Monday 9 July 2018

Construction and Repair Cost Increase In Germany

Construction costs for apartments and offices increased by 4.1%

According to the Federal Statistical Office (Destatis) prices for the construction of conventionally manufactured residential buildings in Germany in May were 4.1% higher than a year before. This is the highest increase since November 2007 (+ 5.8%). For office buildings and for commercial buildings a price increase of 4.1% was determined. In particular, concrete construction (+5.4%) was the price driver in housing construction, while masonry (3.7%) was less expensive. Carpentry and wood construction were 4.3% more expensive than a year ago.

Photo by Fancycrave on Unsplash

The interior finishing prices increased by 3.6% and maintenance, repairs and upkeep by 3.8%.


Especially the maintenance and repairs bracket is relevant for property owners as in most cases they will affect the bottom line of their investment directly. 


Sunday 8 July 2018

The International Monetary Fund: View of the German Housing Market

Germany : 2018 Article IV Consultation – Press Release; Staff Report and Statement by the Executive Director for Germany

In summary the IMF concluded that Germany needs to keep an eye on its property market.  House prices are most overvalued in Munich, Hamburg, Hannover, and Frankfurt, and are estimated to be more than 20 percent above their fundament level on average in major German cities.
A housing valuation model using Germany’s ten largest cities and twelve European peers shows that since 2010, house prices in Munich, Hamburg, Frankfurt and Hannover have increased by 25 to 50 percent above the levels suggested by economic fundamentals. The average overvaluation gap in the 7 biggest cities was 21 percent in 2017.
Annex IX. Is There a Housing Price Bubble in Germany’s Main Cities? 
IMF Country Report Germany, Annex IX 
As most studies are based on country wide price levels a view at city-level is important as they expose a risk level that does not shown at the housing market aggregate level.
     Kajuth, Florian, Thomas A. Knetsch and Nicolas Pinkwart (2016).
     Assessing House Prices in Germany:
     Evidence from an Estimated Stock-flow Model
     using Regional Data.
     Journal of European Real Estate Research Vol. 9(3), 286–307.

IMF Country Report Germany, Annex IX 
The IMF concludes that there is no cause for an alarm yet because there is no lending boom to accompany the price boom.

The economy surprised on the upside in 2017.

The findings of the IMF Report on the general state of the German economy is headed:  IMPRESSIVE RECENT ECONOMIC PERFORMANCE. Real GDP growth picked up sharply, reaching 2.5 percent, as exports rebounded and triggered a much-awaited pickup in investment. Strong private consumption, supported by a robust labor market, was offset by a slowdown in public consumption as refugee-related expenditures stabilized. Although both exports and imports grew strongly, the contribution of net exports turned positive again. The labor market continued to tighten: even though employment grew more slowly than in previous years, reflecting diminished migrant inflows, job creation was strong enough to bring the unemployment rate to a new post-reunification low of 3.6 percent.1 In the first quarter of 2018, growth slowed to 0.3 percent (qoq), reflecting a normal correction following unusually strong growth in late 2017 and temporary factors (strikes, a particularly nasty flu outbreak, and early Easter holidays), but the labor market continued to perform strongly.


The Germany : 2018 Article IV Consultation – Press Release; Staff Report and Statement by the Executive Director for Germany by the IMF shows Germany as a stable investment environment in the Housing Market.


Global Cities Index Posts Weakest Property Price Growth Since 2015

Globally, urban prices are rising at their slowest rate since the third quarter of 2015. The Global Residential Cities Index, which tracks the movement in average residential prices across 150 cities worldwide, rose by 4% in the year to March 2018, down from 6.4% a year ago.
According to a new report by international real estate consultant Knight Frank, despite the global economy's strong performance, increased government activities to fight inflation in the real estate sector have slowed the price increases to some extent. While last year's report saw 12 cities with a growth of more than 20 % this years there is only one left in this bracket: the Indian city of Surat.
Europe's growth path continues as 11 of the top 20 cities in the ranking for growth are in Europe. Previously in the top ranking Berlin (14.9%), Budapest (14.4%) and Reykjavik (11.8%) are now joined by Rotterdam (14.8%), Edinburgh (12%), Porto (11.7%) and Sofia (11.3%).

In Canada Vancouver continues to outperform with annual growth of 15.4% as tracked by the National Bank of Canada.

In the US Seattle (12.9%) continues to lead the 15 cities tracked by the index.

Southern Europe is increasingly polarised. Whilst Italian cities are well-represented at the foot of the table, Spanish and Portuguese cities are registering stronger growth. Porto, Malaga and Madrid all sit high in the rankings with annual growth of 11.7%, 10.4% and 10.3% respectively.
The report also contains interesting insights in the bandwidth within countries which can go from + 22% to -5% within one economy.

For the full report just click on the graph or table above.


Friday 29 June 2018

German Property Finance - LTVs are Decreasing "Only" Due to Price Increase


A recent finance study by IRE BS Immobilienakademie states that the Loan To VAlue ration in German property financing has decreased from 65% to 61% since 2016 but "only" because of price increases. In other words, banks  don't believe that current prices represent the value of the properties they are financing so they are cutting back on their exposure.

Why is this supposed to be good news? It follows the calls form the Deutsche Bundesbank about a Property Bubble even though several demand based indicators don't support the view. Maybe if they keep it up for another 5 to 10 years, one day, they will be right.

Press release in German.

Purchase the report in German.


Knight Frank Active Capital Report 2018: Canada and Germany Attract Further Real Estate Investment

Knight Frank Report: Active Capital - 2018.

Active Capital gives a unique insight into the dynamics of the real estate capital markets around the world. It projects that Canada and Germany have the greatest potential for increasing real estate investment from around the world.

Download the Report directly:


Wednesday 27 June 2018

Berlin Remains in the Top 5 of the Most Dynamic Cities in Europe

Savills Investment Management LLP has published their annual  "Savills IM Dynamic Cities Index" for Europe.
Europe stands among the most urbanised regions on the globe. Trends
in urbanisation are increasingly important for investors. However, not
all cities are equal. With the predicted growth of disruptive technology,
it is vital to identify locations that will show resilience to change. 
The Savills Investment Management Dynamic Cities
index incorporates cities’ longer-term upwards growth
potential rather than focus on the one- to two-year,
shorter-term real estate cycle.
Using 60 indicators across 6 subcategories, Savills
Investment Management has identified London,
Cambridge, Paris, Amsterdam and Berlin as the top
five European cities for real estate investment.
KIRAN PATEL Global Chief Investment Officer Savills Investment Management

London, Cambridge, Paris, Amsterdam and Berlin remain the five most dynamic cities in Europe, according to Savills Investment Management. They claim their position in the new edition of the "Savills IM Dynamic Cities Index", for which 130 European cities and city regions were evaluated according to the criteria of innovation, inspiration, inclusion, networking, investment and infrastructure. The index is led by cities that are successful in attracting and retaining talent, promoting innovation, and increasing productivity, which in turn drives prosperity and population growth and thus has a positive impact on the commercial real estate markets. Most of the locations investigated achieved better results than in the previous year. In Germany, especially Frankfurt (+4 in 17th place) improved.

The full report is available at this link:
And an interactive presentation with visualisation of the the results and their components allowing direct comparison and search is available at this link:


Monday 25 June 2018

Eight Percent of Office Space Turnover in Berlin are Accounted For by Flexible Workspaces.

The average share of Workspace as a Service (WaaS) take-up in Europe reached 7.5% in Q1 2018,
up from 7.2% in 2017 and almost three times higher compared to 2016, corresponding to a total volume of 680,000 m² according to Savills.
“The effect of 'on-demand' economy on the office sector, is bringing the expectation for higher flexibility, shorter leases and personalised services.” 
Eri Mitsostergiou, Savills European Research

Briefing note Workspace as a Service (WaaS) Trend or necessity?

The largest market over the past five quarters was London (217,000 m²), followed by Paris (126,000 m²) and Berlin (81,000 m²).

Eight percent of space turnover in Berlin are accounted for by Flexible Workspaces.


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.


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:

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.


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



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,

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.


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.


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:
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

Based on value incl. VAT and sundries
Based on value
As built measurements and plans
6 € per m² gross floor space
Producing split plans for the property register
Time fee and reproduction and submission of application at local authorities
Certified Partition Plan by local authorities
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
Estimated 4 days at a daily rate 800.00 plus VAT
Estimated total cost
 With new measurements and plans


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: Please contact me if you are interested in long-term strategies as the level of detail would go far beyond this article.


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.)


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,

For more background information in German:


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: 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: 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 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.


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…/phoenix-spree-the-berlin-p…/a1117964


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


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: 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.


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).


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."


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:


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:

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:

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 .


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.

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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