Chinese buyers snapping up 'safe' German properties
Real estate agents report surge in investors buying commercial and residential assets in a country valued for its stability and legal standards
Since Chengdu native Li Yi made Germany his home 11 years ago he has witnessed a gathering tide of interest among Chinese investors following in his footsteps.
Now general manager of machinery and industrial equipment company Likotec, Li is currently in discussions to buy the factory building he has been renting in the town of Oberstenfeld, north of Stuttgart.
"German real estate retains its value. Compared to the United States, Germany is more stable," he said.
He is not alone in his view, and commercial property brokers report a steadily increasing number of inquiries from Chinese clients, both those living in Germany and their homeland. Some are purchasing commercial properties as a safe haven for their cash. They are entering a market that is already gaining popularity.
Investment in residential property in Germany rose 84 per cent to €11.25 billion (HK$108.5 billion) last year compared to a year earlier, according to a CBRE report. The first quarter of this year saw transaction volumes fall by 36 per cent to €1.66 billion compared to the previous quarter due to short supply, but that was still the highest quarterly result since the Lehman Brothers minibond crisis of 2008.
Net yields in the first quarter were 3.7 per cent for prime newly built apartments, and 4.6 per cent for existing units.
For commercial properties in the country, transaction volumes rose 32 per cent to €6.7 billion in the first quarter compared to the same period a year earlier, with yields ranging from 4.38 per cent for prime retail to 6.5 per cent for prime logistics' properties, according to CBRE.
Lin Dattner, owner of Anjia Immobilien & Consulting, said mainlanders were buying commercial property as a safe haven. "Germany is very stable and has a robust legal environment," said Dattner, whose company specialises in serving Chinese clients in the Frankfurt area.
For Li, the appeal of buying rather than renting offers more immediate benefits. With the estimated €8,000 that would come in rent per month for the space he does not use, the company could pay off its monthly mortgage of about €6,500 in 10 years, he said.
That beats other investment products and leaving his money in a bank in China, said the 32-year-old, who regularly travels to China for business. He plans to more such purchases in future.
Dattner said her clients include those from second- and third-tier cities like Foshan, Chongqing and Shenyang. Many are business owners.
Among the properties they buy are hotels and shopping centres, typically priced at €5 million to €6 million, with multiple buyers each purchasing a share.
Jan Linsin, head of research at CBRE in Germany, expects more interest in commercial properties from institutional investors in China in the next three years.
"Usually in Europe the first step is London, then Paris, then Germany," Linsin said. "We've seen an interest in London in the last three years, so we are now expecting an increasing interest from Asia and especially China."
Apartments and homes are also attracting notice, from two groups: high-net-worth executives who need them for their own use or want to rent them out; and parents who want to provide accommodation for their children when they attend university in the country.
Luxury residential agent Engel & Volkers has reported increasing sales to wealthy Chinese buyers in the past two years; before that, activity was almost non-existent.
""There has been a significant growth in demand from Chinese clients. It wasn't noticeable before, but now it's very noticeable," said Anne Riney, sales director at the office of Engel & Volkers in Berlin's Mitte, the district in the centre of the city.
"They are doing it for the capital appreciation and the yield. It's a safe haven. Germany is a very stable economy. Plus, there is an advantage on the exchange rate."
Residential property prices there have increased 30 per cent in the past five years, she said, much more than in the five years before that.
Riney said half of her company's recent Chinese clients in Berlin's Mitte were those working in a branch of Bank of China which opened in April on Leipziger Platz, a square in the heart of the city. Other buyers were executives of Chinese companies opening branches in Berlin who were looking for a place to live or let out.
Konstantin Wettig, managing director at the Munich office, said agents in the premium residential segment in Munich saw 15 to 20 sales to Chinese buyers last year. Activity from Chinese clients was non-existent before 2010.
Wettig said these buyers purchased apartments of 150 to 300 square metres at €10,000 to €15,000 per square metre. Popular locales in Munich include the upscale areas in Maximilianstrasse, Lehel, Schwabing and Bodenhausen. Clients include hedge fund managers and executives from Shanghai and Beijing working in production, development and service companies.
Dattner said Chinese clients were also buying for their children: "They want to prepare a place for them to live in during their studies."
Chinese residents in Germany are also buying for themselves. There were 86,435 Chinese nationals - mainlanders and Hongkongers - in Germany at the end of 2011, 6.3 per cent more compared to a year earlier, according to the country's central registry of foreigners.
More students come from China than any other country. In 2011, 22,828 students went to Germany to study, more than double the number from Russia, the second-biggest source of students.