Friday, 22 June 2018

Changes on Share Deal Regulations To Make Them Less Attractive

The controversial methods used by property companies to avoid property sales tax (stamp duty) have been a thorn in the side of the tax authorities in the German states as they are the recipients of the revenue from this tax. The current federal government has picked up the issue as it is regulated by federal law and was agreed as an action item in the coalition agreement. The finance ministers of the states (Bundesländer) have passed a reform model for the regulations for Share Deals in their last joint session on Thursday. Any change in this taxation has to be agreed on by both levels of government.

In the Share Deal model the parties involved use a loophole in the tax code selling shares in a property instead of the entire property. If the amount of shares sold is below 95% there is no property sales tax because in theory the property remains with the company owning it and the company has not fully changed ownership.


  • In the new model this quota is to be reduced to 90% in order to avoid property sales tax.

Another condition is, that the owner of  the remaining 5% plus, 10% plus in the new model,  has to remain in the company for a minimum of 5 years to avoid taxation.

  • In the new model the minimum holding time is planned to be extended to 10 years.

As the tax rates vary between 3.5% and 6.5% (overview of the states) of the purchase price in different states it poses the question if these changes are enough of a deterrent to not try to avoid this tax. The total amount lost to the states through this model is estimated at ca. 1 Billion Euro annually.

Stay tuned for updates.


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Tuesday, 19 June 2018

Cash in The Attic - Rooftop Developments in Berlin


The Urban Land Institute Leader Summit 2018 in Frankfurt in May touched on the subject of repurposing roof space in Berlin. Be it your classic attic rooftop development or installing completely new units on top of existing buildings:

In Brief: Repurposing Rooftop Space as Values Climb in Berlin
With property in high demand in Berlin—it had the largest year-over-year real estate price increase of any city in the world last year—it makes more sense than ever to look up for new opportunities. A number of developers have found success (or are hoping for a top return) from add-on projects atop existing structures in Germany’s capital.
For the full article and video: https://urbanland.uli.org/development-business/brief-repurposing-rooftop-space-values-climb-berlin/


This is especially interesting in "Mileuschutz" protected areas as there are no "luxury" limitations for the new apartments and the rent is not limited. You just cannot integrate existing apartments into the development. For more information on "Milieuschutz" see The Can Do and Can't Do Renovating Apartments in Certain Areas of Berlin in this blog.


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Thursday, 14 June 2018

IBB Housing Market Report 2017 for the Berlin and Greater Berlin region

The annual IBB Housing Market Report has a different angle at the market situation than the commercial reports produced by big property agents and banks. Here is how they characterise themselves:
"IBB is the business development bank of the Federal Land of Berlin. With its business support, it actively contributes towards developing Berlin as a hub for business and industry. Our staff working in housing and real estate promotion are the people to contact for all issues related to real-estate financing."
Their viewpoint is policy based and not biased to talking prices up for business purposes (also available in this blog). The main report is in German and a volume of 121 pages with very detailed data and information. There is an 8 page summary available with all key findings of the report addressing these topics:


Selected Data at a glance


  • Economic factors
  • Housing demand
  • Housing supply
  • Rents and housing market
  • More detailed data available in the German version of the full report

General situation and important trends


  • Berlin’s economy – growth once again above the national average
  • Trend in demand
  • Trend in supply
  • Market for detached and semi-detached homes
  • Market for freehold apartments
  • Market for rented apartments
  • Key topic: The “Berlin and greater Berlin” housing market region

Downloads:





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Monday, 11 June 2018

Expiring Energy Certificate (Energieausweis) can be very costly, even when renting out or selling only one apartment

Renting or selling an apartment or apartment block requires the presentation of a valid Energy Certificate at the time of viewing. Even an ad for the rental or sale requires certain information contained in the certificate. Otherwise fines and / or libel suits could follow.
If your building in Germany was completed after October 1, 2007 it was required to have an up-to-date Energy Certificate. These certificates are valid for 10 years and start running out this year. If the building is dated before 1966, Energy Certificates were required since January 2009, running out next year.

Von Eigentum vom Autor - Eigener Energiepass - Autor Dirkes1,
CC BY-SA 3.0, https://de.wikipedia.org/w/index.php?curid=2832021

There is no requirement to renew the certificate if you are not re-renting or selling. Owners associations with owners predominantly using their apartments themselves will be reluctant to spend the money for a new certificate if they personally don’t need it.

An example: You are expecting to rent your apartment in January 2019 because you know it will become vacant. This year’s owners meeting did not have a new certificate on the agenda because the property manager was not paying attention to the issue, so there is not budget item for it. Even if it is considered “normal management” which does not even need a vote, it needs to be budgeted. So a discussion with the management company and the co-owners might be advised.

As there are different types of certificates we recommend professional consultation if in doubt.


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Thursday, 7 June 2018

Why Would I Divide My Apartment Block Into Separate Units, Condos?

Yesterday's post created many responses regarding the question: Why would or should I divide my property into separate units?

At the outset I would like to stress two big words: IT DEPENDS or as we like to say "How Long Is A Piece Of String".

List of possible reasons:


  • sharing out a property between investment partners wanting to go separate ways
  • sharing out a property between heirs wanting to go separate ways
  • selling off a property in single units at a higher price per m² in single units
  • increasing value for potential buyers
  • increasing LTV for mortgaging as banks like divided properties very much
  • ...

Areas of Concern


  • Many of the angles have tax implications totally destroying the intent, for international investors possibly a double taxation issue.
  • Is your property in an area where the division might be blocked by local authorities for fear of "gentrification" or is it already in a protected area.
  • What is your investment goal?
One of the key variables in deciding on a strategy for your property is the time horizon you have set for yourselves. If you are looking for the long game, blocked areas are still feasible for a division, as long as you don't plan to sell within the next 7 years. So one investor's concern is no problem to the next.

One item everybody shares in this process is the cost as it does not depend on the intent, this is what yesterday's post was about. Developing a strategy for your property or portfolio based on the intentions of the owner(s) and the individual properties is one of the specialties required. So the main question is:

How Long Is A Piece Of String?

Which summarizes strategy if not approached deliberately. Are you an investor wanting annual income from your investment or are you investing in value gain and see what happened after 10 years? Both strategies are valid but need different approaches.

If you are interested in a cost estimate for dividing a 20 apartment "average" building have a look at yesterdays post on this block.
If you want a cost estimate for your specific situation please contact an expert.





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Tuesday, 5 June 2018

How much does it cost to split my apartment block into condos?

Many owners of apartment buildings in Germany are contemplating a title split for their property. There are various reasons why property owners might want to divide a property into separate legal units and this is not limited to apartment buildings. However, the purpose of this article is to cast a light on the steps involved and their cost based on an “average” building in an average location.

Profile of our “average” building:


  • The rental area is 1,660 m².
  • There are 20 apartments.
  • The monthly rent is 6.00 €/m² resulting in an annual rent of 115,000 €.
  • The fair market value is 115,000 € annual rent x multiplier 25 = ca 2.9 MM €
  • The gross floor space is 2,000 m² (including ca. 17% construction and traffic area).

As-Built Measurements

The single largest cost is producing exact plans and measurements if not readily available. This will mostly be the case with pre-war buildings. The first step would be checking the archives, including the local council’s archives for building permits. If plans and measurements are not available there is no way of getting around having a surveyor take every measurement of the building and drawing up new plans. There are different cost models for this type of work; a widely used one refers to the actual measured gross floor space.

Photo by Lorenzo Cafaro from Pexels

In the case of our “average” building, this could be 6.00 €/m² gross floor space = 12,000 € plus VAT = 14,280 €.
As all apartments need to be accessed by the surveyor there is a great coordination requirement with the tenants by the property manager which he might well want to charge for but this is not included in this calculation.



The next cost items are incurred in any case, independent of the origin of the plans and measurements.

Plans and Certification

A set of plans including the land surveyor plan of the plot have to be prepared according to specifically defined requirements issued by the local council. The cost for the production and submission of the application for the certification of the partition plan (ger. Abgeschlossenheitsbescheinigung) will in our example be about 2,000 €.
The charges levied by the local council for issuing the certificate for the partition plan depends on the level of complication, for our “average” building I am estimating 10 € per unit = 2,000 €.

Declaration of Division

The declaration of division (ger.Teilungserklärung) is a notarized document based on the plans as certified by the local council which also includes statutes of the owners association. It refers in most parts to the code of the Wohnungseigentumsgesetz (WEG). An English translation of the code is available here: https://www.gesetze-im-internet.de/englisch_woeigg/index.html
The draft of the declaration of division should be done by an experienced lawyer/notary in conjunction with someone knowing the strategy for the property. e.g. planned rooftop development, expansion of an existing building or a separate new building on the plot, parking lot spaces, garages etc..

The fee scale for the notary (assuming he produces the draft) is based on the fair market value of the property, in the case of our “average” building it would be ca. 6,200 € incl. VAT and sundries.
The execution of the title split in the register is also value based and would be 2,450 € in our example case.

Project Management

I strongly suggest engaging a project manager experienced in this field to manage the process if you are not in the position to confidently deliver the task yourself. Poor concepts for the declaration of division can create big problems, are costly to rectify and in some cases irreparable once only one unit is sold to an external owner. ANY change to the Declaration of Division or the statutes needs 100% votes. A new co-owner might demand payments to agree to the changes. Even if changes can still be made, it will produce further, unnecessary cost.
In the case of our “average” building the project management cost is estimated at 3,800 € incl. VAT.

Cost Summary


Notary
6,200.00
Based on value incl. VAT and sundries
Register
2,450.00
Based on value
As built measurements and plans
14,280.00
6 € per m² gross floor space
Producing split plans for the property register
2,000.00
Time fee and reproduction and submission of application at local authorities
Certified Partition Plan by local authorities
2,000.00
Ca. 100 € per unit, depending on the level of complication
Property Management for access coordination with tenants
?
Depends on contract and relationship with the property manager
Management of the project
3,800.00
Estimated 4 days at a daily rate 800.00 plus VAT
Estimated total cost
30,730.00
 With new measurements and plans

Conclusions

The cost of the conversion of your apartment block into a condo building is roughly 1 % of the value. This is not a formula for the estimation just the outcome for our “average” building but it provides an idea of scale to “plug in” your preliminary business plan. As mentioned at the outset, the motivation for the process and the timescale are central elements to the decision.
Further considerations
There are areas in big cities in Germany where title splits are blocked to prevent “gentrification”. However, this block can be avoided when the strategy for the property is long term. More information about the legal block: http://germanproperties.blogspot.com/2018/03/thinking-about-dividing-apartmentblock.html. Please contact me if you are interested in long-term strategies as the level of detail would go far beyond this article.

Glossary

Here are further terms describing the process of dividing a property into individual, legally tradeable independent units

  • declaration of division
  • declaration of apportionment and the apportionment plan
  • statement of partition
  • title split
  • Teilungserklärung (ger.)




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Friday, 1 June 2018

Leipzig is Planning to Identify 4 Areas for "Milieuschutz" - Gentrification Protection

The city of Leipzig is planning to identify four areas for protection restricting certain activities by landlords, like title split or luxury modernisation. The application of federal law  is called "Städtebauliches Erhaltungsgebiet" or "Milieuschutz". The consequences are described in detail in this article on this blog: The Can Do and Can't Do Renovating Apartments in Certain Areas of Berlin
It applies to Leipzig as well.

Von Frank Vincentz - Eigenes Werk, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=53288072


For more background information in German: http://www.lvz.de/Leipzig/Lokales/Leipzig-will-Milieuschutz-gegen-steigende-Mieten-einfuehren


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Monday, 28 May 2018

RICS: Germany Commercial Property Monitor - Overall outlook remains positive

Overall outlook remains positive although portions of the retail sector are showing signs of fragility

Occupier Market

The Occupier Sentiment Index returned a reading of +29 in Q1, very similar to the previous figure of +32. Consequently, this indicator continues to suggest occupier market conditions are improving to a solid degree.

Source:
www.rics.org Global Commercial Property Monitor


Investment Market

The Investment Sentiment Index moved to +37 in the latest results, representing a slight easing on +45 in Q4. Although this measure is still consistent with solid investment market trends, it represents the most modest reading since 2014.

Source:
www.rics.org Global Commercial Property Monitor


Global Commercial Property Monitor RICS’ Global Commercial Property Monitor is a quarterly guide to the trends in the commercial property investment and occupier markets. The report is available from the RICS website www.rics.org/economics along with other surveys covering the housing market, residential lettings, commercial property, construction activity and the rural land market.

The full report is available on the RICS website.




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Friday, 11 May 2018

The Berlin Property Market Has Much More Scope

The Berlin Property play has more to give


Demand for rental properties remains strong, as the city continues to attract people from other parts of Germany and the rest of the world. However, supply of rented accommodation is unable to keep up with demand. As property prices remain lower than other major cities, the costs of building new homes is higher than current prices, which means supply of new homes is low.

Phoenix Spree: The #Berlin property play with more to give http://citywire.co.uk/…/phoenix-spree-the-berlin-p…/a1117964



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Friday, 4 May 2018

Pitfalls to Avoid When Buying an Apartment

You are planning to buy an apartment and you're satisfied with your calculations. A few months after the purchase you receive a letter from the property manager asking you to transfer 2,400 Euros because of a decision made by the owners association months before your purchase.

This has happened to a buyer and he thought he was not liable for decisions made by the owners association before he became the owner of his apartment. He took it to court but the court denied his objection. So did the next to levels of courts of appeal. The payment of any extraordinary payment agreed in the owners meeting are not due right away but when the property manager calls in the payments. Whoever is the owner entered in the land register at that point in time is liable for the payment.




This is proof that the investment into a due diligence is not a luxury but a necessity. When performed thoroughly it would have detected and highlighted the looming payment and would have enabled the buyer to make a provision in the purchase contract, support price negotiations or at a minimum would have avoided a nasty surprise.

In the example given, the surprise payment exceeded the cost of a due diligence for one apartment sixfold.

For more information on due diligence services see also http://www.berlin-portfolio.com/Purchase.html


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Friday, 13 April 2018

Berlin, March Against Displacement and Rent Madness

More than 180 organisations and group initiatives have called for a "March against gentrification and rent madness". The march starts at Potsdamer Platz in Berlin on 14. April 2018 at 2 p.m. and was registered for 4,000 participants but 10,000 have already announced their participation via facebook.



Photo by Darko Pribeg on Unsplash

85 % of Berlin's population are living in rented accommodation which makes changes is rent levels felt by the overwhelming majority. Families have to leave the areas where they have lived for years, where they have formed social ties and where their children have been going to school. They just can't afford the rent increases anymore and in some cases have to move out of the city altogether.

Most of the declining numbers of newly built apartments are in the luxury segment out of financial reach for the local working population. Social housing has been neglected, affordable housing is not available.

Of the existing apartments many have been modernized in recent years and the organisers of the march are criticizing that those modernisations play a big part in the rent increases and displacements. E.g. a new lift and energy saving new facade easily run up to 20,000 € per apartment which will allow the owner to raise the rent by 11% or 2,200 € per year for this apartment.

Regulations like "Milieuschutz" are trying to put a limit on the type of modernisation that will be allowed in protected areas amongst other things, more details here: http://germanproperties.blogspot.de/2018/03/the-can-do-and-cant-do-renovating.html. But the organizers say that there are not enough protected areas especially in the inner city districts.

The federal government has already announced a new initiative to increase social housing but also to expand the regulations for local authorities to protect social structures in their cities.


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Wednesday, 28 March 2018

Rental Price Break in 16 Town and Cities in Hesse Unlawful

The Frankfurt District Court (Landgericht) has ruled that the Rental Price Break (Mietpreisbremse) in 16 towns and Cities including Frankfurt has not been sufficiently substantiated and is therefore invalid. This follows similar court rulings in Berlin and Bavaria.



The main feature of the Rental Price Break is a regulation that the rent for new contracts is not allowed to be higher than 10% above the rent table (Mietspiegel) for the area.

This is another blow against attempts by Federal and State Governments to slow the rent increase mainly in urban areas. The legal discussion is not focussing on the regulation itself but on the determination of the areas it should be applied and the data provided to prove the need for the measure.

However, it is not the time for property owners to lean back and take whatever rent they can get. All court rulings are on their way to the next level of appeals up to the Federal Constitutional Court (Bundesverfassungsgericht).


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Monday, 26 March 2018

The Federal Government Plans to Tighten The Restrictions on Rent Increases in Germany

Katarina Barley, new Justice Minister, about future Housing Policy of the Federal Government

ARD "Bericht aus Berlin" 18.30 , 25.03.2018

Immediately in Barley's area of responsibility, is the rental price brake, which is to be tightened according to the coalition agreement. Barley announced that in the future the landlord should provide information about the amount of the previous tenant's rent. If it turns out that the new rent is too high according to the rental price break regulations, tenants should get the opportunity to reclaim the rent, including retroactively and have the current rent adapted. The Minister intends to present a draft bill before the summer break.


The Interview in German


"Outmodernizing" can be expensive

Barley also wants to prevent tenants from being burdened with modernization measures "beyond reason". In many cities, one can see that long-term tenants are specifically "modernized out" of their apartments, the minister said. Such a "targeted" procedure should be punished in the future as a violation. Tenants should also be given the opportunity to assert claims for damages.

Barley rejected the argument that this would impede housing construction. The apportionment of "normal modernization" should even be facilitated, that is, stripped of hampering bureaucracy. The minister suggested fines in a range of up to 10,000 Euros. She also emphasized: "Where luxury modernization is abusive, we will make it harder, and that's right."

Commentary

Rental Price Break and limitations on "luxury" modernisation are at the top of the agenda of Germany's new Justice Minister Katarina Barley. It seems to be a tribute to the political base of the SPD for joining the coalition against a substantial number of members wanting to stay in the opposition.

Both topics are full of legal traps. While the current version of the Rental Price Break has been challenged by lower courts and is on it's way through appeals, a new version is being hammered out. An upgraded version is planned to be presented to parliament before the summer break.

The limitation of "luxury" modernization seems an even bigger legal minefield. The definition of "luxury" depends on many factors. Most likely it will pick up on the norms used in regulated urban development areas called "Milieuschutzgebiet". These norms are orientated on average sizes and standards, e.g. a new balcony added in a modernization is not allowed to be bigger than 4 m². More details here: https://germanproperties.blogspot.de/2018/03/the-can-do-and-cant-do-renovating.html.


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Saturday, 10 March 2018

The Can Do and Can't Do Renovating Apartments in Certain Areas of Berlin

Preservation Statute Areas -. “Mileuschutzgebiete” in Berlin. What can I do, what can’t I do with my property.

The prevention of so-called “gentrification“ is a central issue for the Berlin city government. The term “gentrification” is describing the process of displacing parts of the current population of inner-city areas through rent increases beyond their reach. This development completely changes the social structure of entire boroughs and destroys social networks and the associated support functions for its members.
The Federal Building Code (Baugesetzbuch, BauGB) includes a regulation that provides local authorities with a tool that is intended to avoid such a development. More details about the split of apartment blocks into individual condos and the English version of the building code can be found here:
https://germanproperties.blogspot.de/2018/03/thinking-about-dividing-apartmentblock.html

Section 172 of the code allows for the definition of protected areas under certain statistical conditions and for a specific time period of up to 5 years. There is a widespread consensus that after 5 years another 5 year period can be proclaimed and so on. It would be highly speculative and dependent on political significant changes to expect a change after 5 years.

There are two different criteria for protection which can be applied separately or in combination,
Social Preservation area § 172 (1) Nr. 2 BauGB and/or Erhaltungsgebiete with unique urban character § 172 (1) Nr. 1 BauGB

The map below shows the Berlin areas that are currently covered by individual Preservation Statutes (Milieuschutzverordnungen)

Source: Senatsverwaltung für Stadtentwicklung und Wohnen
For detailed information about the individual districts please visit our Blog: https://propertylocations.blogspot.de/

Social Preservation area § 172 (1) Nr. 2 BauGB

Examples of renovations or modernizations that are not allowed (examples)

  • Floor plan changes
  • Merging or splitting apartments
  • Extension of balconies, conservatories, loggias or terraces with more than 4 m² of floor space
  • Extension of second balconies, conservatories, loggias or terraces
  • Fitted kitchens
  • Installation of a second toilet, complex bathroom renovations

Examples of renovations or modernizations that are allowed (examples)

Refurbishments that only produce the "state-of-the-art" equipment of an average apartment must be approved. The resulting rent increases must be borne by the tenants in most cases.
To be approved by authorities (among others):

  • Initial construction of a central heating with hot water supply
  • Initial construction of a bathroom
  • Upgrade of an existing bathroom with modern equipment
  • Basic equipment with plumbing, water and electrical installations, antenna, cable TV and intercom systems
  • Replacement of existing windows according to the Energy Saving Ordinance (Energieeinsparverordnung EnEV)
  • Obligatory energy conservation renovations
  • Attic conversion and new construction
A post like this one is always restricted to general examples and can never provide an all-inclusive overview of all aspects. Before any action is taken and money spent we recommend a consultation with the local authorities.
We provide advice and guidance for these types of projects for our clients from the first steps of a feasibility study through to a business plan and completion of the project. For inquiries about our services please use our contact page .



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Sunday, 4 March 2018

Thinking About Dividing an Apartment Block into Condos in Berlin? What Could Possibly Go Wrong?


A growing number of owners of apartment blocks in Berlin are contemplating selling their property to take advantage of the high demand and increased prices. Instead of selling an apartment block in its entirety in one go, the sale of single condos is seen as a way to achieve higher prices per sqm and ultimately for the building in total.

The main issue I want to discuss here is the subdivision of an apartment block into single apartments in inner-city areas in order to be able to sell them individually.

Certain district administrations of Berlin, which are the local government in this context, have declared certain regions of their district “Milieuschutzgebiet”. These are areas where a Preservation Statute applies. Every area has a specific boundary and will quote specific regulations from Section 172 of the Federal Building Code (Baugesetzbuch).

These are the districts that already have preservation areas in place or are in the process of raising the empirical data needed to declare such an area:
  • Charlottenburg-Wilmersdorf
  • Friedrichshain-Kreuzberg
  • Lichtenberg
  • Mitte
  • Neukölln
  • Pankow
  • Tempelhof-Schöneberg
  • Treptow-Köpenick 

What is the impact on the owner?

In order to convert an apartment block into condos or individual freeholds (Eigentumswohnung) a permit from the district is required. In March 2015 the Berlin city government has released a regulation called “Umwandlungsverordnung” which allows the district to refuse the permit to divide (Teilungsgenehmigung) in areas under the Preservation Statute. Since preventing the “gentrification” of these areas through conversions is one of the purposes of declaring these areas “under protection”, the permit will be denied.

However there is another aspect to the story of the Preservation Statute which is not related to the division: The owner will not get a permit for what is seen a luxury modernization, e.g. new balconies bigger than 5 m², luxury bathrooms (definition in the regulation), join small apartments into big apartments, lifts and many other major works usually leading to rent increases.

What should I do?


If you are happy with your building and don’t plan to sell it in the near future you just need to keep your building in good shape and well managed, there is nothing you need to worry about.

However, if you are considering selling your property I recommend getting experienced local advice. There are different aspects of the business plan that might lead to different decisions when looked at in isolation as opposed to the total picture. Just to name some of these aspects, permits, tax, cost of marketing, timeline, first refusal rights of city and tenants (condos only) etc.. And it’s worth mentioning that sold individually you might not sell some units for years, at least not for the price envisaged.

Call me. We are specialized in guiding international investors through the ever-changing picture of market developments and regulations. Phone number

Academic / para-legal background.


The Federal Building Code allows local authorities to define specific areas for protection. This is done by means of local government procedures within the framework of the Federal Building Code. The regulations are spelt out in Section 172 of the code. All specific regulations will have to relate to this section.
Section 172 The Preservation of Physical Structures and of the Specific Urban Character of an Area (The Preservation Statute)

You will find an English version of the code here germanlawarchive.iuscomp.org




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Tuesday, 13 February 2018

The price boost on the German real estate market has further accelerated 2017




VDP-Real Estate price indices: The price boost on the German real estate market has further accelerated slightly 2017. With the results for 2017 The VDP also publishes the development of purchase prices n the top 7 cities for the first time.

The Association of German Pfandbrief Banks (vdp) represents the interests of the Pfandbrief banks in dealings with national and European decision-making bodies, and of a wider expert public.

Main findings of the report:


  • Residential real estate prices rise 6.9% year on year
  • Commercial property prices increase by 6.5% compared to the previous year
  • Expansion of the vdp real estate price indices with information on the housing markets of the TOP 7 cities in Germany
  • Housing markets in metropolitan areas remain strained: TOP 7 index rises 13.7% over the previous year
The full report in German is available here:


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Saturday, 27 January 2018

The German housing market in 2018

Price and rent outlook for Berlin, Düsseldorf, Frankfurt, Hamburg, Munich and Stuttgart

The following information was provided by Deutsche Bank Research in their Germany Monitor.

Metropolitan areas in Germany are booming. The current real-estate cycle started in 2009 and has led to significant price increases for residential property in many cities. Prices for apartments have as much as doubled in some cities. Strong population and employment growth and declining unemployment rates are driving demand, and supply elasticity is low. New construction is slow to pick up, and vacancy rates are declining. As a result, rent growth is accelerating. Regulatory measures are unlikely to provide sufficient relief. House prices and rents look set to rise markedly in 2018.


Data from a number of cities confirm that demand is high and supply insufficient. In Munich, the vacancy rate is near zero. In Berlin, employment increased by c. 4% in 2017. Frankfurt was already 40,000 residential units short in 2015 – which suggests that 2017’s 15% yoy apartment price increase was not just Brexit-related. Stuttgart’s location in a basin restricts construction activity, contributing to the doubling of apartment prices during the current cycle.
Prices in Hamburg and Düsseldorf have risen strongly as well, even though demand growth has been slower in these two cities than in other metropolitan areas. The local housing-markets might therefore be more sensitive to interest-rate changes than their peers. Still, as our baseline scenario foresees only marginal interest rate increases during 2018, Hamburg and Düsseldorf should experience
price and rent uptrends, too.
Overvaluations are rising, and the risk of a price bubble in the German housing market is increasing. The price uptrend is likely to continue for several years, at least in most major cities in Germany.









The full report is available for download here: >>> The German housing market 2018 - DB Research


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Wednesday, 24 January 2018

CBRE: Berlin Office MarketView Q4 2017


Berlin Office MarketView Q4 2017

 

Berlin Office Market
Foto: Uwe Falkenberg


• Year-earlier take-up record exceeded by 4%

• Prime rent at the €30 mark, up 9% y-o-y

• Weighted average rent rises 22% to €19.31/sq m/month

• Vacancy rate declines steadily to 3.1% – full occupancy in central locations

• Only one quarter of office space to be completed in 2018 still free

The full report is available for download at

https://www.cbre.de/en/research



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Tuesday, 23 January 2018

Berlin Housing Market Report 2018


The Berlin Housing Market Report has developed into a tool widely accepted in the Berlin Housing Market. Initiated by GSW an originally City-owned but now privatised property company it has experienced a change in sponsorship over the years and is now published by Berlin Hyp and CBRE. The report for 2018 is being published on 25.01.2018 and will be available for download for our clients and readers at the bottom of this page. If you have signed up before, you will receive the newest version automatically.

The report covers these areas:

  • City comparison
  • The city of Berlin
  • Rents, sale prices, investments, transactions and financing
  • Furnished housing
  • New Construction
  • The city: Expert interviews
  • How cities and markets will develop by 2030 – and beyond
  • Housing Cost Atlas: Introduction
  • Housing Cost Map covering the whole of Berlin
  • Berlin's 12 districts and their 190 postcode areas
  • Explanatory notes on the rental map
  • Rental map covering the whole of Berlin
  • Special residential areas



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Friday, 12 January 2018

What does it say about Berlin? Avison Young releases 2018 North America and Europe commercial real estate forecast.


Change and opportunity will abound in 2018

TORONTO, Jan. 11, 2018 /CNW/ - Rapid change is underway in the world's commercial real estate industry, and the dynamics are in flux as the current investment cycle enters its latter stage. The industry continues to contend with differing property fundamentals across asset types, markets and regions, with occupier behaviour, innovation and technology acting as key sources of change that are taxing the sector. The current interest-rate environment is another contributor to this change – albeit a somewhat limited factor.

These are some of the key trends noted in Avison Young's 2018 North America and Europe Commercial Real Estate Forecast.

Berlin

German capital remains on its remarkable growth path.

Investment

Demand from national and foreign investors for investment product will remain high in 2018. As major assets, such as the Sony Center and the Upper West, were sold in 2017 and availability of product is expected to decrease, investment volumes could fall short in 2018. As in most German markets, investors continued to move up the risk curve in 2017 and showed great interest in value-add product and forward-sale deals. Strong interest and high investment volumes for development land underscore this trend. Accelerated yield compression was recorded between 2015 and 2017 –
especially in the office segment, where Berlin now represents the country’s prime yield. However, prime yields are likely to have reached their low and all signs point to a gradual stabilization at this level.


Avison Young's 2018 North America and Europe Commercial Real Estate Forecast

The Full report is availabel on http://www.avisonyoung.com/en_CA/

For local support in Berlin during all phases of the investment cycle please contact us through our website berlin-portfolio.com or directly info@berlin-portfolio.com.


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Wednesday, 10 January 2018

AFIRE Global Ranking for Real Estate Investment: 1. London, 2. New York, 3. Berlin, 4. Los Angeles and 5. Frankfurt

The results of a new survey taken among the members of the Association of Foreign Investors in Real Estate (AFIRE) was recently released.
AFIRE members are among the largest international institutional real estate investors in the world and have an estimated $2 trillion or more in real estate assets under management globally. The 26th annual survey was conducted in the fourth quarter of 2017 by the James A. Graaskamp Center for Real Estate, Wisconsin School of Business. Press Release

Strong Showing for Germany; Emerging Markets Shift

For the first time since the question was first asked, two German cities are included among the top five global cities: Berlin in third place, falling from second last year, and Frankfurt, making this list for the first time.

Surce: http://www.afire.org/
The top 3 have shifted places, Los Angeles remained on 4th while Frankfurt made top 5 for the first time coming from #13 last year.
1.London (#3 last year)
2.New York (#1 last year)
3.Berlin (#2 last year)
4.Los Angeles (#4 last year)
5.Frankfurt (#13 last year)

Looking at the cost side of property investments in these cities, Berlin is still by far the best bargain as property prices still have not caught up with other major cities.

We support property search and assessment for investments in Germany berlin-portfolio.com.


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Monday, 8 January 2018

Eastern Germany Property Market Report and Investment Opportunities

The Berlin Residential Property Market has been on the forefront of the German property boom of the last 2 years and signs are pointing at a continuation of this trend. With increasing rents, purchase prices are rising as well and lately faster than the rent level. See Rent levels in the German Big 7.
As a reaction, investors are looking for alternative locations with similar prospects for the future but lower price levels. One of the obvious choices could be East Germany with a generally still lower price level. But caution is required: Some of the regions have been losing population while others have (re-)gained workplaces and inhabitants.
Research on alternative locations is complex and wrong decisions can be costly. To help your assessments for informed decision making we enclose the link to this report at the bottom of this message.

Through our Network we can provide 3 investment opportunities in this region

1. Multi-tenant home Leipzig with development potential, balconies
04179 Leipzig
asking price € 930k€
642.31 m²
33,807.72€ net rent p.a.
potential for increase
2. Multi-tenant home Leipzig with balconies
04177 Leipzig
asking price € 1,270k
581 m²
38,200.08€ net rent p.a.
potential for increase
3. Multi-tenant home in attractive location in Halle
06110 Halle
asking price € 650k
571 m²
34,619.64€ net rent p.a.
at its current potential


For more information on these properties, please contact me directly
uwe.falkenberg@falkenberg-solutions.com
_________________________________


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Friday, 5 January 2018

Berlin's residential property market has been outperforming since 2006

Press release from: Accentro GmbH

Residential real estate worth 5.64 billion Euros changed hands in Berlin in 2016. This is the upshot of the latest ACCENTRO Homeownership Report. It suggests that revenues from residential property sales in Berlin almost tripled over the past ten years, up from just 1.97 billion Euros in 2006. ACCENTRO assumes that revenues will cross the mark of six billion Euros this coming year.

The ACCENTRO Homeownership Report highlights the brisk outperformance of Berlin’s residential real estate market over the past decade. It is perhaps best illustrated by the surge in the number of completions. While just 363 new-build properties were sold in 2006, the sales total was up to 5,608 properties ten years down the road, more than 15 times as many.




Equally unrivalled by any other German metropolis are the price hikes in Berlin. Between 2006 and 2016, revenues per residential property sold went from 96,141 Euros up to around 250,215 Euros, an increase by 160.26 percent. None of the other cities that were studied showed a comparable price growth.

Declining Number of Transactions, Rising Revenues

The above-average growth in revenue per sale is apparent not just in the ten-year comparison but in the short-term track record as well. Between 2015 and 2016, the growth in revenue per sale equalled 16.73 percent, whereas the 20 biggest German cities averaged a growth rate of merely 8.03 percent. Despite the fast growth over the past years, prices in Berlin remain quite affordable when compared to price levels in other major German cities. The German capital ranks only twelfth in terms of revenue per sale, trailing mid-sized cities like Heidelberg, Mainz or Regensburg.

Lately, however, the number of condominium sales has slowed in Berlin, or so the ACCENTRO Homeownership Report suggests. Specifically, the number of transactions dropped by 7.42 percent between 2015 and 2016. ACCENTRO blames the fact not on a lull in demand, but primarily on short supply. The fact that revenues in 2016 went up by 8.07 percent year on year in spite of the declining number of transactions reflects the persistently keen demand for residential real estate in Berlin.


For local support in the fast-moving Berlin Property Market 

Please visit our website for more details on our services and how we provide a Home Base in the German Property Market not only for international investors: http://berlin-portfolio.com/index.html


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