Germany House Prices 2013 in International and Historical Perspective

The economic research institution of Deutsche Bank DB Research has published their results on current property prices in Germany. Here is the translated content:

Germany house prices in international and historical perspective. 

With the rise of the German house prices concerns have increased that a housing boom has begun, which could end up with noticeable negative impact on the German economy. Our analysis of house price cycles in OECD countries shows that the current price increase in Germany, compared with past climbs, are moderate. Compared with other OECD countries, Germany shows even well below-average prices. We expect that the increase in real estate prices will continue in Germany, but the formation of a bubble is unlikely and the price increases are the normalization of the total housing market.

The development in different areas are obviously different. Munich and Hamburg are closer to a possible "bubble" than e.g. Berlin which is still highly undervalued compared to other European capitals like Warsaw and Budapest, not to mention Paris or London.

For support in the identification of the right investment targets please visit our website at www.berlin-portfolio.com. 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 

Germany House Prices 2013 in International and Historical Perspective

From January 2014 Property Sales Tax in Berlin up by 1%

Properties in Berlin

It is official now: Last Tuesday the Berlin City Government (Senat) has passed the increase of the property sales tax from 5% to 6% of the purchase price. It is expected that it will pass the city parliament (Abgeordnetenhaus) as the coalition gavernment has a majority there. The last raise from 4.5% to 5% was only in 2012.

The declared purpose is to improve Berlin's disasterous debt position. We had posted up front information in June when the plans transpired.

http://germanproperties.blogspot.de/2013/06/update-increase-or-property-sales-tax.html


Anyone planning to buy a Property in Berlin should move fast now because there are really only 8 weeks left to check any property, get the financing in place and the contract agreed. To speed up this Pre-Aquisition and Purchase process we provide a specialised service for international investors. For more information and contact please visit our website www.berlin-portfolio.com.

From January 2014 Property Sales Tax in Berlin up by 1%

English Translation of the German Civil Code - German Tenants Rights

There is a lot of confusion amongst international investors about tenants' rights in the German Residential Market. One thing needs to be clarified at the outset, German tenants have more rights than investors from western societies are used to. The historical background is the vast destruction of residential buildings during the war and a need to protect the needy in a time of scarcity.

Now it has turned into an election ritual to improve tenats' rights prior to elections since the majority of voters in Germany are still tenants and not owners. The conservative Merkel government makes no exception in this game and has enabled local governments to limit the rent increase to 15% over a time period of 3 years just before the elections.

The main legal structure for tenancy law is the German Civil Code (BGB - Bürgerliches Gesetzbuch) and there is an official translation available on the website of the German Ministry of Justice:

http://www.gesetze-im-internet.de/englisch_bgb/index.html

The regulations regarding tenancy are in Title 5 of the code.

This will give you some idea what a paragraph quoted in a contract or legal document is about - but please refrain from making any legal interpretation on your own without legal council or at least feedback from your property manager. The German judicial system is not determined by precedence as much as the Anglo-American system but there is up to date high court ruling to be taken into consideration for the interpretation of the civil code. So the translation is to be used only as an indication of the subject that is addressed.

Uwe Falkenberg

English Translation of the German Civil Code - German Tenants Rights

October 2013: Berlin Residential Real Estate and Investment Property Market

Berlin residential real estate and investment property market

Residential market :

• 87 % of the housing stock is rental housing
• Extensive historical buildings in Berlin available
• the average basic rent at approx € 7.50 / m² ( 2012, increase of 13.8 % on 2011 )
• price level well below other international capitals
• High demand for housing in high income and demanding segments of the population
• Low residential construction (about 3,000 units per annum )
• Many of the houses are in good condition ( “Reconstruction East” , renovation through tax incentive models), extensice renovation of pre-war buildings

Rental Housing Market :

Young Metropolis Berlin

Also in 2013 , the popularity of Berlin as "a place to be" will continue. Sustainable rising rents and very good predictions for the housing market have ensured that in addition to private investors who have always viewed Berlin as an investment hub, the traditionally slower Institutional Investors appeared again as buyers. There are almost on a daily basis headlines about big package deals.

For many high net worth private investors the reasons to invest in Berlin Residential Property have been obvious: A stable investment in troubled times.

Interest rates are historically low , the rents rise above the rate of inflation and the vacancy rate is narrowing. Properly managed resources generates returns that do not exist in other forms of investment for the foreseeable future.

The supply shortage is going to cause further moderate price increases. The average prices in Berlin so far have remained remarkably moderate. In general although there were increasing purchase prices no price bubble has built up.

For investors in 2013 , Berlin is a more promising market, as opposed to other German cities that are even shorter in supply of interesting investments. In the German Capital one can make attractive investments through systematic search, while the Investment property market in other cities has come to a massive slowdown due to the low supply of opportunities.

" Window of Opportunity "

Why invest in Berlin?

Berlin Marathon

Berlin is attractive and popular. The Berlin Marathon on the last Sunday in September brings visitors from around the world. Many decide to buy some property because they like the atmosphere of a growing young metropolis.

• Berlin is a favorite among private and institutional investors with a specialization in Residential Properties.
• Favourable yield levels and prices per sqm compared to other European cities, especially capitals.
• Yield level will adjust soon adjust to other European cities > will lead to price increases.
• Positive population growth.
• Increasing number of single households and commuters.
• Low volume of new construction.
• Rental increases continue.
• Property prices continue to rise.
• Cheap redevelopment prices.

For support in the identification of the right investment targets please visit our website at www.berlin-portfolio.com. 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

October 2013: Berlin Residential Real Estate and Investment Property Market

Yield vs. Multiplyer (Faktor) and how to Monitor your Property Manager

In this short article I will define the difference between the terms "Faktor" and yield in Property investment in Germany and how you can use the Faktor as a tool to manage your property management and monitor the value development of your property without having to get an expensive valuation.

Receiving property offers from Germany you most likely will come across the term "Faktor" meaning multiplier. It describes the rental income of a property (net rent without ancillary cost like heating) through the purchase price divided by the annual net rent. 

 purchase price
annual net rent

Often you will also get the figure for "Rendite" which is a percentage figure and the word for yield. However this term can lead to misunderstandings between parties: Is it calculated before or after purchase cost like property sales tax, is it before or after property management charges etc.? The definition should always be clarified before discussions.

An active property management will have to look to raising the rent in an appropriate way which is legally sound and does not scare away the tenants you want to keep. One of the mostly used references are rent tables which are published by local authorities for big cities. If your property manager is not keeping the rent for your property at least at the level of the rent table they are throwing away your money. Most likely they will come up with lots of reasons why it is hard to get the rent you could expect according to the rent table. If the reasons are based on the state of the property the reasons need addressing. Otherwise you can show the damage the property manager is causing using the "Faktor" mathematics. An example:

• A 100 m² apartment is rented for 5.50 €/m² per month.
• The rent table states an average for the building age and location of 6.50 €/m².
• The "Faktor" when you bought the building was say 18.
• The "damage" caused by the property manager is calculated as the difference between the actual rent and the table rent 1.00 €/m² times the rental area 100 m² times 12 months = 1,200 € -- quite a figure already. But to arrive at the value you multiply this annual figure by the "Faktor" and arrive at a damage of 21,600 € just from 1.00 €/m² in one apartment.

If you were to sell your property now you could get 21,600 € more without any discussion or any investment while it certainly would be nice to have the monthly income in the first place. These facts will change your position in the discussions with your property manager
The view above is on existing rental contracts only. For new rentals the impact of underselling by the management company can be much greater. In our experience the new rental price is determined by the rental agent the property management is "associated" with. The driver of this process is usually more for an easy rent and a quick commission rather than the best result for the owner.

This "Faktor" method also allows you to assess easily the likely market value of your property by applying the "Faktor" and the annual net rent.This will give you an idea if your location value has not changed significantly, e.g. closing of an airport nearby or major improvement or decay of your property itself.

I have shown how the "Faktor" compares to yield and how it is calculated. Furthermore I have shown how it can be utilized to monitor the performance of your property manager as well as the value development of your property. However "the devil is in the detail", you still need to get all the information and it would most likely be more reliable if you don't have to ask you property manager for it, only the actual figures need to come from him.

Reserve your seat

We will shortly run a webinar on how to get your information from the Berlin Rent Table even without knowledge of the German language. If you subscribe to this blog at the bottom of the right hand column of this page you will not miss the announcement, you will not receive any other mail from us other than the blog updates, unless you sign up for one of our mailing lists.



For support in the assessment of the performance of your property and your property manager please visit our website at www.berlin-portfolio.com. Please use this link to the contact facilities provided there to place any requests .
Uwe Falkenberg

Yield vs. Multiplyer (Faktor) and how to Monitor your Property Manager

Berlin Property Crisis

The Berlin Property Market is swept clean of apartment blocks for sale.

• If you have considered selling your property in Berlin – now is the time!

• If you have not considered selling your Berlin property yet – now is the time!

We are experiencing high demand for Residential Property in Berlin and prices have risen steadily. Investors are biting their nails about the property they turned down half a year ago as being too expensive.
We have helped international property investors from the UK and Ireland to get their property ready for the market and have more than met reasonable expectations regarding the purchase price.
We provide all necessary services and support to bring your property to market and position it at its optimum. These services are free if we are then allowed to sell your property as agents.
If you want to find out more please leave your contact information below and you will receive a more detailed description of our services.

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Berlin Property Crisis

City of Berlin has extended protection of condo tenants to 10 years.

The Berlin City Government has signed off a new regulation today starting 1. October 2013 protecting current tenants of a property newly divided into condos from being given notice for the purpose of own use for a period of 10 years after the division. This new act replaces the last 2011 regulation which only covered 6 districts and 7 years whereas the new one applies throughout the city.

This protection is for the residents at the precise moment of the division only. In case of new rentals the new tenants should be made aware of the fact that their new home is actually a rented condo, buy-to-let apartment or investment apartment as they are called as well. There is no influence on rent levels, contract durations or any other contract matter through this regulation.

The purpose of this act is said to address issues of so called "gentrification" in popular central locations and the impact of current short supply of affordable (low rent) apartments on the rent level inthe city.

For support in the identification of the right investment targets please visit our website at www.berlin-portfolio.com. 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 

City of Berlin has extended protection of condo tenants to 10 years.

Rise in Porperty Prices and Rents Flattens Out in Q2 / 2013

The much scrutinised rise in property prices and rents over the last months is taking a breath in the second quarter of 2013. This is the result of a regular study performed by Empirica  (click for full report in German) looking at advertised offers.

Investment Apartments

For condominiums, prices went up by 0.1% compared to the previous quarter 2013 but up by 5.1% for the German average compared to the second quarter 2012 (YTD). For the big cities this YTD figure is even 6.7%.

click to enlarge
 

Interestingly the Berlin market for condos does not appear in the top 10, yet neighbouring Potsdam made it. Common view is that Berlin will catch up soon and at high speed. Berlin being traditionally a city of renters (more than 80% are renting) there is a high influx of international money looking for investment after the stock markets are getting more and more volatile due to uncertainty about the duration of cheap money from the Federal Reserve in the US.

The demand of international investors is mainly targeted at buy to let apartments in preferred locations in Berlin.

Rents

There was virtually no change in rents compared to the previous quarter detected by Empirica. Compared to last year the average rise in Germany was  3.3%.

click to enlarge

The graph shows Munich ranking in No.1 as has been for years now. The Berlin Rental Market is still behind but the catch-up over the last years has been enormous.

For support in the identification of the right investment targets please visit our website at www.berlin-portfolio.com. 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

Rise in Porperty Prices and Rents Flattens Out in Q2 / 2013

Update: Increase or Property Sales Tax in Berlin

www.properties-in-berlin.com

The Berlin Senate has now decided to raise the property sales tax (stamp duty) in Berlin from 5% to 6% taking effect 1. January 2014.

As a compensation the Senator of Justice will introduce a legislation for agent's commission to be limited to 5% plus VAT. Currently there is no regulation but the custom is 6% plus VAT - negotiable, especially for bigger investments. In Berlin as in most parts of Germany the commission is fully paid by the buyer.

Both the level and the fact that the buyer is paying the full commission is a "surprise" for many international investors but in the current "seller's market" situation hard to negotiate.

See the previous posting in this blog.

For support in the identification of the right investment targets please visit our website at www.berlin-portfolio.com. 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 

Update: Increase or Property Sales Tax in Berlin

Increase of Property Sales Tax in Berlin!

The Berlin Property Market
is very popular with
Inernational Investors

According to several Berlin newspapers the Berlin city government is planing to raise the property sales tax from 5% to 6%. This is to compensate for a reduction in subsidies Berlin receives from other German states like Bavaria in the 2014/2015 budget.
It is not clear yet when this increase will take effect. The Christian Democrats in the government want to compensate this by reducing agents commissions but there currently is no legal tool to achieve this.

Anyone considering a property purchase in Berlin might want to speed up the selection process to save that extra 1%.

For support in the identification of the right investment targets please visit our website at www.berlin-portfolio.com. 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 

Increase of Property Sales Tax in Berlin!

Berlin's Housing Market - Skyrocketing Prices | Made in Germany

This article was shown on DW - Deutsche Welle. It characterises the situation in the central districts of Berlin and highlights the fact that compared to other German and European cities this is only the beginning.

Use this Link if the video does not show: http://youtu.be/mIokc-VFKRA

An overview of price developments is available on our website. Provide your details on the left of the page and have the latest report sent by email.

For support in the identification of the right investment targets please visit our website at www.berlin-portfolio.com. 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 

Berlin's Housing Market - Skyrocketing Prices | Made in Germany

Berlin Housing Market Report 2013

Download the HousingMarketReport 2013 by GSW Immobilien AG and CB Richard Ellis.

For the most comprehensive and up-to-date survey of the Berlin housing market, more than 400,000 advertised rental, purchase and investment properties were evaluated and trends derived for both the city as a whole and its 12 districts. The Housing Cost Atlas provides information about rent levels, purchasing power and relative housing costs for 187 Berlin postcode areas.

For support in the identification of the right investment targets please visit our website at www.berlin-portfolio.com. 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 

Berlin Housing Market Report 2013

Berlin Housing Market 2013 - What's up?

During the last few weeks there were some significant changes in the Berlin Housing Market.

Berlin Rent Table 2013

The new Berlin Rent Table 2013 (Mietspiegel 2013) was published and showed significant rises (20+ %) in some areas and hardly any changes in others compared to the 2011 rent table.

Location Grading Map of the Berlin Rent Table 2013

Reminder:

The official rent table determines the limit to which rents for existing contracts can be raised. Other regulations apply as well, (see below). The table does not apply to new rental contracts, even though tenants looking for apartments will tend to take their information from there.

New Cut Off Rate for Rent Increases

A change in the tenant law by the federal government allows the local governments at state level to reduce the cut off rate for rent increases in existing contracts from 20% over a period of 3 years to 15%. Two of the states, Bavaria and Berlin were very quick in applying this option and have issued regulations for Munich and Berlin respectively, meaning that as of March 2013 this new limitation applies. By the way,  both states have elections coming up this year as there will be elections at the federal level.

Setting up the right strategy

First of all - do not have your property manager send out a rent increase to all tenants at the same time, you might find yourself with more simultaneous vacancies than you would like. This really does happen!

Before applying the possible increases of the the rent table draw a development plan for your property. This does not necessarily mean spending extra money but have a guideline for you property manager where you want to be in 5 or 10 years. Some examples:

• Use repairs and tenant changes for upgrades if this is what gets you into a better bracket within your location.
• Groom some tenants that you would like to keep and take it easier on increases, engage them into a dialogue.
• Take good care of the first impression of your property. If you want to attract tenants that are prepared to pay higher rents you have to do just that, attract them.

Falkenberg Solutions - Real Estate Consultants have supported the development of such plans. Good property managers should be able to help you but are often to involved in the property to take a step back for the assessment. Sometimes they would have to ask themselves why they have not done x or y long ago but this lies in the nature of being tied down in day-to-day business. A fresh look from a third party is often the best way. Click here to find out more about the services and/or contact us.

Berlin Housing Market Report 2013

Shortly we will send out the 2013 Berlin Housing Market Report with the latest developments for the different regions of Berlin. If you requested the 2011 report from us you will receive the update automatically. If you have not requested it, you could sign up for the 2012 Report here on this blog by using this link:
http://germanproperties.blogspot.de/2012/04/berlin-residential-market-report-2012.html
or you come back here as it will be announced soon. There is also a sign up box on our website http://www.berlin-portfolio.com.

Berlin Housing Market 2013 - What's up?

Sharp Rise in German Business Climate Index

The Ifo Business Climate Index for German industry and trade rose significantly by over three points in February. This represents its greatest increase since July 2010. Satisfaction with the current business situation continued to grow. Survey participants also expressed greater optimism about their future business perspectives. The German economy is regaining momentum.

In manufacturing the business climate indicator rose sharply. This was specifically due to a considerably more optimistic business outlook. Manufacturers also expressed greater satisfaction with their current business situation. Export expectations increased and are now above their long-term average once again.
In wholesaling the business climate also improved clearly after deteriorating last month. Wholesalers are more satisfied with their current business situation and less pessimistic about future business developments. In retailing, on the other hand, the business climate remained unchanged. Assessments of the current business situation were more positive than last month, but retailers were slightly more sceptical about their future business developments.
In construction the business climate index continued to rise sharply, primarily due to a far more optimistic business outlook. The business outlook reached its highest level since German reunification. Satisfaction with the current business situation also continued to grow.
Hans-Werner Sinn
President of the Ifo Institute

Press Release with details click here.

"The fact that the German economy suffered a setback towards the end of 2012. As the Federal Statistical Office (Destatis) already reported in its first release of 14 February 2013, the gross domestic product (GDP) decreased by 0.6% - upon price, seasonal and calendar adjustment - in the fourth quarter of 2012 compared with the previous quarter. The result for the entire year of 2012 remained unchanged at +0.7% (calendar-adjusted: +0.9%)." (Source: Destatis Press release)

Despite this setback all indicators point to a strong recovery of the German Economy as stated by the German Chamber of Commerce and other sources. The property market has seen price increases on all fronts including rent.

For more information keep visiting this blog or sign up for updates. For information on the German Property Market visit www.berlin-portfolio.com.

Sharp Rise in German Business Climate Index