Dollar fall may trigger German property sell-off

By Peter Starck

BERLIN, May 6 (Reuters) - The U.S. dollar's slide against the euro <EUR=> could make it attractive for U.S. investors who bought real estate in Germany three or four years ago to start offloading some of those properties.

The exchange rate effect was among factors expected to shape the German real estate investment market in the near to medium term, according to speakers at a property conference in Berlin on Tuesday.

Property investment units of big U.S. banks as well as U.S. property funds and U.S. private equity companies have been at the forefront of an overseas charge into the German real estate market in recent years.

After a decade of almost flat prices, property in Europe's largest economy was seen undervalued relative to other European markets and budding signs of a recovery in German economic growth underpinned expectations of higher prices, rental growth and lower vacancies.

In 2007, when the German property investment transaction volume hit yet another record -- 75 billion euros ($116 billion) -- half of the buyers were Anglo-Saxon, said Marcellino von Hoensbroech, managing director at London-based CarVal Investors Ltd with $17 billion in assets under management.

"If and when we see signs that the dollar's slide has come to an end, which I haven't seen yet, I think we will see a massive wave of selling," Von Hoensbroech said, referring to U.S. investors with German property holdings.

The dollar has fallen against the euro, and many other currencies, since the start of 2002. It hit a record low of 1.60 per euro last month, against 1.35 one year earlier and 1.10 in April 2003.

Hence, euro-denominated assets such as German real estate have risen in value in dollar terms, an increase that clearly outweighs the so-far modest decline in property prices stemming from the global credit crisis.