Wednesday 30 May 2012

Purchase Cost for a Property in Berlin 2012

One of the most asked questions by investors new to Berlin is regarding the typical cost involved in making a real estate investment. Since we last published this overview in December 2007 the property sales tax has gone up to 4.5% and since April 1st of this year is at 5% where about half of the German states are.

The cost depends on the price of the property and the cost tables for the notary public and the land register. They are digressive, in other words, the higher the price, the lower the percentage of the cost.

For a property with a purchase price of € 1 million the cost would be roughly:
Notary Public
for the contract
6,965 €

For an escrow account if required (based on $ 500k) 3,020 €

Land Register

4,280 €
Property Sales Tax
5% in Berlin
50,000 €

(4.5 – 5% rest of Germany
except Hesse, Bavaria and Saxony 3.5%)

Agent Commission
Between 5 and 6 % plus VAT 19%,

(assume 5%)
59,500 €

120,745 €

For a property with a purchase price of € 2 million the cost would be roughly:
Notary Public
for the contract
13,660 €

For an escrow account if required (based on € 1 mill.) 5,995 €

Land Register

8,410 €
Property Sales Tax
5% in Berlin
100,000 €

(4.5 – 5% rest of Germany
except Hesse, Bavaria and Saxony 3.5%))

Agent Commission
Between 5 and 6 % plus VAT,

(assume 5%)
119,000 €

241,070 €

For the quoted size of investment as a rule of thumb it is safe to use 12 % purchase cost for an initial calculation, with higher values reducing the percentage slightly.

These figures also identify the items where savings can be achieved:
If it is a straight forward purchase an escrow account should be avoided as the saving can be quite substantial.

Traditionally in Berlin the commission for the property agent is paid by the buyer. For a long time 6% plus VAT was custom and practise. With the recent influx of international investors these margins have come under pressure, especially with the agents not assuming any responsibility for the information provided by them. On the other hand there are 5 or more interested buyers for any property coming to the market which is a difficult negotiating position. Please also read our post about the Double Commission Trap.

The cost of financing will depend on many factors like the amount of equity used etc.. There will be cost for Technical Due Diligence and valuation, "handling fee" between 0.25 and 1 % of the loan charged by the bank and entry of the loan into the deeds register. With the right approach and experience there is also a money saving way of doing this.

Naturally there are many more aspects to be considered before making a purchase: Review of the rental contracts, maintenance, ancillary cost to mention only a few of them. Language can be quite an obstacle because an investor cannot expect every property manager or care taker to speak English.

Businesses like Falkenberg Solutions – Real Estate Consultants. and their network of Real Estate Professionals from Notaries to Tax Consultants and Finance Brokers are specialised in assisting international investors in their investment decisions, providing a "home base" for their activities in Berlin -- before and after the purchase.


Friday 25 May 2012

New Tenancy Law in Germany


Germany's government decided on an amendment to the tenancy law.

The most important changes:

  • Landlords can invest in energy efficiency measures, even against the will of the tenants. In turn the tenant will have a special lease termination right. Any disturbances arising from construction work must be accepted for up to three months without any reduction in rent.
  • The rent increase remains at 11% of the renovation costs per year, and examining the question of whether this represents an economic hardship for the tenant can no longer delay the start of work.
  • If a switch to energy contracting is made to improve the property performance, the cost can be distributed to the tenants if it is not higher than the previous operating costs.
  • Owners will now be able to more easily enforce the eviction of tenants in default.
  • In case of disputes, the courts may order the tenant to deposit the disputed amount until the end of the procedure.
  • Finally, the new law is to prevent the circumvention of protection against eviction (protection for three years against eviction due to future owner usage) in cases of apartment buildings’ being converted into condominiums.
These changes  make life for owners a lot easier and the rental market more balanced. They take away some of the uncertainty for international investors in Residential Property who see the legal regulations in the German Housing Market as very tenant-friendly.


Thursday 24 May 2012

Ifo Business Climate Index Falls Sharply in May 2012

Results of the May 2012 Ifo Business Survey

The Ifo Business Climate Index for industry and trade in Germany fell significantly in May. Assessments of the current business situation deteriorated clearly. The business outlook nevertheless remains above the long-term average. Companies also expressed greater pessimism about their business outlook. The recent surge in uncertainty in the Eurozone is impacting the German economy.
The business climate index in manufacturing dropped sharply. This is primarily due to much poorer assessments of the current business situation. As far as the six-month business outlook is concerned, positive and negative expectations roughly balance each other out. The majority of manufacturers reported defensive recruitment plans for the first time in months. However, they expect further stimulus from exports.

The business climate clouded over significantly at both levels of trade. Assessments of the current business situation slumped in retailing and the majority of expectations are pessimistic. In wholesaling the downturn was relatively small. The wholesalers surveyed saw deterioration in their current business situation and are less optimistic about their six-month business outlook.
The business climate indicator also dropped in construction. While the current business situation showed a slight improvement, the constructors surveyed were less optimistic about future business developments.
Hans-Werner Sinn
President of the Ifo Institute

For detailed results click here.

For support in the identification of the right real estate investment targets please visit our website at Especially for international Private Investors and Property Funds we provide a task force service for quick reaction to interesting opportunities.

We provide independent support for the property search including foreclosure or auction properties and their valuation or appraisal. (Also see our free property market Research Service)

Please use this link to the
contact facilities provided there to place any requests .

Uwe Falkenberg


Monday 21 May 2012

GSW Rental Income Improvement in Berlin


Berlin based GSW which recently had a successful IPO boosted its rental income during the first quarter by 14.1% to €39.7mn (Q1 2011: €34.8mn). This was due to the purchase of 4,800 apartments in Berlin from Gagfah at the end of 2011 as well as to rent performance improvement and a reduction in vacancies.
Net profit for the quarter dropped from €33.2mn last year to €8.7mn. However, earnings in 2011 had been heavily influenced by the sale of the Media Haus GmbH (BMH) cable network in Berlin. Excluding this special effect, consolidated net income increased by 11.5%. The FFO I figure (without sales income) grew by 13.6% to €15.0mn. The company reaffirmed its forecast for the yearof an FFO I of approximately €59-63mn, excluding any purchases.


Saturday 19 May 2012

How to Avoid the Double Commission Trap for Properties in Berlin

During periods of high demand in a property market, for example, as has been experienced in Berlin since mid-2011, the need for quick responses and decisions can easily lead to expensive oversights.
This article will describe a quite common succession of events which can lead right into the Double Commission Trap. It will also provide strategies to avoid this trap while still acquiring the desired property. In the process it will point out some common errors in the context of agent’s commissions in Germany. The article will focus on the buyer’s viewpoint even though there are also risks for the vendor when he involves more than one agent at a time.

The search for the right property takes weeks sometimes months and the internet provides access to many agents. In particular an international investor can easily end up on 15 – 20 mailing lists with an increasing likelihood of receiving the same property from different agents. If the investor knows a property from a different source he has to react immediately and let the agent know that he already has received information about the property and if he does a thorough job he says when and how before the second agent requests that information. Implicitly an investor enters into a contractual relationship with an agent when he requests information from him. This contractual relationship will inevitably entail a commission agreement in the case of the purchase of one of the properties where the agent provided the initial information.

Here lies the first trap even a diligent investor can fall into: He receives a property offer and arranges a viewing through the agent. He decides the property is too expensive for the state of disrepair. After a few weeks he gets an exposé for the same property from a second agent with a price reduction. It is now of interest and he pursues it as there are already other investors competing for it. If he just goes ahead he walked right into the trap and if the first agent finds out, which is very likely, the investor owes two commissions, the first one for the initial introduction and the second one for actually making the deal possible. Contrary to popular belief neither of the agents needs to have had a contract with the vendor.

How to avoid such pitfalls?

First of all, the investor needs to communicate to the second agent that he knows the property. The reply will most likely be that the second agent states that the first one cannot deliver since now he is instructed by the owner. If the investor still lets the second agent work for him he is earning his commission in the case of a purchase. So before that happens the investor has to approach the first agent and inform him that he still wants to buy but at a lower price. If the first agent can deliver the property at that price the investor can go ahead with the first agent if he told the second agent about the previous knowledge and not let him work on the sale. If the first agent cannot deliver it, it is highly advisable to have an expert lawyer look at the circumstances to determine whether there is a risk of double commission. In the end the investor might have to abandon the potentially lucrative property as the only way to avoid the Double Commission Trap.
To make things more complicated there are actually agents specializing on setting up these traps. They have a high visibility on the internet and are building their mailing lists. They employ a small army of people doing nothing but trawling the market for exposés which then are re-written and sent to the mailing list. Chances are that they will get to quite a few investors first and the fact that they cannot deliver the property is never tested because they are “forgotten”. But they do not forget: A few times a year their lawyers compare the changes in the property register with the mailing list. The rest of the story is straight forward and sadly, some investors will experience this deliberate version of the Double Commission Trap.

The strategic approach requires two kinds of actions:

  • ·         Meticulous record of property offers received and prompt action on doubles
  • ·         Limited number of trustworthy agents or alternatively a service provider doing the search work according to an agreed search profile
This article has provided a standard scenario for a property search by an international investor which is happening every day obviously with some variations but with similar consequences:
If an investor receives the same property offer from two or more agents he has to ensure that he can later prove that he only accepted the service from one of them. The way to ensure this might vary from case to case. In particular when entering a new market it is important for the investor to have a local property consultant supporting the search and purchase phase to avoid costly pitfalls such as the Double Commission Trap.

The Pre-Acquisition Service of Falkenberg Solutions - Real Estate Consultants is providing a shield for the investor by managing the search process and using their local knowledge for staying clear of  "Trappers".


Tuesday 15 May 2012

German Economy Returned to Growth in the First Quarter

Economic Newsflash

 The German economy returned to growth in the first quarter. Gross domestic product  (GDP) rose seasonally adjusted by 0.5% from the previous quarter Q4 2011. The figure was higher than the 0.1% experts had estimated, according to a report by Barclays Capital. Compared with first-quarter 2011, the German economy rose 1.7%, the Federal Statistics Office reported on Tuesday. In the fourth quarter 2011, German GDP had declined 0.2% from the third period, its first drop since 2009. Europes biggest economy is more robust again mainly supported once again by exports but also private sector spending.

Supported by the economic development the German Property Market remains a top destination for International Investors.


Wednesday 9 May 2012

No Price Bubble in The German Housing Market 2012

The Association of German Pfanbrief Banks (vdp) does not see any indicators for a price bubble in the German Housing Market. The positive climate with moderately rising prices started three years ago and continues at steady pace.
Owner occupied apartments saw price increases of 1% to 3% with exceptions in big cities like Berlin (8.6%), Hamburg (8.1%) and Munich (8.7%) where the price increase exceeded 8%. With a Consumer Price Index increase of 2.3% for the same period the German Housing Market is far away from a price bubble. The Bundesverband der Deutschen Volksbanken und Raiffeisenbanken (BVR) comes to he same conclusion.

For data details in German please visit this link.

Especially the Berlin Housing Market is still undervalued compared to other metropoles and also still catching up on rent levels. The demand for investment properties by international investors is very apparent in the market and will increase the pressure in yields.

For support in the identification of the right real estate investment targets in the German Property Market please visit our website at Especially for international Private Investors and Property Funds we provide a task force service for quick reaction to interesting opportunities.

We provide independent support for the property search including foreclosure or auction properties and their valuation or appraisal. (Also see our free property market Research Service)

Please use this link to the contact facilities provided there to place any requests .

Uwe Falkenberg


Wednesday 2 May 2012

Unemployment in Germany below 3 Million again

The unemployment figure for Germany went below 3 Million again to where is was last December. The rate is now at 7.0% after 7.2% in March 2012.

The head of the unemployment agency is quoted "The positive basic trend in the labour market is still there but has lost some of its momentum."

The decline is partially caused by seasonal effects. With these neutralised the unemployment actually rose by 19,000 but even then the standardised unemployment rate without seasonal effects for April 2012 is now set at 6.8%.

Germany remains the big exception in the European Labour Market.