Introduction
At ProVenture Property we are always seeking new markets to offer to our clients. A good deal of our investors seek yield, and yield markets do not stay the same forever, we need to continually search property markets around Europe to continue to deliver the service that clients expect. Our most recent foray in 2011 has been to enter the market in Chemnitz, a major city in the state of Saxony, Germany. As we have been working there for around 6 months now, we offer this report “from the streets” and our findings thus far.
Background to the Market
Should you have missed the article we produced on the investment case for Chemnitz, and why we entered the market - you can read our article on investing in Chemnitz property for sale here.
In the article we made the case for a fairly strong economic position for the city, falling unemployment and in certain parts of the city a strong increase in population and tenant demand. We also pointed out the backdrop of falling population across the city as a whole, although stabilised now, which has perhaps fed into the lower investor confidence / higher yields possible there today.
Looking across the city at rent levels, we see a surprisingly flat picture, with only a few districts not falling in the 4.1 to 5.5 Eur per sqm bracket. Whilst the lower level of this range is supported by social housing being paid around the 4 Eur per sqm level, income levels and demand in the more affluent parts of the city would in usual circumstances support a wider range of rents, with perhaps 7 Eur being the price paid in more of the city in prime property.
This flat picture in respect to rents can be seen as an anomoly. As the city develops, a wider range of rents should be expected, like in most cities across the world. This points to some positioning at the current time towards more prime property and the latent increase in rents, commensurate with demand and the purchasing power of tenants in these areas.
Indeed, looking to how rents have developed between 2009-10, we see a general upward picture from the patchwork below across the city with some areas enjoying rental increase in this period of 10-20%, whilst much of the rent of the city is flat or up or down less than 10%. So pressure on rents in some areas is already being felt it can be said.
In terms of purchase prices, it is without question still cheap in this city. The graph below shows that, apart from some small areas [characterized by higher proportion of owner-occupation], property can be had pretty much anywhere for under 1000 Eur per sqm. This figure relates to single apartment sales, multi family apartment houses can often start as low as 350 Eur per sqm for a refurbished and rented property.
This picture of flatish rents, low prices, and higher yields / lower investor confidence is very much a hallmark of the markets ProVenture have entered as investors these past 20 years.
Stop Being Boring Mat
But, I said this was an article “from the streets” and we are in danger of another journey into yield calculations and city statistics with Mat here. Let's share some thoughts from some of the streets we have plodded around so far...




