I had a chance to have my internship at Witte & Grabert company. The company deals with real estate and finance.
They buy and sell buildings, doing different insurance offer, and help customers to sell buildings or change insurance companies.
I was supervised by Mr Dahlmann who is an experienced member of the company. Except his personal wonderful features he taught me much how to work in this sphere, how to communicate with people. I learned much about the rules and norms of negotiating and different psychological ways of communicating with people.
The remarkable peculiarity that was noticed by me was the discipline at the company and punctuality of the workers. Another thing that is very good for any company is team-working. I mean that is very important for work of any company. The latest concepts of leadership are successfully involved into the work of the company.
To my personal duties belonged the customer support, individual consultations, contract preparation, assistance in meetings halftime (helping in the accounting office), website working out (pictures, color).
Analysis
After the fall of the Berlin Wall in the real estate market of Germany it is possible to observe a surprising situation: prices in the east, formerly socialist territories, did not grow for a long time. And now, as we have seen in some depressed, in terms of economic development, zones, you can easily buy housing for 500 euros or less per square meter.
But it is impossible to have business in this embedding: if the region is not in the labor market, it means that there is no market rent. But Berlin today is another prospective for investment. Let us leave aside the large-scale investment projects in the commercial sector. Housing in Berlin – is a stable market with very favorable compared to many German cities the ratio between purchase price and the level of rents received. This situation is unlikely to last long – the prices for houses and apartments are rising.
Here is a concrete example. Flat area of which is 31 square meter is sold for 26 400 euros, taking into account all the paper costs. It has already gone for 350 euros per month, what includes 110 euros of utility payments, 20 euros – services Management Company, and net income of the owner is 220 euros what gives 10% of annual return on invested amounts.
The number of apartments bought by foreigners in Germany is not restricted. Therefore, the market offers multi-income homes. For example, a five-storied house in Berlin is sold for 650 thousand euros – for 848 euros per square meter. It surrendered all eight spacious apartments and two commercial premises. Net income from the rental is 50 thousand euros per year – that is, more than 7.6% per annum. Doubling the investment, we can buy 22-apartment house and receive more than 110 thousand euros of net profit, which is 8% per annum. Such «arithmetic» lease in Berlin allows fully recoup the investments for 10-12,5 years, a growth market (in Berlin, experts observed in 2007 across the central part of the city increase in the price of apartments in new buildings by 10%) (Davis, 2007).
After German reunification in 1989, rapidly rising cost of housing in the land the former East Germany – for the development of these regions, the Government gave the people and businesses a lot of tax preferences. As a result, many traders moved their business to these regions. People bought flats as investment in order to donate them. But production capacity of many enterprises in the east was directed to the markets of neighboring countries in Eastern Europe.
Imported goods and commodities from the West lands have been much better. Therefore, a lot of enterprises in the east in the 1993-1995 biennium have bankrupt. People lost their jobs, they could not withdraw housing, pay loans, etc. The population was to migrate to other parts of the country. As a result, all those who invested money in the purchase of real estate in the east, lost rental income. Prices of real estate during the year declined by 40-50%. There appeared the abandoned entire villages, whose inhabitants had to move to Berlin and further west hoping to find work.
Those who lost money because of the crisis in the economy of the eastern lands lived and worked in western Germany. Overall the country, people have begun to lower their costs. Businessmen have tried every way to reduce their costs by reducing staff, costs for advertising, etc. It was a chain reaction in the economy, which has resulted in the demand for real estate fell, and people ceased to repay mortgage loans. Prices of real estate in the western part of the country gradually fallen by 20-30%. In doing so, we have seen permanent level of GDP growth at the level of 1-1,5%, and declining inflation.
The chain reaction appeared because of those who invested in real estate in order to earn lower prices comparable to falling profitability of the business. In addition, only 40% of Germans owned their own housing, half of them – the owners of 15 or more houses and apartments that rent for rentals. Most of the population is renters. And for those people declining incomes mean inability to pay high rents. What do traders when the business ceases to bring them revenue? They just sell it. The fall in prices in one region causes deterioration in price expectations in society as a whole. Therefore, investors sought to get rid of real estate across the country.
Today thousands of foreign real estate companies acquire real estate in Germany, believing that there will be no falling prices, and rents will only grow. There bare various venture capital funds and investment companies, which say: “Over the past 10 years, your market was stable. Now it will grow. We will buy”. I think they make a mistake – there should not be a significant increase in property prices, because the rent is so high. As I said earlier, Germany’s economy is growing at an average of 1% per year. This means that incomes of people grow very slowly in order to further raise the rent. Now we are increasingly faced with declining rents, rather than with its growth (Davis, 2007).
There is a tendency now when people preferred to pay more for rent than to invest in acquiring their own property. The first what went down were the prices for old apartments and houses, which required considerable investment in order to live in them. Against a backdrop of declining prices, no one wants to buy poor quality housing. These are the most illiquid goods during the crisis.
The geographical location of housing is a major factor in determining its price. In West Germany the real estate market has long been shaped. The natural increase in prices is, according to various respondents, from 2 to 4% a year. It is the western German lands, especially land Nordrhein Westfalen (North Rhine-Westphalia) are perhaps the most attractive for investment, primarily for home buying. There already have their residence of citizens of many EU countries, and the recent housing market of large cities of the land (Cologne, Dusseldorf, Essen and others) was particularly attractive to the citizens of Russia, which is literally buying up housing apartment buildings.
In the eastern lands of Germany empty entire neighborhoods, as well as the homes do not meet modern standards of construction. There is still a strong outflow of the indigenous population of East Germany: people migrate to other cities and countries, which can find better paying jobs. The Germans prefer to buy a new, albeit more expensive housing in the west than the cheapest in the east. Index – to conform to the current requirements for construction and equipment of homes, which provide savings on water, electricity, heating (Frej, 2003).
Many experts suggest that the prosperous West, federal land and the eastern state of Brandenburg are the two poles of German real estate market, very different from each other to develop, cost and standard of living.
Currently the situation in the real estate market in Germany, compared to other European countries, is unique: houses and apartments in decent condition remain undervalued. They have good growth potential value, which already has, mainly due to increased demand from abroad. And this demand is not accidental: to date cost of one square meter of housing in Germany on average in 1,5-3 times lower than in big cities of Eastern Europe.
Germany was and remains one of the most reliable and economically stable countries in Europe, the buying real estate which will not only preserve but also to increase their savings. A careful choice is the best done with the support of competent and reliable realtors, who picked up property in the maximum under the requirements of the customer, helping it to evaluate all the pluses and minuses of various proposals.
As another important investment, the experts identified the investment in order to profit from the lease. So, what can expect the owner of real estate in Germany to surrender its lease? Immediately reservation: Germans prefer to rent rather than buy apartments and houses. Just over 40% of Germans own their own housing, unlike many Western European citizens. Thus, according to Eurostat, in Spain the figure is 81%, Ireland – 78% in Britain – 69%… Perhaps, demographic shifts, credit policy, low mortgage rates make a difference, but so far Germany is somewhere in the bottom of the list.
Housing in large urban centers such as Cologne, Munich, Hamburg, and Frankfurt is especially popular (among tenants and buyers). The market has a lot of sites already entered into the lease agreement. Real estate was the owner of 6 to 12% only at the expense of the lease, but given the increase in property prices, the investment will turn out very profitable even when compared to deposit in Swiss banks. In this case it does not matter the footage and number of rooms, only profitability is important. Compared to rural homes, the foreigners much more willing to buy an apartment in the city: they are cheaper in the content, and prices are rising faster. The average rental rate in Berlin is 6 euros per square meter in new homes – up to 14 euros per square meter (Mütze, 2007).
The right to surrender their properties for rent has any owner, including foreign owners. By the way, this can help Real Estate Company, through which the property was acquired. According to experts, the vast majority of apartments in favor management companies with a condition of putting them in rent and profit. Office includes a full range of services for the functioning of housing, including the removal of technical problems and all sorts of calculations with the tenants. Of course, the content of property is charged separately. For the management of multi-or large objects collected from 6 to 8% of the rent. Managing a flat at an average cost of ownership 40-50 euros per month, depending on the size of the apartment and values profits.
Utility payments are directly dependent on how much housing is equipped with modern equipment (if there is in the house elevator, a central hot water, etc.) as well as the size of the site where the house is situated, and the area of the apartment. The consumption of heat and water meters is measured, and at the end of the year the owner receives account (Davis, 2007).
Munich, Bavarian capital, is the most expensive city in Germany. The cost of one square meter in the center of Munich starts from 3.5 thousand euros per square meter. Prestigious regions are the demand for elite housing, that is why the center is well under way the construction of multistory buildings with fashionable apartments. According to the German press, near the main square Marienplatz houses with several dozen of apartments grow soon which will cost from 8 to 15 thousand euros per square meter. For less Munich could be the fact that the greatest part of Germans have extremely negative attitude to foreigners.
Cologne is one of the oldest cities in Europe. Perhaps it is Cologne may be among the million-Germany as the most attractive to invest in real estate, both for private individuals and large businesses. Cologne is usually described as a place of new media. It is here that housed offices of the leading television companies of Germany: RTL, WDR, Pro 7, Sat 1, Phoenix and others. Cologne also won fame «scientific» city: the location of the largest university in the country and a number of institutions here flock best minds of Germany, forming Professorship and a student of the local population. After all, only within the walls of the University of Cologne enrolled nearly 64 thousand students.
Among cities, interesting for investment is Dusseldorf, the capital of the federal North Rhine-Westphalia. The cost of one square meter area in the center of Cologne starts from 2.8 thousand euros per square meter. Average same price, according to the experts, is equal to 2 thousand euros per square meter. In the lower range of home buying by 1,4-1,6 thousand euros for the “square”, as a rule, with additional investment in repairs. The overall cost can easily calculate its own, based on common sizes of apartments: footage of apartments averaging 25-38 square meters, two-room apartment – about 50-68 square meters, three – 70-85 square meter, four and more rooms – 90-170 square meter in Dusseldorf on average housing costs by 5-10% cheaper.
Speaking of Berlin, it would be better primarily to recall its history. Berlin, unlike most European capitals, does not have a single point. In 1991, in line with the integration process in the country, the association has been the capital of East and West Berlin. However, this does not affect the existence of two centers in the city for its specificity and a special way of life.
Berlin was divided into zones, and each has its own prestigious (for example City) and “workers and peasant” part. If to talk about the price variation, the value of real estate in these areas (City) starts from 2 thousand euros per square. m, within a radius of kilometers from the city is already 1,5 thousand euro as the starting point and then falls to 1.2 thousand euro. In reviewing other areas of it is better to be oriented on the price of 1.5 thousand euros per square meter. Of course, there shelter in Berlin and expensive, and cheaper average performance. Everything depends on the location of housing for the park, the river or the autobahn, the center of the city or university.
In eastern Berlin, you can find real estate for 700-800 euros per square meter. But that option will come, rather, the man who is ready for the long-term investment. But today the infrastructure of East Berlin (former GDR) is still very different from the West (FRG) (Mütze, 2007).
In Germany, by purchasing real estate there are no restrictions for foreigners, and no privileges for EU citizens. Moreover, the alien acquires not only housing but also the land on which it is located in its full private ownership.
Once the desired apartment or house have been chosen, the time of negotiations on the sale between the current and future owners. Commenting on the conditions and characteristics of purchase, they said that the buyer must necessarily refer to a specialist – the broker with state license.
The transaction takes place in the notary office. In presence: the buyer, seller, realtors, notary and certified translators (if the buyer does not speak German at a sufficient level). Buyers must have a passport. Notary – the guarantor of the transaction, previously examined the documents provided by realtors, is preparing the sales contract. A notary is obliged to read the agreement aloud, then everyone will be able to ask questions and to clarify the nuances. Among other things, the treaty specifies the amount of transaction and payment for the purchased property.
Notary offers a special temporary account in the German bank, which is expected to reach money specified in the contract term. Once the money come from to the notary, the buyer will be registered in the Land Register as new owner of the land in Germany (similar BTI). Sometimes investors want to come to Germany only a couple of times: the final selection and inspection acquire real estate and with the signing of notary deeds. The process of buying, including submitting to the state registry of property, will take about three months.
At the first glance, regular income from rent, good liquidity and increase the market value makes the purchase of real estate in Germany a reliable investment. In fact, things are not so simple.
Not every property justifies the expectations of buyers and potential investors. Only those who carefully select the site and building plans with a view to the future, can expect to be profitable. To do this you need to take into account such important factors as the location.
For the investor, it is very important to acquire real estate had the return to the dynamics of growth, not fall in price and guaranteed to rented. Not all sites on the market meet these criteria: on some you can see in advance that they will bring only constant problem. Therefore, the potential investor must take responsibility for the choice real estate – the imaginary attractive prices could result in significant costs in the future.
If possible, the facility should meet the following requirements (Davis, 2007):
- It should be interesting for the widest possible range of tenants: small apartment suitable for students and single people, and withdraw the spacious apartments class «lux» can afford only rich citizens. In addition, we must take into account freedom of design: whether, for example, from one room to make two and vice versa. An additional positive factor is the fitness facilities for the disabled and the elderly.
- The location should be chosen with the expectation for the future. An area where the deposits are made and where ere is the building of new housing by the large investors. This means that the demand in those areas do not come down to nothing and by 20-30 years.
- The facility must be located in a good spot: as inner circle, and the place must comply with the request of the buyer and potential tenants. The low economic level or high unemployment could lead to the untimely release of the square.
- The condition of the building. For sites that require repairs, the cost must be pre-get: old burdens or hidden built drawbacks may unexpectedly affect the cost. If there are doubts, it is better to should contact a specialist.
- A facility should be well-planned: very small are not welcomed, irregular in shape and adjacent rooms. Investors interested in those rooms, where the design meets the requirements of neighborhood, or its amendment, possibly at no additional cost.
- Low cost of utility payments. While most of the utilities paid by the tenant, the value of those costs directly affects the speed of the rental of premises, as well as any tenant interested in the total value of the premises. Utilities can increase because of poor insulation or outdated heating system.
Upon the acquisition of real estate for the purpose of the lease is guided by simple rule: if the buyer did not want to remove the object, it is unlikely that someone else wants to do it. Let us not forget that any property requires regular maintenance, repairs, including re major repairs in the future. The object must always remain liquid, even though some time will be empty space.
To get your return on the purchase, you should pay attention to several factors:
- The ratio of the value and cost of major repairs;
- The cost of financing;
- Development of rent;
- Taxation;
- Fixed costs.
When buying on the secondary market price set in advance. But even in this case, much to test: does not require additional cost of maintaining soon, whether dry basement, there is not outdated heating systems, wiring and windows, there would not have to do cosmetic repairs after the departure of the tenant (Frej, 2003).
The construction of the new facility may have unforeseen costs. Therefore, even before the conclusion of the contract does not prevent determine what additional costs would be borne by the buyer: for example, connect homes to communications, interior finish, garbage removal, the electricity. In connection with this description of all the work, issued by construction firm, should be as detailed. We should not forget about the costs that accompany each transaction of real estate: notary services cost an average of about 1.5% of the cost of the facility, a tax on the purchase of real estate and the fee – up to 6%.
What are the implications for the real estate market could lead fertility decline in Germany, one can say with accuracy 100%, but now you can draw some conclusions.
Richard Haymann, a recognized expert in real estate, believes that in big cities, investors almost always win and can count on growing revenue in the long run. Just in a different look at the chances of buying the object in a small locality.
Real Estate Market research conducted by Deutsche Bank, showed that demand for housing will increase. The reasons for this: the increase in life expectancy, the population influx, a large number of single people, increase the amount of living space per person. It is estimated that the number of households by 2020 will reach its peak, and then a decrease is expected (Mütze, 2007).
For the landlord, this means that in coming years, demand for flats will exceed the proposal, which would lead to higher rents. However, this rule will not work everywhere. Based on the results of the study, Deutsche Bank experts argue that the increase in demand will occur in economically strong areas, constantly offering new jobs. In the weak regions of the population will decline.
Speaking about real estate in Germany it would be appropriate the role of insurance market. German insurance market is characterized by dynamic development. Annual Growth in income insurance payments is 10%. Personal insurance in national insurance market takes about 37%. Health insurance is
less popular than in other Western European countries, represents approximately 12% of the total income of insurance payments.
Property insurance occupies 51% of the national insurance market in Germany. The sector of life insurance in Germany is growing competition by commercial banks seeking to arrange insurance servicing customers through the operating room for commercial banks. In general, profitability of operations in the sector of insurance services of individuals above than in the service sector insurance entities.
Branch insured the services of individuals took 87% of the German insurance market, service sector insurance entities – 13%. Dividend on shares of Shareholders of insurance companies is stable, but slightly lower than in other Western European countries.
Insurance in Germany is divided between the state Social Security and the private sector insurance services. Social Insurance is mandatory for all employees, if they do not covered by private sector insurance cases. It is understood insurance of old age, in the event of unemployment insurance in the event of temporary loss disability. The private sector of insurance services in Germany presented the following types of insurers – stock insurance companies, which are the property of their shareholders, society and mutual insurance State Insurance Corporation (Frej, 2003).
A major source of attracting customers of insurance companies serves the work of independent insurance brokers serving the various insurance companies. Widely represented the direct sale of insurance policies carried out directly from the offices of insurance companies.
All the German national and foreign insurance companies are subject to compulsory state insurance supervision of the Federal agency oversight of insurance companies (BAV), located in Berlin. Insurance companies established certain federal lands are subject to supervision by the Insurance Commissioners of the Land of the authorities (Mütze, 2007).
Compulsory insurance in Germany is relatively limited by nature. Federal law sets mandatory Germany insurance employer for damages to employees caused injury or dangerous working conditions, compulsory liability insurance of owners of vehicles for damage to third parties as a result of traffic accident. There is a Mandatory insurance of professional (civil) responsibility aircraft carriers and air traffic controllers to manage movement of civilian aircraft, accounting, hunters, and operators of nuclear power plants, atomic energy consumers and radioactive isotope producers (producers) pharmaceutical products. In addition, some federal states of Germany found compulsory insurance of buildings from the fire, regardless of their form of property.
Insurance in foreign countries is part of the international insurance market. However, it is an important sector of national economies, ensuring the redistribution of 8-12% of gross of national product. Accruing through the insurance money is a major source of investment. Financial flows of insurance companies largely focused on servicing the public domestic debt. State regulation of insurance activities in Foreign mainly aimed at monitoring the financial side of the insurance companies.
Evaluation of the internship
I learned about different kinds of insurance and how to calculate (the amount).
I learned how the insurance companies defend their interests and insurers, creating an association of insurers. Such associations have expressed interest affected insurers from unscrupulous insurance companies have Victims Legal Aid, are involved in the improvement and development insurance legislation, etc.
An important part of the insurance market is supported by the system of government regulation, which needs to relate primarily to the protection of the rights and interests of the insured, the prevention of financial loss due to insolvency insurance company.
I learned about the selling prices in Germany (Berlin) for real estate, and why the prices are so. How to make insurance for a building, why it is necessary for the owner and the building it sell in Europe.
References
Davis Tanya, The Real Estate Developer’s Handbook: How to Set Up, Operate, and Manage a Financially Successful Real Estate Development, Atlantic Publishing Company (2007).
Mütze Michael, Senff Thomas, Möller Jutta C. , Real Estate Investments in Germany: Transactions and Development, Springer; 1 edition (2007).
Frej Anne B., Peiser Richard B. , Professional Real Estate Development 2nd Edition, Urban Land Institute; 2nd edition (2003).