Germany Boosts Property Markets

The positive outlook of the German economy is pushing Central and Eastern Europe economies forward, a recovery that also supports Turkey, accord¡ng to Peter Damesick, chief econom¡st at property adviser CB Richard Ellis. Turkey is on the map for many investors, he says. Still, the country has solid rivals.

The rapid recovery of Germany, Europe's economic powerhouse, is boosting economies in Central and Eastem Europe, rendering the region that includes Turkey even more attractive for investors, according to a top property economist.

"Though southem Europe is having serious troubles, we are observing very strong growth in Germany and the Central and Eastem Europe [CEE] region," said Peter Damesick, chief economist at properly adviser CB Richard Ellis.

This phenomenon is also expected to help the Turkish economy, which enjoys strong links with Germany. Indeed, Turkey's exports to Germany in 2010 totaled $11.4 billion, while its imports
from Germany reached $17.5 billion. Germany tops the top importers from Turkey list, while it ranks second after Russia in the exporters to Turkey list.

Foreign trade with Germany, at $28.9 billion, is nearly one -10th of Turkey's overall foreign trade, which stood at $299.4 billion last year.

"Britain led the global property recovery in 2010. Now investors are looking at where economic growth is stronger. And that’s Germany plus CEE," Damesick told the Hürriyet Daily News & Economic Review during an interview earlier this month.

Turkey is "on the map" for many investors, especially with the opportunities it presents in hotel development, according to Damesick.

Strong rivals in the region

However it also has formidable rivals. "Poland emerges as a most attractive and interesting market,
especially in retail property investments," Damesick said. "The Czech Republic is offering lots of opportunities, while German growth also helps Russia in the property sector."

"Political risks" in Russia have not been tackled completely, according to the economist. "There are problems regarding the legal structure on property ownership," he said.

For Damesick, the distinct feature of the property sector in the current global recovery is that it does not have an oversupply of space. "Thats because development activity was hit quite early on, with the start of the credit crunch," he said. 'Today, we see that the number of office markets that will be finished in 2011, or even 2012 is quite low. This (shortage) is helping the stabilization of rental levels."

The property sector worldwide has become more attractive in an environment marked by low interest rates in the U.S. and Europe, according to Damesick. However, investors still are concentrated at the so-called "core property'' in developed markets such as London or Paris. "When you move away from this core, the quality of the property falls. Thus, we haven't seen an improvement in value. This presents an opportunity for investors, as they will be able to buy at depressed prices."

However, not all is bright. Damesick expects "more writedowns" related to losses that currently are not on the books of European banks. "It will be a long slow and painfu Process for banks," he said.

According to a report released March 9 by the Los-Angeles based CB Richard Ellis, property investors have shifted their focus toward commercial property in Germany, as Prices rose rapidly in Britain. The report said nearly 32 percent of investors intend to buy property in Germany this year, up from 18 percent in 2010.

Source: Hurriyet Daily News