The Germany Property Bundle currently includes assets in Saxony and Bavaria but aims to expand to other regions of the country. According to global macro models and analysts expectations from S&P Global Ratings, the Housing Index in Germany is to increase by 10.55% between 2018-2021 as detailed below. The properties in the Germany Property Bundle are forecast to bring stable rental gains, given that the assets are expected to be rented long-term to families. We forecast the return on investment from Q1 2019 to Q1 2022 to be approximately 31.55%, which is made up of the various expected gains as detailed below.
Saxony and Bavaria are known for their rich, colourful culture and beautiful landscapes. The selected properties are located in peaceful locations, about 70 km from Nuremberg. At the same time, they offer quality lives for families.
Rental yields: Included in the property bundle are properties that are generating gross rental yields in the region of 7-8% p.a. After management fees, maintenance expenses, void periods, and corporate tax, we expect to achieve net rental yields of 3% per annum, which amounts to 9% over 3 years.
Renovation & Flipping gains: By working closely with respected local agencies we have access to deals that are priced below market value. We expect to buy, renovate and sell (flip) around 25% of the Bundle properties each year, by selling assets at their market price and buying assets at approximately 10% on average below their market values. We therefore expect the flipping and renovation to create an increase in share value of approximately 2% p.a. and 6% over three years form Q1 2019 to Q1 2022. In Addition, we estimate that 20% of the assets will require renovation and estimate the renovation gain per flat to be at least 10%. As a result, we expect that the bundle share value will be increased by 2% p.a. and 6% in the three years to Q1 2022
We plan to keep developing the Germany Property Bundle, renovating the existing properties and purchasing new assets at below market value.