Not Convinced by Germany

Posted on 30. Oct, 2008 by EOW Team in Investment Guru

Posted on 22 November 2006

Hi,

Have had a busy week in UK and over in Germany – hope your investing is going well.

Germany

I am just back from a trip to Berlin – which was excellent.

However I am still not convinced it offers any great opportunities at this time for individual investors.

The reasons?

The locals are not a nation of homebuyers – with only 13% owning in Berlin

Rents are generally low

German law is highly protective of tenants – it is very hard to evict tenants or raise rents!

However German banks can be reluctant to finance vacant property

Buying costs are around 12% of purchase price

There has been little growth for 10 years – although institutional finance is now going in

So with such high buying costs, not particularly attractive leverage options, and strong tenancy laws – I personally would rather invest elsewhere – your ROI over 3-5 years can be far higher in countries offering far higher leverage and far lower buying costs.

Let’s look at an example of what I mean:

Eg if have £50,000 to invest

Let’s look at 2 countries that are both expected to see 20% capital growth next year – at first glance they may look as if will give you a similar return on investment, but lets look in more detail.

Country A you can get loan to value borrowing of 60%, and buying costs are around 12%

Country B, you can get loan to value borrowing of 85% and buying costs are 5%.

So if are targeting property priced at £50,000,

In country A, one property would cost of your own money, assuming you get maximum loan to value available,

£20,000 + £6000 = £26,000, so you can barley buy 2 properties

In country B one property would cost

£7500 + £2500 = £10000

So you could afford to buy 5 properties.

After year 1, your ROI would be around 38% if invested in 2 properties in country A, not taking any other costs into consideration, but in country B, your ROI would be 100%.

So a huge difference in performance – which is why is so important to look at leverage and buying costs when comparing deals.

Morocco

More positive news on Morocco – Rabat, Morocco’s tourism industry’s income has reached a new record, after increasing 25.8 percent during the first nine months of the year, the ministry of tourism said.

The ministry said income hit a record 3.67bn (about $4.5bn), while passenger numbers for the same period had increased 9 percent.

Morocco has estimated that tourism earnings would be between 4.1bn and 4.5bn, against 3.7bn in 2005, said the ministry.

It added that tourist numbers would reach 6.5 million for 2006, up from last year’s 5.8 million visitors.

Morocco plans to encourage 10 million tourists by 2010 and was currently pushing tourism development throughout the country to make this possible – Business in Africa Online.

Hotel rooms are not being built fast enough for Morocco to meet its tourism growth targets, and the kingdom is introducing penalties for foreign developers who fall behind schedule, Morocco’s tourism minister said on Friday.

Tourism Minister Adil Douiri said the number of tourists visiting the country was growing in line with expectations but hotel rooms were not being built fast enough to accommodate the 10 million tourists a year it aims to host by 2010.

Speaking at the General Assembly of “Airports Council International” held in Cape Town (November 7 through 10), Benallou stressed that the capacity of the airport of Marrakech will rise to 10Mn passengers by 2010, and will consequently be similar to that of Mohammed V airport in Casablanca.

Touching on Morocco’s efforts to promote tourism in the framework of the country’s Vision 2010, Benallou highlighted that the Kingdom had launched several projects ranging from airport extension to airport creation.

In related news it has been announced that an airport will be launched in the western city of Essaouira by the end 2008 as well as a new airport in Tangier, while the airports of Casablanca, Oujda (west) and Dakhla (south) will be extended.

At the same time, economic growth has contributed to the creation of 272,000 new job opportunities between 2003 and 2005. This was announced today by the Minister of Employment and Vocational Training, Mustafa Mansouri.

So well worth a close look at Morocco right now – more news over the next few weeks.

India

Am hearing a great deal of positive news about India and the rate of growth – a colleague is out there this week, and will be reporting back over next month.

Many thanks for all your emails – as always can catch me at info@property-investment-deals.com

We also received a good number of emails regarding Fuerteventura last week – for details on a deal we have coming out there, drop us a quick email to fuerte@property-investment-deals.com and will keep updated.

Have a great week,

Regards

Alan

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