Munich has been named as Europe's 'best' property location in 2009, while...

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German cities offer best
prospects for real estate

A report by the Urban Land Institute
and PricewaterhouseCoopers

3 February 2009: With property values tumbling in the UK, Ireland and Spain as well as in many Eastern European countries, German cities emerge as the new favourites among European property investors. Real estate experts say that German cities are now the most promising and safest ones in Europe to invest in. A survey by the Urban Land Institute and PricewaterhouseCoopers (PwC) places four German cities among Europe’s top ten. Munich and Hamburg are awarded the top two spots, with Berlin and Frankfurt ranked nine and ten respectively.

2011 update: Summary of latest findings

ECA International survey (June 2008): Introduction | Table: World | Table: Europe | Table: Asia |
UBS survey (March 2008): Most expensive cities (Intro) | World's most expensive cities (table) | Richest cities by personal earnings (table) | Richest cities by purchasing power (table |
Mercer survey (2007): Most expensive cities
EIU survey (2007): Most expensive cities

Introduction | 150 richest cities in 2005 | 150 richest cities in 2020 | Europe's richest cities |

European investors, developers, bankers, and brokers ranked Munich top of the investment market league table due to a combination of factors including: an increase in government spending, which may lead to future economic growth; the decline in unemployment; a fast growing population and increased consumer spending power. Munich also came top of the European City Risk league table. Munich is seen as having low risk because of its diverse economic base, which mitigates risky investments. Indeed Germany is considered ‘less volatile with more long-term investors’ helping Hamburg to second place with Frankfurt and Berlin also ranking among the top ten for investment prospects in 2009.

However the authors of the survey Emerging Trends in Real Estate Europe, 2009 point out that the investment climate in all major European cities had fallen. “This is going to be a tough year for many investors. For those who bought at the top of the market it could be a struggle for survival, particularly if banks become more aggressive in dealing with covenant breaches. On the other hand for those with equity to invest, there will be opportunities as the banks start to take action. Although new debt will remain in very short supply, banks may have little alternative to remaining as lenders during the restructuring of defaulting borrowers,” said PwC real estate director John Forbes.

Investment and development prospects fell for all of the cities ranked in the report, with overall investment prospects dropping from a rating of 5.6 (modestly good) in 2008 to 4.7 (fair) in 2009. Developments prospects fell even further, from 5.6 to 4.3 (modestly poor). Risk ratings have also worsened.

ULI’s European president William Kistler pointed out that the full impact of the financial crisis was just starting to permeate the economy across Europe, as consumer spending, business confidence and property values continue to decline. “Everything is being put on hold until we start seeing signs of a bottoming out,” he said. However, despite the overall gloomy conditions, opportunities remain for those who have cash to invest, he noted. “With interest rates low, and the market generally not overdeveloped, there are bargains available for those who are in a position to buy.”

According to the report, Germany was seen as less volatile with more long-term investors. "The German real estate market is becoming more attractive in the crisis," Helmut Trappmann, head of real estate at PwC, told reporters in Frankfurt. "Acceptable returns make the risks considerably lower here then in the boom regions in earlier years."

Survey respondents ranked Istanbul third for investment prospects, falling from first place last year as investors continue to seek opportunities in the city. Istanbul secured the top place for development prospects although investors are still concerned with the risk Istanbul brings, viewing it as the eighth riskiest city in which to invest.

The retail sector has once again been awarded the top spot among property types for investment prospects, only just hanging on to the top spot with the hotel sector following closely behind. Economic development will determine just how rewarding these investments will be. Moscow is the most favoured investment spot amongst the major European cities and nearly half of all respondents regard it as a ‘buy’. Munich, Warsaw, Hamburg and Istanbul also earn marshal investor support. Markets with the highest sell rating include Dublin, Prague, Athens and Madrid and investors are urged to proceed with caution.
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