Housing Market Report Berlin 2020

Berlin polarises like no other city. Nevertheless - or precisely because of this - it is still a magnet for many people from  all over the world. The influx into the metropolis is unbroken and there is a lot going on in Berlin’s economy: Tesla is coming, the BER Airport will (hopefully) soon start operating, and Siemensstadt 2.0 will open up new possibilities. Also, relocation for the entire federal government from Bonn to Berlin is repeatedly being discussed. All this affects the Berlin housing market that has been tense for years.

Housing Market Report Berlin 2020

An outcry swept across the country when Berlin announced the implementation of a rent cap. According to the tenor of the real estate industry, the rent cap is expropriation, investments are on hold, and there will be a hail of bankruptcies in the real estate industry. That being said, many tenants and people looking for accommodation, who perceive the increasing housing prices as a threat, welcomed the initiative. In order to shed some light in the effects of the rent cap announcement in the Berlin housing market, we have postponed the publication date of the Housing Markt Report. Articles on the rent cap and other recent topics regarding the Berlin housing market can be found, in the familiar way, in our small-scale analyses.

The report is available directly from the site of BerlinHyp:

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Housing Market Report Berlin 2020

Study: Eastern Germany's mid-sized cities are becoming increasingly attractive

TAG Immobilien AG Housing Market Report 2017

• TAG Housing Market Report Eastern Germany 2017 analyses 27 large and mid-sized cities in Eastern Germany
• Growing demand for housing in areas around major Eastern German cities
• Increase in popularity and new residents drives up rents and purchase prices, while vacancy rates fall 
• Household housing cost burden remains stable or even declines due to strong purchasing power growth

Hamburg, 18 October 2017 - Eastern Germany's housing markets are on course for further growth. Urban populations continue to expand while vacancy rates fall. As a result, rents and property purchase prices are increasing in many locations. The good news: "Despite the fact that rents are rising, dynamic purchasing power growth means that household housing cost burdens remain stable or have even declined in some places", said Claudia Hoyer, Member of the Management Board at TAG Immobilien AG. This has been confirmed by the "Eastern Germany Housing Market Report 2017", published by TAG Immobilien AG today. As with last year's study, the real estate consultancy firm Wüest Partner Deutschland analysed data from 27 large and mid-sized cities in Eastern Germany, including data on population and economic growth, rents and purchase prices, property yields and the financial burden of housing costs across the region.
The report also includes interesting details about the development of gross yields and price development in Berlin.


Further findings, including the complete Housing Market Report Eastern Germany 2017, can be downloaded for free here.

Study: Eastern Germany's mid-sized cities are becoming increasingly attractive

Surprize Results In The Top 50 House Price Index: #Berlin at No.18 and Waterford, Ireland at 9

The Hurun Research Institute released the Hurun Global House Price Index 2017 Half-Year, listing the 50 cities with the highest house price changes in the twelve months to 30 June 2017.

China housing prices growing fastest in world

 6 Chinese cities in Top 10 & 21 in the Top 50

Toronto jumped 26% yoy, Number One in world

Hong Kong Top 5, with house prices rising 20.8% yoy

Wuxi fastest growing city in mainland China; Zhengzhou, Changsha, Guangzhou and Shijiazhuang in Top 10

USA, with 15 cities, led way for highest global property ROI (housing price change + RMB change + rental yield), followed by Germany (5), Australia (4) and Canada (4)

 The ranking for individual cities shows some surprizes:

Source: hurun.net

There are only 7 non-Chinese cities in the top 20 (blue frame) out of which 3 are European.

The report also looks at the ROI where Berlin ranks at No. 16. You can download the press release including the ROI ranking here ⇒ Hurun Report 1 - 2017 Press Release.

Surprize Results In The Top 50 House Price Index: #Berlin at No.18 and Waterford, Ireland at 9

Furnished Apartments in Berlin, the Answer to Growing Demand and Tighter Regulations

The Demand for Furnished Apartments

In the ever-changing world of work, often involving flexible locations, it is becoming more and more important that we can easily find a fully-equipped living space, ready to move into and easy to call home. Furnished living concepts are a response to this growing trend. Providers of this concept say that in 2016, every 5th space was occupied by a ‘commuter’ – someone who might only live in Berlin during the working week. In addition, fixed term contract jobs have significantly increased with this defined time span a matching comfortable living space in a given location is needed. Who wants to go find an apartment, furnish it, only to dismantle everything after 6 or 12 months? Providers of such accommodation are flexible regarding the rental period from 1 month to a year or more, and some contracts can be open ended. There is a growing preference for a furnished apartment solution over serviced apartments or hotels.

 Recent projects were developed in the light of the fact that there is an urgent need for affordable living space in Berlin. It is expected that around 250,000 people will be relocating to the city by 2030. Already, 83 percent of New Berliners live alone or in pairs. The rise in single households is twice as large as in comparable large cities.

Request more detailed information here.

The Ideal Location for Furnished Apartments

For the concept to be successful avoiding longer vacancies the location is a key factor:

• Close proximity to professional clusters with sufficient demand
• Well connected by public transport;
• Shops, restaurants at least for daily needs.

The Best Planning Concept

To achieve the best cost/benefit ratio for the users as well as for the owner these planning parameters should be adhered to:

• Compact, affordable living space with a choice of apartment size of 1.5 to 2 rooms
• Apartment sizes from 30m² to 60m²
• Fully equipped kitchen
• Modern “clean” furniture and decorations
• Smart TV, Wifi and smart metering.

Recommended Operational Concept

For an investor, it could turn into a long and in parts painful experience to try to achieve a smooth set-up and operation of a furnished apartment unless he lives “around the corner” and is flexible regarding availability. A service concept from the outset is important. It should cover these items:

• Furniture concept, delivery, and installation
• Service for rental, management during the occupation and most important handover from the tenant
• Maintenance and replacement of furniture and equipment.

In order for a service provider to be efficient and successful, they should have a number of managed apartments in the vicinity.

Example for a Suitable Location for Furnished Apartments

One such area ideally suited to furnished apartments is the vicinity of the Science and Technology Hub Berlin Aldershof, an important science, business and media centre in Berlin. It includes ten non-university research institutes, six institutes of the Humboldt University. and some 1,000 additional companies, where ca. 16,500 people are employed and more than 8,000 students are registered.

In addition, the area has attracted 146 companies in the media sector, employing another 1,763 people.

For detailed project information and price list of such a project you can sign up here:

Furnished Apartments in Berlin, the Answer to Growing Demand and Tighter Regulations

City Comparison Berlin and The Rest of The Top 7 in Germany

One of the results of this year's annual Housing Market Report Berlin 2017, published jointly by Berlin Hyp AG and CBRE. The report is available for download.

http://germanproperties.blogspot.de/2017/01/housing-market-report-berlin-2017.html

The housing market is catching up but purchasing power not yet. In 2015, Berlin gained almost 48,000 new inhabitants due to its positive economic development and attractive quality of life, thereby continuing the development of the past few years. Since 2005, the population of the city has grown by about 270,000 inhabitants. This increase entails a growing demand in the housing market, even if the purchasing power of other large cities in Germany is still well above the Berlin average (Cologne: plus 14.6 percent, Hamburg: plus 18.6 percent, Frankfurt: plus 23.7 percent, Munich: plus 42.5 percent). Despite increased new building activity, the vacancy rate in Berlin is now 1.2 percent, which is only slightly above the Cologne (1.1 percent) and Stuttgart (0.8 percent) but already below the vacancy rate of Düsseldorf with 1.5 Percent. Accordingly, the average supply rent in 2016 rose to € 9.00 per square meter per month but is still below the supply levels of the other Top 7 cities, of which Munich is the highest value at € 15.11 per square meter per month.

"The continued development of Berlin is impressive and offers a dynamism that is unique in Germany, both at the rental and new market as well as at the purchase prices," says Henrik Baumunk, Head of Residential Services at CBRE in Germany. "Nevertheless, there is still room for improvement in Berlin with regard to rents and purchase prices, due to the progressive growth in population, while at the same time moderate new construction and due to the increasing economic power of the city", explains Baumunk.

Offer rents are twice as strong as in 2015. In 2016, the supply rents rose by an average of 5.6 percent and thus reached a dynamic level comparable to 2014, when an increase in the supply rents of 5.8 percent was observed. In contrast, in 2015 the increase was 2.3% much lower. "Growing population numbers and economic growth are putting more tension into the market," says Gero Bergmann, a member of the board of directors of Berlin Hyp. "The offer is becoming ever lower because, in the case of scarcity and price increases, the willingness to move is always decreasing."

Not only the median values of all offer rents but also the mean values of the lower and upper market segments (the cheapest and most expensive ten percent of the offers) show marked differences in the growth rates between the districts. Across all market segments, the rents offered rose most clearly in Neukölln with 17.1 percent. Marzahn-Hellersdorf recorded as the only other district a double-digit growth with 10.2 percent. At 6.70 euros per square meter and month in the median, Marzahn-Hellersdorf was still the district with the most favourable offer rents - in the lowest market segment, there were even offer rents of 5.20 euros per square meter. At EUR 11.04 per square meter, Friedrichshain-Kreuzberg showed the highest average offer with a 7.5% increase. The district with the lowest increase was Charlottenburg-Wilmersdorf with 2.7 percent. In the upper market segment, 17.46 Euro per square meter was the rent advertised in Berlin-Mitte.

These rents result in very different housing costs quotas, the ratio of the purchasing power of residents to the average warm rent of an apartment offered. The housing costs range from just over 17 percent in some quarters in Marzahn-Hellersdorf to almost 47 percent at the Hackescher Markt in the district of Mitte.

The details about the districts will be analyzed and published in our blog http://propertylocations.blogspot.de/ over the next weeks. You might want to subscribe to the blog to receive updates.

For property search, assessment and management please refer to our website www.berlin-portfolio.com.

City Comparison Berlin and The Rest of The Top 7 in Germany

South China Morning Post: Berlin Offers Opportunity and Frankfurt, Stability

When looking at your home market it is sometimes useful to hear what others are saying. Especially Berlin seems to be everybody's darling in the forecast for 2017 and there are good reasons for it ... and bad ones.

Here are some quotes from the South China Morning Post (link to full article):

When considering Berlin property, affordability springs to mind – homes are a fraction of the price compared to London and Paris. First time buyers and investors – who may feel intimidated by prices in first-tier cities, but still want a foothold in Europe – are looking to the German capital, where there is good investment potential.

Unfortunately, this reminds of advertisements 10 years ago like: "Buy an apartment in Berlin for the price of a parking garage in London". It did not mention that the rent for the apartments in question was the same as those of a parking space in the top parking zones in London. Why? Let's not go there, you know the Ferraris I'm talking about.

Next quote:

These are exciting times for Berlin. Formerly run-down neighbourhoods have been transformed into fashionable, hip hangouts. Infrastructure development is rolling out, from a new international airport with connections to the Berlin S-Bahn and the wider regional and national railway grid, to new international hotels and retail sites rising up around the city. A large regeneration area directly behind the central train station will bring Berlin another centre of commerce, with integrated retail sites and mid- to high-end residential properties.

The development of so-called "run-down" neighbourhoods has a name, it's called "gentrification". This comment is not about the social impact on the locals but about the fact that apparently investors looking at affordability are lured into regions where there is very likely strong resistance to rents promises in the sales documents and no established environment for high rent tenants. People who look for affordability are not the right trailblazers, especially if they are investing their life savings.

But then Berlin has a lot to offer for investors, international and local - but not the "mid to high end" developments popping up in "no man's land" around Chausseestrasse or around Ostbahnhof. Our recommendation is looking for a single existing property in a mature neighbourhood with social infrastructure, shops and people. It will definitely require more effort than picking "apartment 138" from a glossy brochure that does not exist yet and certainly does not have a tenant paying a net rent of 15 Euros per square meter per month - but then belief is everything in the religion of real estate.

Here is the "I thought so...": We provide support for finding the right property investment in Berlin - but we are not agents, or only in very few cases. Investors can rely on our impartial professionality. We don't only know about the sales process but also a lot about running a property to make it perform at its best potential.

Contact: http://www.berlin-portfolio.com/feedback.html

South China Morning Post: Berlin Offers Opportunity and Frankfurt, Stability

Real Estate Market in Berlin and Germany - Outlook After Brexit

The outcome of the UK referendum on membership in the European Union (i.e. the vote to exit the union known as Brexit has led to many discussions and wild speculations regarding the impact this will have on the economies of the UK and indeed the remaining EU members. Most statements and predictions are based more on emotions than economic facts but emotions have a significant impact on market developments as we see demonstrated by the global financial markets every day.

A clear economic downturn in the UK and political reactions to this development have already manifested themselves.

Alongside financial services, the property market in the UK has been a destination for international investors. There are uncertainties linked to Brexit with regard toall aspects of how and when the procedures will start and what the impact on investments will be. There already are negative risk aspects attached to investments in the UK without any decision actually having been made. This will cause a diversion of investments to other destinations in Europe. On a city level the winners will most likely be Frankfurt, Berlin, Paris, Luxembourg, Dublin and Amsterdam. On a country level the biggest winner is most likely Germany. This is the conclusion a recent study made by Cushman & Wakefield comes to:

Brexit & The European Property Investment Market.

Our market observation in Berlin confirms this development as we see an increased activity by international investors from large residential property package deals in the housing market to investments in commercial and development properties.

For information on current investment opportunities in all property market segments in Berlin please contact us using the contact facility on our website: http://berlin-portfolio.com/feedback.html

 

Real Estate Market in Berlin and Germany - Outlook After Brexit

German Property Performance Survey – International Investors

The challenge for every provider of services is to understand what the ever changing needs of their clients are. In the Real Estate Consultancy business in Germany, the needs have changed dramatically with the arrival of more international investors on the scene. It was only after the German re-unification and a consolidation period that Germany became relevant for international investors. They soon realized that compared with other major economies, properties were largely undervalued. This was especially true for Berlin and ex East Germany. There were headlines like “In Berlin you can buy an apartment block for the price of a London parking garage space”!

As the word spread more and more private investors jumped on the plane and since about 2005 many have bought apartment blocks in Berlin, Leipzig and other places. The purchase process was foreign but most put their trust in what was considered German efficiency. The actual management of their property after the purchase, which had to deliver the promised yield, was hardly a big concern. So many investors just left the properties with the Property Management Company (PMC) of the previous owner and inherited all previously existing quarrels and issues.

Most property agents quickly adapted to the new situation and made sure their information was available in English including English speaking personnel. This was easy for them because of high commissions, significantly bigger than property management fees. PMCs did not have that luxury and could not keep up with the shift. And this is only one of the causes for friction and frustration between international investors and German PMCs, even though a very fundamental one.

Experiencing the disappointment and frustration of investors almost every day we produced a survey to find out more about the background, motivation and current issues of international investors engaged in the German Property Market. There were some expected but also some surprising results. We asked our clients, subscribers to our blog (which is this one you are reading right now) and visitors to our website www.falkenberg-solutions.com.

Here are some of the results:

About 43 % of property owners do not get their reporting in English even when the request was made. How can you monitor your property’s performance if you cannot understand what is happening? The only clear information is the bank account and that does not tell why something went wrong if this is the case and what should be done to improve things.

The burning issue for 50% of the respondents was the rent level of their property, they were not confident that it was at the optimum. This was followed by the readiness to sell. Both answers correspond with our observations in our daily business of consulting property owners regarding the performance improvement of their property.

On the second important issue the “Maintenance and repair cost” have it at 35.71 % followed by “Readiness to sell” and “Rent level” each at 21.43%. The overlap of first and second issues of the properties shows that the “Rent level” is the main concern then “Maintenance and repair cost” closely followed by “Readiness to sell”. The relatively low focus on the “Vacancy level” as first or second choice reflects the current market situation of high demand.

For the time and effort invested by the respondants we offered a free property health check and the choice of the specific health checks coresponded with the issues stated as being the most impotant ones in the survey. But then came the surprise: In order to perform the service we need some basic information about the properties. Only ca. 25% of the respondants provided the data necessary to perform the Property Health Check and were able to take measures for improvements. We can only speculate about the other 75% but our suspicion is that not even the basic data needed was readily available for them.

Next Steps

We are currently working with some of the respondents to either improve the performance of their properties and/or get them ready for sale. Some of the findings after a deeper involvement are shocking, e.g. in one case a claim of ca. 50,000 € against the PMC for not raising the rent in 50% of the apartments for eight years.


The survey is still open and if you own an apartment block in Germany we can only encourage you to participate and take advantage of the absolutely free Property Health Check we are offering. Here is the link to get started:

The survey is now closed

German Property Performance Survey – International Investors

Purchase cost for German Real Estate 2015

One of the most asked questions by investors new to Germany is regarding the typical cost involved in making a real estate investment.

The cost depends on the price of the property the cost tables for the notary public and the land register relate to is as value of the transaction. They are degressive, in other words, the higher the price, the lower the percentage of the cost.

Another cost factor is the property sales tax (stamp duty) which varies in the German states (see table below).

Last but certainly not least there is the commission for the property agent. These also vary in different areas of Germany and are easily obtained from the offer you are looking at.

Depending on your financing there will also be a cost for entering securities into the register, relating to the amount to be secured. Because the financing varies individually, this is not included in the examples.

For the purpose of the examples it is assumed that the property is bought in Berlin

Click on the table for a bigger pdf-version.

Property sales tax (stamp duty) in the German states 2015

Further cost will be incurred in the context if financing which may include due diligence and cost for notary and register for the entry of securities into the land register.

Purchase cost for German Real Estate 2015