“Germany boasts a stable and secure market,” said Dietmar Krywald, Managing Director of Kowloon Land.
“I strive to bring good and safe investment opportunities to investors in this financially, politically and legally stable environment.”
Founded in 1999, Kowloon Land is a consultancy that mainly focuses on German real estate investment. Before moving to Hong Kong, Krywald spent more than two decades working in both the financial and real estate sectors in Berlin. As a result, he knows the local property market backwards and has an extensive network with developers and other market players in the city.
In 2015, he decided to move here permanently. Since then, he has continued to work closely with German developers to introduce projects to Hong Kong and Mainland Chinese investors.
Krywald is committed to finding the opportunities that “will deliver the best for investors.”
“We are not property managers; we are consultants,” he said. “With our expertise in the German real estate market, we tailor-make properties that come with good return on investment on a case-by-case basis.”
To provide a range of options, the company offers long-and short-term investments, in both residential and commercial projects.
“The duration of long-term investment should be a minimum of five years, but mostly 10 years in residential or commercial properties, due to the tax exemption. On the other side, the duration of short-term investment is around six to 18 months, using the high need for plots of family houses, with a minimum investment amount of only EUR10,000 (HK$87,000). These are very strong and secure investments,” said Krywald.
The strong demand for residential housing means that these short-term investments have proved to be very successful, as the properties are snapped up quickly by young families seeking a place to rent.
“When you do it right, the risk is very low, the security is very high, and the business is very quick – with a lower minimum of capital,” he said.
Krywald gave the example of a high-quality apartment complex in Großziethen, outside the city lines of Berlin. This development was fully occupied by tenants soon after completion.
“Not only do we invest in absolutely safe German properties and areas where the building law is clear, but we also only cooperate with reliable German developers who have profound knowledge of the property market, and we only invest in plots that are saleable and hot-picks,” he added.
At first, Kowloon Land was acting in a niche market. But over the years, the advantages of the German real estate sector have become clearer and the country is an increasingly favoured destination for Hong Kong and Mainland Chinese investors.
“One direct reason is the low entry barrier compared with other Western countries, and there is no additional property tax for overseas buyers,” said Krywald.
In addition to affordability, Germany – the world’s fourth largest economy – has advantages including a stable economy, high growth potential in major cities such as Berlin, Munich and Frankfurt, and an environment where renting is the norm.
“The majority of Germans prefer to rent rather than buy, with 40% of people owning a house, whereas 60% are renting. The rate of renting is as high as 77% among young people,” he said. “In Berlin, more than 85% of people are tenants.”
Another reason is the growing demand for residential homes in Germany, as building new homes has not kept up with demand. This is especially the case in Berlin, which has been facing an acute housing shortage due to the city’s rapidly growing population.
“This can be partly attributed to the influx of refugees and a strong work migration as a result of the booming IT and start-up economy, which will continue to drive high population and residential market growth,” said Krywald.
Strong economic fundamentals combined with historically low interest rates have also been driving the growth in property prices and rent across Germany.
“Housing prices have accelerated by 50% from 2010 to 2019. Over the past ten years, rents have almost doubled in the capital,” he said.
However, to put the brakes on the spiraling costs for tenants, the Berlin government passed a new law in 2019 that includes a five-year rent freeze from 2020. This will relieve the pressure on tenants until enough new houses are built to alleviate the current supply/demand crisis.
“It is a difficult situation and hard to strike a balance between different stakeholders,” said Krywald. “Renting is part of the German civil rights.”
Still, he remains confident about the market. The new rent control itself is a temporary measure, and buildings built after 2014 will be exempt from the rent cap provisions.
The country’s very strong tenant market and low vacancy rate means that investors can continue to expect stable rental income.
Kowloon Land has developed a range of other services that have emerged from its property business. “New services emerge step-by-step owing to the different needs of clients,” Krywald explained.
The company’s education services evolved as Kowloon Land’s clients learnt about the advantages of Germany’s education system, and considered sending their children there to work and study.
“Germany has a dual education system that is recognized worldwide,” said Krywald. More than half of German young people follow this vocational track, which integrates school-based learning with practical training at businesses.
Krywald helps to connect Hong Kong students with German companies, giving them the opportunity to experience German education, and also helping construction companies to find new blood. Kowloon Land has now extended this programme to students in Vietnam: once they pass a German language test, they are able to study and work under the dual education system.
In 2017, Kowloon Land decided to expand into tourism, offering all-inclusive packages to Germany, from flight and hotel bookings to transport arrangements, dining and entertainment. This service also emerged from the real estate business, as such visits give investors a deeper understanding of a city or area before they make a decision. Outside Germany, Krywald’s enthusiasm for Sri Lanka prompted him to introduce a one-stop travel service to this island country.
In recent years, the company has also started to offer financial backing to start-up companies to help them to grow, and also advises them on future business opportunities.
The current shortage in housing supply and continuing internal migration towards urban areas means that Krywald sees a rosy future for the sector. “The German construction market is set to grow, as over 1 million apartments and houses are needed,” he said.
External factors are also driving interest in the German property market. “From what has been happening here in Hong Kong, as well as the uncertainties of Brexit, more people will seek out a safer and more stable well-performing alternative,” he said.
Krywald remarked on the housing shortage in Hong Kong, and said that building more homes should be a priority. Around the world, people want a safe and comfortable place to live.
“After all, housing is a basic need for people,” he said. “We need to provide people with homes, and this is what we do.”
Company : Kowloon Land Ltd
HKGCC Membership No. : HKK0465
Established : 1999
Website : http://www.kowloonland.com.hk
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