BIW, Conwert Immobilien Invest, CWI, European sovereign debt crisis, German bunds, Germany, Grand City Properties, Hans-Peter Haselsteiner, home ownership, income/dividend bubble, Karl Ehlerding, KWG Kommunale Wohnen, Net LTV, residential property, Sirius Real Estate, Stavros Efremidis, Torsten Hoffmann
It’s six months now since I did a write-up on KWG Kommunale Wohnen AG (BIW:GR) (the ultimate post in a 5-part series). Actually, a recap’s in order here & probably the best introduction for this post:
Part I & II: German residential property has been (recently) described as:
‘Perhaps one of the safest & most attractive asset classes in Europe, or even the world‘.
Its attractions include:
– Demographics: German population growth is broadly neutral, but is experiencing pronounced trends in favour of urban migration, smaller households & increasing floor size per capita. Investor horizons are often limited when it comes to property – they’d do well to note Germany has the largest population in Europe, the 16th largest in the world & Berlin is the EU’s 2nd largest city with 3.5 million inhabitants!
– Supply & Demand: Annual housing demand’s around 250-350 K pa, well ahead of housing completions which are now accelerating but only recently bottomed out at 175 K pa in 2009-10. Germany’s second-hand property also trades at a major discount – e.g. in Berlin, existing housing stock can be purchased at a 30%+ discount to new building costs.
– Home Ownership: German home ownership is a lowly 46%, in stark contrast to the usual Western market rate of 60-65%+. This reflects the government’s long history of housing provision & rent subsidies/suppression, but in recent years authorities have increasingly opted for privatisation. Couple this with rising prices & rents, plus the desire for a safer long-term investment alternative (vs. equity/bond markets) – I think we can be confident of a slow & steady convergence towards Western home-ownership levels.