Residential buildings in Berlin.

As impressive as the real estate boom in Berlin is: for owners of tenements or apartment houses in the German capital, the currently excellent development is an overdue compensation for years of restraint, weak returns and rising costs with stagnant rental incomes.

Dear owner of a Berlin tenement house.

For years, the population development in Berlin has been underestimated. New housing construction was neglected and until the previous legislative period, the state even separated itself from municipal housing stock. More than 200,000 homes have been lost to the country in this way. Instead of fulfilling its core task of building affordable housing or promoting it more strongly, Berlin is now responding to rising rents with a flood of regulatory measures.

As the owner of a Berlin apartment building, you are directly affected by this, especially if your property is in a milieu-protected environment. The Senate and District will intervene directly in your property rights. Construction projects or modernization are subject to approval as well as the allocation. In principle, potentially tenant-raising measures are only approved if you enter into an urban development contract with the district authority, which is associated with major economic disadvantages for you.

Guthmann & Guthmann Immobilien GmbH is at your side if you would like information and advice on how to deal with your property and the consequences resulting from environmental protection areas. Since 2006, we have been advising owners in both long-term partnerships and sales.
The state legislature uses conservation statutes as the sharpest instrument against rising rents and prices. With Paragraph 172 of the Building Code at its back, the city submits quarters for quarters to the protection of the environment. What happens after that is expropriation. Because it's no longer you as the owner who is in charge, but the authority.

Adjustment of the capping limits, extension of protection against dismissal in the event of conversion, prohibition of alienation from the intended purpose, rental price brake and environmental protection statutes. What's next?

In the current situation, it is important to be informed as a foreign owner or landlord and not to play a passive role.

We hope you enjoy reading our market report for tenements in Berlin.

Yours sincerely
Peter Guthmann

While repayments, interest, maintenance costs, administration fees and new energy standards had to be beared also in bad times, the rents underperformed for a long period.

The demand situation has now turned in favor of the owners of tenements in Berlin offereimg them the chance to compensate lossy periods. If you as an owner are now facing a sales decision, you should consult with us. As experienced Berlin real estate brokers as well as property owners we know the market and give valuable impulses. Our team has been involved in investment real estate in Berlin for more than 10 years.

If the sale decision has already been done and you are now seeking for the best marketing partner for you, you should look for the conversation with us. Selling your tenement in Berlin might be the most important - and final - commitment related to your property. At the same it is the last opportunity to maximize revenues. With us at your side you can rest assured that the real and full potential of your property will carry the highest yield possible. We are internationally connected and enjoy an excellent reputation. Our clients confirm us best possible results.

The following, summarized report gives you a brief overview of the current market situation. Please contact us for further advice on the sale of your apartment house in Berlin. We can also carry out the preliminary check of a potential transaction in the form of due diligence.

We look forward to your call.

Internationally competitive prices

Despite very strong catch-up effects in the past few years, the house market in Berlin remains in the focus of investment strategies. In the comparison of national and international metropolises, the squarmeter prices for residential buildings are far above the Berlin level. Beside an enormous space for further price development of, the demand is being driven by the persistently low interest rate level and by the positive demographical situation in Berlin. Currently, the demand for housing in Berlin can not be covered despite an extremely high building activity.

The top perspectives for the Berlin real estate market attracts many high-capital investors from abroad. In 2016 more than half of our sales in our company were realized with foreign customers.

Location is losing importance

The location as most important criterion is currently losing importance. In times of rising prices, investors need to focus more on the potential for value increase than on safety through classic locations. Locations in Berlin are classified in six groups as shown below:

Tenement market Berlin. Less sales with rising prices

In its provisional market analysis for 2016, the Berlin Advisory Committee (Berliner Gutachterausschuss) sets slightly declining sales figures and cash flow with considerable price rises in the submarkets for purely residential tenements and residential/commercial buildings. In 2016 only the market for office and commercial properties suffered a decline in turnover and price development according to the Committee.

Based on the figures of the report, a price increase of about 20.2 percent can be stated from 2015 to 2016. Residential/commercial properties increased by almost 48 percent in the same period. Transactions in the submarket for office and commercial buildings in Berlin were notarized with approx. 16 percent lower square meter prices than 2015.

According to the IVD housing market report for 2015/2016 (IVD-Zinshausmarktbericht für 2015/2016), rented residential properties continue to be the "most popular form of investment in the real estate sector" and Berlin remains the largest market for rental buildings in Germany.

  Transaction 2015 Transaction 2016 +/- Sales volume million € 2015 Sales volume million € 2016 +/- EUR/m² 2015 EUR/m² 2016 +/-
Residential 571 510 -11% 1699 1398 -18% 1554 1869 20%
Residential/Commercial 547 567 4% 2458 2566 4% 2288 3381 47%
Office/Commercial 268 197 -26% 3918 2224 -43% 2155 1811 -16%

Squaremeter prices more important than factors

While domestic buyers are beginning to suffer from the increasing price pressure on the building market in Berlin, international buyers bet more on the future development of the square meter prices. In global but at least in European contexts, the prices for tenement houses in Berlin are still extremely moderate. Historically low interest rates and banks which are increasingly turning back torwards international customers, are also pushing the house market in Berlin.

The increasing decoupling of the square meter prices from rents leads to stronger equity requirements. This leaves most international investors unaffected, but is an increasing problem for local buyers.

Increasing population, lowest vacancy rates

The high population growth forecast for Berlin until at least 2030 and the fact that the vacancy rate in the German capital is practically zero is an excellent basis for low-risk, medium- and long-term commitments. The desire to park financial resources in the safe harbor of Berlin is confirmed by the shift from buy-and-sell strategies to buy-and-hold. Most international market participants expect long-term growth in Berlin and further rising square meter prices despite an ongoing regulation on the Berlin housing market.

The Senate tries to counteract the speculation

The currently very dynamic market situation for tenements in Berlin is viewed with suspicion by the government in Berlin. The Senate´s reaction is a policy that tries to control as far as possible the speculation. A series of effective housing market policy regulation measures has been introduced in the last years. Among other measurements, in the new construction sub-sector the quota for rent-controled units and for occupancy obligations were increased. Investors of larger projects have contribute in the costs for the social and technical infrastructure in the environment if these are a prerequisite or a consequence of housing project.

The extension of milieu-protection areas and the so called „rent-price brake“ (Mietpreisbremse) concerns the sub-sector for existing buildings. In „conservation areas“, the auhorities have been enabled to disagree with the division of tenements into owner communities, unless the owner agrees with an urban development contract with the authority. Usually he hast o commits himself to grant the pre-emptive right to tenants for a period of 7 years starting with the formal partition.

Whether the regulatory mechanisms of the Senate will lead to a rapid easing in the tense market environment can not be said so far, since many buyers of rented houses do not have a rapid resale quick profit-taking in mind. In fact, most investors are looking for ways to safely secure money in view of missing or unattractive investment options on the capital markets.

To sell or not to sell – that´s the question

Real estate investments are currently the only answer to the persistently low interest rates on the money markets. This applies to small investors as well as to international and/or institutional investors. When it comes to make a sale decision, owners have to answer a couple of important questions.

- What does the seller do with the money?

- How is ratio from alternative investment types to the house's current yield?

- How would the value of the house develop in the future?

One and two can be answered relatively safely with snapshots taken on the markets. How the value of the house will evolve in the future can be cautiously judged based on experienced values and known real estate cycles, but never doubt-free.

Highest revenues and safe sales processes

In principle, we do not recommend marketing without professional support. Some very important points speak for us as experienced and most professional brokers. If you decide to commission us with the brokerage of your residential building in Berlin

  • we achieve the best possible result for you. Our customers confirm that our agency negotiates purchase prices, which are well above the market average - even in the current high price phase.
  • We have years of competence and an excellent reputation.
  • We have a very large internal customer base with clients coming from Germany and abroad, with proven creditworthiness.
  • We recognize hidden potentials and transform them into revenues

2017: Focus on international investors

With the increasing decoupling of the square meter prices from the rent development, the sales of rental houses in Berlin is particularly interesting for foreign buyer markets in 2017. For these investors, tenements in Berlin offer an excellent potential for further value development. Many investors have high money reserves available.

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