There are some objects in the periphery, which bring in an income of 8%, but we do not deal with them, since we strongly believe that the investment in such facilities is not sufficiently dependable. The motto of our company: the reliability is better than the risk. We would rather offer the object to the investor, which does not have too high yield and still brings a steady income, than we will promise 15% per annum for a period of 2-3 years.

– What is the increase in the value of real estate in Germany? For example, in Stuttgart?

– The growth in the value is approximately 4% per year. This is a very high figure. I believe that not only the large cities such as Berlin, Munich, and Stuttgart will develop, but also the surrounding areas, the periphery. This is associated with the demographic development and urbanization that take place in Germany in present times. The country is getting older very quickly, many residents tend to leave large cities to the suburbs, to the villages, to the countryside... Demographic development affects the value of the real estate, which has been proved by significant marketing researches of the market, that is why we offer the objects that are located at the periphery, which are very beneficial now and in the future will be profitable because of the urbanization that takes place in major cities in Germany.

– What are your predictions for the next year? How will the prices change, if to speak without speculation?

– Many people have argued that Germany will need retirement homes soon, since the population of the country is getting older. In present time, there are three working persons per pensioner, and by 2050 there will be only one working person per three pensioners. Everything will be totally changed. Germany has a low birth rate and a good standard of living, therefore there are many centenarians. However, another fact inevitably follows from that: in the future, Germany will have fewer workers, but there will be more old people, and it means that the retirement homes will not be financed, because there will not be enough working people. Our company offers retirement homes, but contends that, even if there is a need for this facility right now, in the future it will no longer be profitable. Where to get the money? From the taxpayers? Who will service these homes? There are still quite many questions that are not answered yet.

Or apartments for students - is another popular topic in Germany, because now there is a great demand for student accommodation. Such objects have been actively building and they are offered on the real estate market. But I say "no", because in ten years the number of students in Germany will significantly decrease. These are the forecasts. Everyone says: "Invest in retirement homes and student apartments." But our company cautions against such objects, because in the future they will unprofitable and will generate loss of money.

What property to buy in this case? There are many options. You can buy objects for offices, which can be rented out individually or look for more interesting projects. For example, we buy an object in a small town where we can inexpensively rent out the apartments to young families and couples. You actually should not increase the rent, because it is beneficial to the tenant: even though you get a small income, but you will consistently have it.

Or another example – a house (pointing to the stand), which is under the protection of the state and that should be restored. For the purpose of its reconstruction to student accommodation the property developer receives large tax incentives by virtue of which in future the developer can reduce the rental rates and the house in this position will be out of competition from the commercial point of view. Here is an example of our work. We will deal with this house. Before the acquisition of the real estate we carry a thorough technical and legal assessment of each object, and also we conduct serious market analysis. Success of the investments depends on how well-informed investor.

There are plenty of unrealized opportunities in Germany. Our primary challenge is to predict them promptly in order to gain the maximum profit with minimum risk of investment. Stability is more significant than risks is the motto of our company. We do not discover anything new; we just honestly look at the evidence. However, we are not a church: we do not promise anything, but simply offer the qualitative product for dependable investment and services of qualified professionals.