≡ Menu

Berlin Real Estate Market Update 01-2015

Angebotsmieten 2009 vs. 2013 in TOP5 German Cities
While most Berliner hope that the strong rise of housing prices since 2009 will come to an end, the top broker agencies, as Zabel and Ziegert report strong demand from foreign, as well as from domestic buyers.

The shortage in flats and the growing demand for space in combination with historical low interest rates (both for loans, as well as for alternative investments, in combination with a tendency for fear of inflation) fuels the market.

But right now the prices for plots and empty houses, the basic resource needed in order to produce residential space are growing faster than the prices for new constructed flats.

The problem of Berlin is that only in a few districts the rents are that high that new constructions make sense. Even the local municipality owned housing cooperatives admit that they need round about 9€/month/sqm net cold rent (without side costs) in order to produce new constructed multi-family-housing break-even. This is only the case for about 25% of all rental offers in Berlin, as stated by the BBU Marktmonitor 2014.

In this areas (were new construction makes financially sense) supply of plots is very limited, if not non existing.
Berlin still does have a lot of unbuilt plots in the city but the rents there are to low to justify new construction, which typically needs a price tag above 3000 €/sqm.

On one hand we can understand the politicians that want to save the tenants from increasing rents, but we should treat people equal, says Alexander Korte of AMLT Group, a Berlin based residential developer. Why does a new relocated household have to pay 2-3 times more rent than a household who lives here since ages. That sounds highly unfair to me. Please take into account that those household typically have well payed jobs in the strong technology and start-up sector in Berlin, and therefor not only pay more tax, but bring money in the city via consumption and public fees (In Germany fees for public goods, as kindergarden are linked to the income.
Taken into account that the preservation of rents is exactly the number one parameter that keeps developers from building the strongly needed housing, the strong legal tools just introduced to minimize rental growth is exactly the wrong medicine.

The paradox is that the politicians keep rents low and therefore increase the problem.
New housing doesn’t make sense in most Berlin areas, so new supply is nor planed, neither executed.
Here we need higher rents that developer start to build in this areas.
As demand grows and supply stays limited the rents have to rise, and they will find a way to rise.
Talk to an senior property manager and he will tell you what happened when in the 1960ties the rents were artificially frozen by the government. Landlords started to collect money on the side. s.th. like this will happen again.

Since years the output in new housing in Berlin is on a historical low of around 3500 units per year, this is less than in Munich (1,4 Mio inhabitants) or Hamburg (1,7 Mio). Experts see a number of 19.000 new units per year in Berlin needed to cover the demand.

In the end investors in income producing rental property, who typically take much less risk as developers will benefit from the low new output. Rents will rise no matter which legal frame wants to tie them, and tenants will stay tenants, rather than become economical thinking and retirement planning real estate owners, because they hope and believe that politics can and will fight the market logic.
But in the end nobody is helped.

Is this really what politicians want? What do you think? Please comment.

{ 0 comments }

Maybe the most important Berlin map for Real Estate Folks

Berlin U-Bahn Bar MapDrinking might be the only solution after a hard day of researching and sourcing property out there. This map shows a good bar close to every U-Bahn stop.

We recommend the U2 and U8 drinking line.

Find the original big version here.

Filed under essentials ;-)

Big thanks to the guys from Thrillist.com.

 

{ 0 comments }

ZIEGERT Condominium Report Berlin 2014

ZIEGERT Berlin Condominium Report 2014We added the brand new ZIEGERT Condominum Report 2014 to our extensive research report library.
This issues is published by ZIEGERT for the first time.
Do you need Berlin Real Estate Market Data ?
Drop us a line and we give you free access to our archive dating back to 2005.
Get the ZIEGERT Condominium Report 2014 (German or English Version) directly from Ziegert Immobilien here.
{ 0 comments }

The Economist interactive guide to the world’s housing markets

Very interesting data and  cool graphics from the economist on global real estate markets.
The stand outs are:
  1. Germany still cheap absolute and especially relative.
  2. Most Anglo-saxon markets excluding the US in a clear bubble.
  3. Italy and Spain reversing downwards towards their average and becoming more affordable but not yet cheap.
Here is the link:
Enjoy
Want more research data? Post us a note:

{ 0 comments }

Rising locations in the Berlin property market updated

The biggest challenge property investors face in a new city is the location question.

Therefore we regularly publish location information for the Berlin property market.

In 2014 we added so far:

  1. Potsdamerstrasse, the north part of the street towards Potsdamer Platz
  2. Area around Gleisdreieck
  3. Victoriastadt typically named Kaskelkiez

The full list of our Berlin location recommendations can be found here.

Potsdamerstrasse, the north part of the street towards Potsdamer Platz
[iframe style=”border: 0;” src=”https://www.google.com/maps/embed?pb=!1m14!1m8!1m3!1d2428.64226545367!2d13.3672613!3d52.5037149!3m2!1i1024!2i768!4f13.1!3m3!1m2!1s0x47a85035bb3ca5d3%3A0xa3ccdbf3a41e6!2sPotsdamer+Stra%C3%9Fe!5e0!3m2!1sen!2sde!4v1401098542756″ width=”400″ height=”300″ frameborder=”0″]

Area around Gleisdreieck and Gleisdreieck-Park
[iframe src=”https://www.google.com/maps/embed?pb=!1m14!1m8!1m3!1d2428.765793229567!2d13.372335!3d52.501479!3m2!1i1024!2i768!4f13.1!3m3!1m2!1s0x47a8503391736269%3A0xdb099e4a7e58052c!2sGleisdreieck!5e0!3m2!1sen!2sde!4v1401098491854″ width=”400″ height=”300″ frameborder=”0″]

Victoriastadt typically named Kaskelkiez
[iframe style=”border: 0;” src=”https://www.google.com/maps/embed?pb=!1m18!1m12!1m3!1d2428.5873538245914!2d13.476372949999998!3d52.5047088!2m3!1f0!2f0!3f0!3m2!1i1024!2i768!4f13.1!3m3!1m2!1s0x47a84eefd6e870c3%3A0x65d48666cda6cbc2!2sVictoriastadt!5e0!3m2!1sen!2sde!4v1401098406234″ width=”400″ height=”300″ frameborder=”0″]

{ 0 comments }

Investors are facing company structure decisions effecting taxation, profits, liability and exit possibilities.

As a family office for wealthy private investors we could gain a lot experience in the last years regarding those issues. This article is a basic introduction and doesnot substitute professional advise.
The article is suitable and addresses the needs of investments between 500k and 20 Mio Euro.

Executive summary:

  • Company and tax structure have to be decided before acquisition, otherwise decisions are made under (time) pressure.
  • German corporate law offers flexibly company structures to minimize liability and taxation.
  • German tax law offers very convenient tax rates especially for foreign investors.
  • Cross border and double taxation treaty experienced advisors are needed to set up the corporate and taxation structure.
  • To keep strategic options open and to avoid negative effects on taxation a separate entity for each property is highly recommended.
  • Advise of a cross border tax structure advisor is highly recommended.
There are a lot of options how to structure property investments in Germany. Upfront we want to stress that we found the typically used “offshore” Luxembourg company structure expensive and inflexible, at least for single investors and small groups of individual with a investment range of between 500k and 20 Mio Euro per single property.
German company law offers 2 types of taxation options.
  1. non-commercial entity
  2. commercial entity

The status depends of the volume traded. The line between non-commercial and commercial is crossed after selling more than 3 units (!) within 5 years. A unit hereby is defined as a single legal unit. A legal unit could be a multi-family dwelling with 2-500 residential units, as long as the property has one land register its one property no matter how big the value might be,

The main benefit is that the German tax law allows to choose between a commercial and a non-commercial, called asset management entity (company). The non-commercial entity is designed for investors that buy and hold property longterm. If you plan to buy-and-flip or buy and develop to resell you are a trading business and considered commercial, therefor the non-commercial status will not apply. At the start of the company you choose the non-commercial status, and you should alwas start as a non-commercial even if you plan to split and sell. Because the status will be automatically switched if you trade more than 3 properties within 5 years. Especially for foreigners a non-commercial GmbH structure with its 15,6% income tax and its extemption from commercial tax (Gewerbesteuer), is more or less a tax-haven and makes sense from a taxation poont of view. The possibility to treat the equity of a sharholder as a loan, and the right to treat the intrest (payed out or not!) as a cost is another advantage of this structure. However the down side of choosing a GmbH (or any other non-tax transparent vehicle) is that capital gains won’t be free of tax (after 10 years of holding the property) . This could be avoided by a mixed structure like GmbH & Co. KG. In any case as a foreigner you should always take into account that the taxation law of your location of residency could apply. Especially if there is a double taxtion treaty. A tax advisor that is used to cross border deals and structures should be advised in any case. No matter what your tax consultant advises and not matter how urgent the situation might be, always choose one entity for one property. Property investmemts are a bet on a location, and this location quality might improve or not, on top the legal situation could be changed by the municipality (must known terms: Sanierungsgebiet, Millieuschutz, Denkmalschutz) forcing you to switch strategy. To make sure you can switch strategy on the property level and don’t harm taxation of other property investments you should use one entity for one property.
We can get you in contact with the tax-advisors that help us and many of our clients to structure cross-border deals.
Just drop us a note.
{ 1 comment }

Beat the competition in a real estate sellers market

You will face competition whether you want to rent or buy space.

Typically renters or buyers of flats (and even investors with deep pockets) tend to view the real estate market from the point of view of a normal consumer. So they end up hoping or asking for services which in most cases won’t be provided. The property market doesn’t necessarily follow the rules of a typical consumer market. In a consumer market, supply is typically not a problem, and sellers with similar products focus on distinguishing themselves by service or other factors. The client is king – and could walk out of your door at any given time and buy somewhere else.

But the property market does not work like this. At least not in Germany. The products are not similar, as the location is a big factor for the buyer/renter. On top of that supply is very limited, in time and quantity. Typically you would search within a certain geographical range and in a very short time period. So walking out of the door is not really an option.

Also, the German fee structure for brokers is highly regulated. A broker can only ask a fee from you if successfully closed a deal. And most brokers don’t share deals, especially not in a tight market like Berlin. In other (more mature) markets like the USA, agents share deals and a broker with a buyer, works with the broker of the seller. In Germany, brokers tend not to share their deals with other brokers.

All these factors together lead to the real estate service providers to focus on the property and not on the clients or their needs.

Let’s face it, there will be no service provider that will search for you. Brokers or landlords will offer the property they have available right now. Take it or leave it. At least in a sellers market like Berlin. By the way, the same applies to the rental market (which is a landlord market here).

And the sooner you face this, the sooner you will succeed.

I will explain the “Do’s and Don’ts” or better “How to successfully rent a flat in Berlin, Germany” in this post and in the following post I will explain “How to successfully act as a real estate buyer”.

As someone with deep insides of the real estate market, I experience problems people have with customs and habits in this market daily.

Originally written for a friend I thought it might be use full information especially for foreigners new to Berlin or Germany.

Related Posts:

Post 1 is for renters:
1. How to successfully rent a flat in Berlin, Germany

Post 2 is for self-user / flat buyers (but not published yet):
2. How to successfully buy a flat in Berlin, Germany.

Post 3 is for investors (but not published yet):
3. How to successfully acquire real estate investments in Berlin, Germany.

This post is written by Alexander Korte. I am a Berlin based property developer and investor, I regularly contribute to real estate relevant themes in the international press.

{ 1 comment }

How to successfully rent a flat in Berlin, Germany

This post was originally written for a friend, but I thought it might have some useful information for people new to Berlin or Germany. It relates to crucial points in the rental process.

You might want to read this post to get a bit of a background.

Typically a landlord or seller of real estate wants as little trouble as possible before (and after) the deal.

The German real estate market is highly regulated. For example, it is more or less forbidden to ask the renter to sign a self-terminating rental contract. Unterminated rental contracts seem to be very nice pro-renter friendly, but it does create several problems.

Once the landlord signed a lease agreement it is hard fro him to get rid of the tenant (if the tenant pays the rent regularly).
Because it’s hard to evict the tenant, therefore, a landlord or his property manager/letting agent will back round scan the tenant, in order not to acquire a “problematic” tenant.

Why should a landlord consider you as a renter?

An owner will make assumptions about you based on your behavior.

If a potential renter asks silly questions or behaves in a strange way, it is likely that he or she will also act strangely after the rental contract is signed. A landlord will always check the tenant’s background and ask as many questions as possible – before the contract is signed.

Apart from some soft factors like the way you communicate, dress and act, the landlord will also check hard facts.
You can, therefore, prepare the data to make it easy for the owner, and gain a small advantage over the competition.

Here are some typical hard facts landlords love to check:

1. Proof of Income (in German: Einkommensnachweis)

Purchase power – can you afford the rent and all the side costs?
Typically the rent payment should not exceed 30% of your overall income. You should be able to show a paper that proves your income, in the best case the typical German “Lohnbescheinigung” or in case you are self-employed a letter of your tax advisor testifying your income.

Extra tip: If you don’t have a high enough income, or you can’t prove it, you could provide a guarantee from a third party, for example, your parents or a friend. We call this in German “Buergschaft”.

2. Rent Payment History (in German: Mietschuldenfreiheitsbescheinigung)

Your past rent payment behavior – did you pay your rent regularly?
You should be able to present a letter from your last landlord(s) that testifies that you always paid the full amount on time and that you don’t owe rent to him or her.

3. Credit Report (in German: Schufa-Auskunft)

Credibility- a landlord who wants to check your credit report might sound crazy, but remember that he has no chance of getting rid of you once you are his renter.
You should have a paper ready to present your latest and current credit report.
If you already own a German bank account the easiest way to get a credit report is www. meine-schufa.de.
I agree that it is a pain in the neck for a non-resident to get a credit report. I will address this problem in a later post “How to get a credit report in Germany”.

4. Identification (in German: Meldebescheinigung/Kopie des Personalausweises)

Who wants to rent the place?
Typically you hand in a copy of your ID. In the case of it being a passport, you should also attach a copy of your residency registration (Meldebescheinigung). Again, it might be a problem for newly arrived people to present such a record. We will deal this issue in a later post.

The easiest way is to rent a room in a shared flat, get a contract and a letter from the owner/property manager that you are living there. The contract is not enough since they changed the rules a while ago. The letter of the owner of the flat is crucial. Then you go to the municipality (Einwohnermeldeamt), to get registered. As a result, you will get a certificate of registration (Meldebescheinigung) from the municipality.

5. Insurance Policies

The two insurances named below are not needed, but could help to stand out. Every good property manager advises the landlord to make this insurances mandatory for every renter anyway. If you present those insurance papers right along with the documents mentioned above, you show that you are a serious, hassle-free renter (and have an advantage over the competition).

5a. Household contents insurance (Hausratversicherung)

5b. Casualty insurance (Haftpflicht)

Why have all those insurances? Its’ easy: like everything in life, some small things can cause big trouble. Remember that your landlord wants to make money with this investment. An innocent candle could cause a fire, and the water from the fire brigade causes a 250.000 Euro damage. If you are not insured, you will probably have to declare bankruptcy and your landlord as well. But don’t worry, those insurances are both around 100 Euro/year. If you have kids under the age of five, you should tell this explicitly to the insurance broker.

I recommend you have all those documents printed with you while you visit the flat – and have it ready to be blown out digitally by email if asked.

Make it as easy for all involved parties and put all the documents in one PDF file.

I am totally aware of the fact that these documents are not easy to get, especially if you are a foreigner.

However, if you can’t present this documents, it will be very hard for you to find a flat.

Make sure you read the more general text by Joseph Parson “Guide for Moving to Berlin 2014“.
I also enjoyed “A Guide to renting in Berlin” by Marcel Krueger.

And give the Official Berlin Senat “Welcome to Berlin” PDF a try, especially section “Housing in Berlin”.

This post was written by Alexander Korte. I am a Berlin based property developer and investor, I regularly contribute to real estate relevant themes in the international press. Press inquiries via this form, please.

Related posts
How to successfully rent a flat in Berlin, Germany

How to successfully act as a flat buyer in Berlin (not published yet)

How to successfully act as a real estate investor in Berlin (not published yet)

{ 2 comments }

Archived Offer for Berlin Fliegerviertel

Its quite interesting to see real offers in tide markets, especially in areas with very high demand and less to no offers. We posted about the hidden and central pearl of Tempelhof, the so called “Fliegersiedlung”.


View Larger Map

On 16. Feb 2014 I found this immobilienscout24 offer in my inbox:

“Rohjuwel in der Fliegersiedlung *Westausrichtung*”

Askingprice/Kaufpreis: 325.000,00 EUR
Residential space/Wohnfläche: 101,00 m²
rooms/Zimmer: 5,00
plot size/Grundstücksfläche: 200,00 m²
Scout-ID: 73349591
Adress: 12101 Berlin, Tempelhof (Tempelhof), Leonardyweg 20

101 sqm for 5 rooms seems small, but the floor plans are quite good.
However taken into account that this house needs rehab and upgrading 3250 Euro per Sqm, doesn’t seem cheap. But if you want to live in this conservative yet cosy neighborhood, in a house with garden, with its central location, this might be a deal.

The offer mentioned above is not longer available on Immobilienscout 24  (18. Feb 2014).

{ 1 comment }

What you should check while buying a flat in a co-op or condo

Please read this upfront: I am an estate agent and asset manager in Berlin, I sell blocks and apartment buildings to private investors and institutional funds, with an equity base of at least 350k Euro, I cannot help you find a flat, but if you send me an inquiry regarding the purchase of a flat or an apartment (please only trough this from) I will transfer you to honest and good estate agents, whom I know in person and I will supervise the process on the line, nothing more, nothing less. Please understand that I cannot meet you, nor talk to you on the phone, best way, really, really is this form, I will reply fast and ask you additional questions to narrow your search.

How-to-do a proper legal due diligence for a flat purchase in Germany

Rule No. 1: Don’t believe what you don’t have in writing

You need hard facts, and that means copies of the contracts/documents.
If they won’t send you copies go to the owners/property managers office and look at the originals.

Rule No. 2: Talk to the renter

or any other party that you meet in the house, ask them if the ylike to live there, just start talking to them after a minute they will tell you about the bad and ugly, but take into account that most renters complain always. Just listen carefully and see if something really bad comes up, something that yu cannot change, or will affect the rent/fluctuation of renters heavily. It might be enough to walk trough the building with open eyes :-)

Rule No. 3: Talk to the Property Manager

Try to talk to the property manager of the co-op/building in person, and check his flexibility and willingless to talk to you (at all) and in English. Remember if the broker tells you the guy talks English, doesn’t mean he is willing to..

Rule No. 4: Let the legal stuff be checked by somebody who knows how to check legal stuff

The documents should be checked by a lawyer NOT your broker, nor the property manager, the person checking this for you should talk German!

Keep it simple for you and your lawyer

Send all the documents listed below to the lawyer at once and ask him/her to have a preview and give you an appropriate lump-sum fee up front. You should give or at least ask for a timeframe for the procedure.

List of documents needed for legal Due Diligence – English/German version –

These papers should be provided by the broker (or owner or property manager), you find the right German terminus technicus in brakets):
1. the offer (issued normally by the broker/estate agent) (Expose)
2. the 5 or at least the 3 last reports of the meeting of the owners (5 letzten WEG Protokolle)
3. the co-op contract agreement (WEG Satzung / Gemeinschaftsordnung)
4. last annual statement of the whole building (Jahresabrechnung)
5. purachse contract draft (Kaufvertragsentwurf)
6. financial plan for the upcoming year (Wirtschaftsplan)
7. co-op agreement with the property manager (WEG Verwaltervertrag / Verwaltervertrag fuer das Gemeinschaftseigentum)
8. property management contract for the unit to be purchased (not the one in place but the one the property manager offers you) (Hausverwaltervertrag fuer das Sondereigentum)
9. copy of the land register (Grundbuchauszug)
if the property is rented:
10. rental contract with all amendments

Due Diligence – German version – for your disposal

You can copy this German version to send it by email:
1. Expose
2. die 5 letzten WEG Protokolle, zumindest die letzten drei
3. WEG-Satzung bzw. Gemeinschaftsordnung
4. letzte Jahresabrechnung
5. Kaufvertragsentwurf
6. Wirtschaftsplan für das kommende Jahr
7. WEG Verwaltervertrag / Verwaltervertrag fuer das Gemeinschaftseigentum
8. Hausverwaltervertrag fuer das Sondereigentum
9. aktueller Grundbuchauszug
10. Mietvertrag mit allen Nachträgen (wenn vermietet)

My recommendation for a lawyer/law firm

If you need a German speaking Lawyer to check all this for you , here are my recommendations.

1.) WMRC Rechtsanwälte

Chaussestr. 5
10119 Berlin
Tel.: +49-30-2888483-0
Fax: +49-30-2888483-10
E-Mail: info@wmrc.de

2.) Ludwig Braun Domrich Rechtsanwälte

Poststr. 12 D-10178 Berlin
Tel +49-30-2021 555-0
Fax +49-30-2021 555-11
E-Mail: info@lblex.de
The companies are not to big so you talk directly to the right person.

{ 0 comments }