"With a market cap of e50bn, the introduction of REITs could provide a fantastic opportunity for the German financial industry. At this level, Frankfurt's property sector would be as big as London's and probably bigger than that of Paris," said the study, released by German real estate bank Eurohypo.
Beyond the property market, the study said REITs would give a big boost to Germany's financial sector. "Frankfurt's stock market could enter a ‘virtuous circle'. A larger market would lead to an increasing number of asset managers and better analyst coverage in the field," the study said.
This, in turn, would improve the quality of information and liquidity, "leading to better performances, new capital and new companies entering the market", it added.
Eurohypo's estimate regarding the market potential of REITs in Germany is similar to those from other industry experts. For example, HSH Nordbank believes that by 2010, REITs could spawn a market of between e30bn and e60bn.
The biggest investors in German REITs would, according to HSH Nordbank, be domestic insurers, who would spend between The German government aims to legalise REITs from the beginning of 2007. Senior officials from the governing Conservative and Social Democratic parties are currently hammering out the details of the relevant legislation.
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