Future of the real estate market in Berlin

I guess you may be right in saying that Berlin has plenty of space for offices etc. The redeveloped Postdamer Platz just down the road was a massive project in itself and provided plenty of new capacity. Add to that all the new blocks around Friedrichstrasse. And Im pleased for Berlin that all this construction has occured, heaven knows they deserve something decent state of the art.

I actually quite liked Erics Lampenladen, couldnt they have just got rid of the asbest and renovated that!

The most sensible proposal I've seen for the Palast der Republik was to convert it into Berlin's central library (Stadtbibliothek), which is currently split into two locations. It could have been done at comparatively little expense and become a useful facility for ordinary Berliners. Too late for that now though...

Probably enough said on this topic already, but surely the whole point about investment is that the greatest opportunities are to be found when markets are depressed? I bought my first house in London in 1993 when everyone told me I was mad to buy a house. I bought it for less than £70k and sold last year for £275k. And that's not even in a fashionable district of London. I wish I'd bought 4 or 5 houses back in 1993 and I would be laughing. So I know the reasons for the low prices in London were different than the current reasons in Berlin, but purely looking at the Berlin market in terms of investment you could probably say that all the bad news is already in the price and the downside is limited, leaving a greater probability of an increase in prices.

I also wish I had bought in Paris 10 years ago when Parisians (like Berliners now) preferred to rent. Then the prices were cheap. Now they prefer to buy and the prices there have rocketed. It would only take a small increase in the number of owner occupiers for prices to start to rise - as it will be the local market that ultimately drives the price up. The recent interest from foreign buyers could be the catalyst that jolts the locals to get interested in buying their flats...

J

If you take a long term view - and I think it would have to be a pretty long term view in Berlin`s case, then perhaps. But the location needs to have strong reasons to rise eg strong growing economy etc. London and Paris are much stronger economic locations than Berlin. And as Keynes said "in the long run we are all dead"!

you made a great investment in the uk. but when it comes to real estate comparisons between countries and even cities w/n countries is like comparing apples to oranges.

the difference between berlin and the cities you've mentioned (london, paris) is that the UK revolves around london, that is its financial center and france revolves around paris (just look at the train grid of france), it is france's financial center. like the u.s., the financial center of germany is in a whole 'nother city. the DAX, etc is located in frankfurt and this is not moving to berlin. such a move would destroy the entire industry of the state of hessen, which depends on it.

if less than 10% of berliners own their own apartment and the city has a 16 - 17% unemployment rate, it would take a miracle to reverse these numbers. also you need a 20% downpayment before a bank will even chat with you about buying property. unlike in some other countries where you can put no money down.

according to friends (mind you, this is not scientific, only opinion), berlin is a city of transients. people come here for a few years to have fun, then they head elsewhere to make real money. most germans dream of retiring somewhere surrounded by nature, not concrete. and if you visit cities like stuttgart or frankfurt or even hamburg, you'll find that most of the people with money, prefer to live outside the city and commute in.

hahah good quote but Keynes also said "It would not be foolish to contemplate the possibility of a far greater progress still"

I was watching Sir Ronald Cohen on Newsnight the other night and he made a stark statement to the effect that 'you can't make significant profit on a low risk investment' which is something we all know to be true. He then said that 'relatively unattractive investments are the ones which make real money when they mature'.

The question is whether Berlin has any possibility of becoming a good place to invest in hindsight. If everyone believed it will then it would likely be very low risk and hence give very low return. Those of us buying in Berlin may lose money. We have to be ready for this possibility. I know I am or I'd leave it safely in the bank. Those of you who believe Berlin is basically a doomed backwater may be right. I don't know for sure.

I think using 'the economy is bad now and unemployment is high' is a poor excuse for thinking there will be little long term economic growth. I come from an area that had horrible unemployment in Canada and you couldn't sell a house and now it has the lowest unemployment rate in the country and real estate prices have boomed. And it's not the economic center of Canada either.

I doubt Berlin will prove to be the stellar investment that London and Paris turned out to be, but it doesn't need to be. It only needs to make a combined return of rent + capital gain (less costs) greater than bank interest rates over a given period and it is a good investment. At current levels it shouldn't be hard to find properties in Berlin that can offer that. You then have an option to benefit from the possibility that if any of the current reasons for the depressed market change for the better (eg. improved employment, new industries, shift of culture from renting to buying) then you are sitting on a much bigger capital gain. With all the bad news already public knowledge, and reflected in the low prices, it could be worth a punt as a pension top-up.

i studied economics. bad economy. high unemployment. anti-speculation laws. extremely low property ownership rate. rental laws.

your're comparing apples to oranges. 2 different countries. 2 different cultures. germans are not breaking down doors to buy property in berlin. it is people from outside of germany. but the overwhelming number of people living in berlin are german and less than 10% of them own their own property. in order for a german citizen or resident to purchase property in this country, he or she would need to put down 20% of the total cost in cash and decide that they will continue living in this city for a minimum of 10 additional years. all of these things have already been pointed out. germans have the highest savings rate in the world. and unlike americans and brits, don't believe in debt. so i don't see any sort of radical change occuring here anytime soon.

Most of my young German friends plan to own property in the future. I think things are already changing. You're forgetting that there's a whole new generation coming of age that has a very different attitude to the ones that currently exist.

Anyway I'm done arguing with you. Clearly you are set in your ways.

Yes, but there was a property boom in Berlin during the 90's, so it's not like it hasn't happened before. OK so the major reason for that boom can't be repeated, but it's certainly possible that Berlin could enjoy an upswing within the next 10 - 15 years, even if only a mild one. As it's now starting from such a low point, any improvement wouldn't have to be dramatic to be reflected positively in property prices.

One of the factors that caused the housing boom in the UK was a relatively lack of supply, and an inability to scale it up to meet demand in places such as London. Is there a shortage, a surplus, or a relative equilibrium in the Berlin housing market? Is it easy to build outside of the city?

I personally think the lack of supply argument in the UK has been exaggerated. It may have some effect, but house prices have gone up by 400% in London in 10 years and the population hasn't increased by anything like the same amount.

I think the major factor in most areas of the UK has been cheap and easy credit. People can easily pay £700,000 + for a 4 bedroom house in the suburbs of London, not because they are very wealthy, but because the banks will lend them crazy multiples of their salary. That is, until very recently.

Berlin sounds like a very desirable place to live, and it is strange how oversupply can easily turn to undersupply (and vice versa) when other factors come together to move a market.

Something like 100,000 vacant apartments within Berlin (it's easy to spot "zu vermieten" signs everywhere - in contrast to say 10 years ago). The surrounding state of Brandenburg has a shrinking population.

There is an undersupply of high-quality Altbau apartments in highly desirable locations though.

agree with that 100%. If you want to make serious money buy an altbau around lake lietzensee. 3 room places are going for 350,000 and up and up and ...

Not really. Population of whole Brandenburg is more or less stagnating, but the population number of the metropole region of Berlin in Brandenburg increased in unbelievable 50% during the last 10 years.

You mean the population of Brandenburg in the area around Berlin (Speckgürtel)? Yes, that certainly has increased (at the expense of the rest of Brandenburg and also of Berlin). The total population of Berlin and Brandenburg hasn't changed much though.

yes, exactly. maybe, buying property in the so called speckgürtel around berlin is more worth the money than in berlin itself...

Let it be said once again: you cannot talk of a "property ladder" in Berlin. That is to say, Berliners are not feverishly continually buying and selling and moving up, unlike in London. They mostly rent and they tend to rent the same property for a comparatively long time. I believe the proportion of tenanted households in Berlin is currently over 80%. If Berlin was a city of 80% owner-occupiers then the prospects would be a lot better for capital growth on property. But it isnt and there`re not. In that sense, its similar to London`s Tower Hamlets borough, which has similar proportions of owner-occupation and tenancy.

Yes but you're missing the whole point. If owner occupation was at 80% in Berlin then the investment opportunity would be long gone.

Does anyone know which are the best local banks to deal with for obtaining a mortgage? What would be the maximum loan to value?

The Volksbank in Budapester str are quite good. I got a LTV of 79% on a recent loan there. Rates fairly good. Got fixed at 4.5% for 10 years (but that was back in Febuary)

Thanks for that. Can you tell us how much you borrowed?

I have 3 loans in total with them. Details are as follows
1. Property bought for €810,000 in August 2005, loan of €640,000 rate of 4.4% fixed for 10 years (capital repayment 3% per year), Rent of €67,000 per year (property 988 m2)
2. Property bought for €1,960,000 in December 2006, loan of €1,500,000 rate of 4.95% fixed for 5 years (capital repayment 2% per year), Rent of €165,000 per year (property 2915 m2)
3. Property bought for €615,000 in March 2007, loan of €440,000 fixed for 10 years (capital repayment 2.4% per year), Rent of €51,000 per year (property 884 m2)

I dont know of any other place where you can buy property at €800 per meter squared and with a yield of 8% and finance costs of 5%.

Thanks for the information. My plans are smaller scale than yours, buying individual apartments in central areas. I was thinking of letting them out to tourists rather than locals. More work but then there are agencies that can handle it.

Do you think your places have increased already? Which areas did you buy in?

galway lad, thanks for listing the numbers - that is very useful info.

my neighbor - who is American & only lives in Berlin a few months in the summer - bought a two room altbau in our courtyard (no balcony, ground floor)

He decorated it with a few snappy pieces from Ikea and now rents it out furnished to tourists and professionals for close to €600 a month.

If you get connected with the right furnished flat agencies you can make good money and have a constant stream of occupants.
l

so €600/month might just cover his mortgage. but what about his monthly fees?

according the the berliner zeitung, there are 156,000 empty apartments in berlin: http://www.berlinonline.de/berliner-zeitun...0013/index.html

yeah - but the article goes on to say that the majority of these empty apartments are "Plattenbaus" from "Marzahn und Hellersdorf .."

I don't think anyone buying property in Berlin would consider a plattenbau in Hellersdorf a good investment. It's a colony of prefabricated concrete slabs. Row after row. No wonder the apartments are standing empty. Before long they may even be torn down.

The article then supports what KofferinBerlin stated above - that even in the most undesirable, rundown areas of berlin (neukölln nord etc) the *altbaus* are NOT empty.

You want a safe bet? get yourself in altbau in a desirable area.
You want to take a risk? Get one in an undesirable area and wait a little bit.

Just stay away from plattenbaus.

http://www.zeit.de/2006/44/Berlin_zeigt_die_rot-rote_Zunge

die zeit.

obviously, if you live in berlin you would know that even combined marzahn and neukoln don't have 150K apartments. read article from berliner morgenpost for more details.

http://www.morgenpost.de/content/2007/06/0...lin/903524.html
beliner morgenpost
'156 000 Wohnungen standen 2006 leer - das sind 8,3 Prozent aller Wohnungen in der Stadt.
Dabei sind nicht nur die Plattenbauten betroffen. Auch in vielen Altbauten sind Wohnungen nicht vermietet'

'"Leerstandsschwerpunkte lassen sich tatsächlich bei Plattenbauten am östlichen Stadtrand und bei unsanierten Altbaubeständen in den Innenbezirken feststellen", sagt Christian Hartwich, Pressereferent in der Investitionsbank Berlin.

Besonders hoch - mehr als acht Prozent - sei der Leerstand von Altbauten in Oberschöneweide, Wedding, Mitte, Neukölln-Nord und am Ostkreuz, sagt Thomas Brand, Referatsleiter "Wohnungspolitik" in der Senatsverwaltung für Stadtentwicklung.'

the article also quotes a real estate company (whom of course will only say positive stuff). like it's hard to find a good apartment in schöneberg, friedrichshain and prenzlauer berg. while a berlin senate representative says '"Sie haben die Auswahl, adäquaten Wohnraum zu finden, und nutzen die Möglichkeit auch sehr bewusst."'

and that is the point of this conversation. in berlin there is a choice. and as long as there is an abundance of choice and rent control, and the local government continues to be controlled by the communists and the socialists, things won't change too dramatically. at it's heart, it is an anti-capitalist city which is what separates it from new york, london, and paris.

but "only" 45% of these flats are empty without a reason. the high number includes flats undergoing renovation, empty flats after tenant change and so on.

Thats an aspect of Berlin that pissed me off when I was there. Advertising for temping agencies (what few temping agencies there are in Berlin compared to London) daubed with "Zeitarbeit ist Sklavenarbeit". The whole Arbeitsamt bureaucracy which moves at the pace of a prehistoric dinosaur. Getting slagged by Germans off for being an IT freelancer and so supposedly a "Scheinselbständiger" and with that an enemy of the Volksgemeinschaft. The place is one big council estate filled with council estate attitudes.

interesting point. it's a different culture. the german constitution guarantees people a minimum standard of living. people pay high taxes so that those less fortunate don't have to suffer in the way they would suffer in countries without social programs. in the 80s, margaret thatcher and ronald reagan expended loads of energy convincing people from their respective countries that poor and/or unemployed people are poor and/or unemployed because they're lazy. while it seems in germany and particularly berlin, people tend to believe it's more because a person is unlucky. and in that way germany has more in common with sweden than the us or the uk.

Yes, people are treated better when unemployed in Germany than they are in UK or US, where it seems its considered almost criminal to be without a job.

But on the other hand quite a lot of people I met in Berlin - and Im talking mainly about Germans here, less so the expats, were very choosy and picky about what they would consider doing for work. Temping? No, because that`s "slavery", even though it might lead to a permanent job. Call centre? No. Won`t do this, won`t do that. Wont even risk starting a business, not even as a freelance one man op. Won`t move to improve their chances - hence my "council estate" label. They`d prefer to sit collecting their not insubstantial Arbeitslosengeld and expect "die Regierung" to "do something"... what I call the Berliner Mentalität. Such people wouldnt last 5 minutes in London.

I think the basics of property investment apply wherever you intend to make a purchase:

1. Choose an area that is popular...location, location, location.
2. Only invest in somewhere that can "wash its own face" as one of the posters above said.
3. Don't invest if you might need your asset in liquid form in the short to medium term.

Of course, Berlin is not a London or a New York. But compare it with the fundamentals.
Property in nice areas of Warsaw costs 2,000 - 3,000 EUR per square metre. The same in Prague and Budapest.
Wages there are at best half of what they are in Eastern Germany.
Economics states that this will sooner or later correct itself. Yes, Berlin is a poor and badly governed city by German standards but it is still the capital of Europe's largest economy.

Think how many Poles will go and work in Berlin as soon as they are allowed to legally work in Germany. And they are canny people. My Polish colleague can't believe how cheap property is in Germany. And he's right...you can buy property within an hour's drive of Frankfurt for 1,000 EUR per square metre if you look hard enough (look at Taunusstein, Bingen am Rhein and Alzey for those interested).

The Germans do not need to suddenly all become homeowners to make it a worthwhile investment. At current prices, as long as rents and capital appreciation rise with inflation, if you pick the right location and have a stable tenant then the rent covers your mortgage repayment and Hausverwaltung costs.

Look at it from the other side of the fence. It is, in my opinion, impossible to LOSE money on Berlin property when decent apartments in some areas cost the same as a 3-Series.

And it is bollocks that you can only borrow 80% LTV. I was approached by a property developer locally asking if I was interested in an apartment in a new development. I went along mainly just to get some free tax and mortgage advice off them. He offered me a mortgage through ING with a 5,000 EUR down payment for a 180,000 EUR apartment. And i've only been in the country for just over a year...so Germans who have a whole life's SCHUFA history must be able to borrow 100% if they earn decent money and are credit worthy.

i agree with you on a couple of points. i think that people should be more flexible when it comes to relocating. --had a german friend a few years back who actually found a job through the arbeitsamt but it was in hamburg. and she told me 'i _can't move to hamburg. i just moved into my new apartment. and went on about the people in hamburg.' she worked in the theatre --where's it's always tough to find work. she passed on the job and fast forward 3 years and she's still unemployed.

there are tons of jobs in southern germany, just say the word baden württemburg to a berliner and that's the end of the conversation. which is funny because schwäbisch people are far friendlier than berliners.

i think expats are flexible because it takes a flexible and somewhat creative person to uproot himself and move to a completely new culture.

i know a guy who grew up in berlin and he said when his father was alive, people were embarassed if they didn't have a job and now the trend is people (in berlin) are embarassed --or treated badly if they have a job.

Yes and I remember when I was unemployed once for a stretch in Berlin, when I found a job, with a small company - one of the famous "Mittelstand" firms (an "SME" in Britspeak), I had acquantances - at least two spring to mind, both Germans, still unemployed, who actually had the gall to look down on me for going to work for what they disparagingly refered to as a "Garagenfirma"!!

Didnt Gate`s Microsoft and Steve Jobs Apple start out as Garagenfirmen in California?!

You encounter some bloody weird attitudes in Berlin. Coming from mad overheated Thatcherite London in the 90s dead-end Berlin was for me a kind of a low cost relief at the time, but these days I just think its pathetic.

My thoughts exactly.

You know, all this stuff about investment really riles me. I am considering moving to Berlin, first because my family is from there and second because it is still a fairly inexpensive city.

I currently live in Florida, and the "investors" have totally ruined it for the rest of us. Prices have gone so sky high, that people cannot afford to pay their property taxes. All this, because of greedy young capitalists who wanted to make a fast buck. I certainly hope the real Berliners, never allow that to happen.

I am a retiree, and old enough to have visited Berlin before the wall came down. I don't know how many of you are old enough to remember that. ( like you Venus from Vancouver--talk of overpriced cities ) I definitely know that most of you are not, simply from your posts much older than the reunited city.

As far as the the lamp shop goes, It served a purpose for the East Berliners. It was a place where they listened to concerts, danced even bowled. It was a place where they could enjoy themselves, in a not so enjoyable city. East Berlin was a drab, depressing place. However, the people somehow made due with what they had. Making a Berlin Disneyland isn't the answer. Heck, it isn't even a real copy. It's only a hollow facade! The Palast could have been refurbished and kept as the one good thing the East left behind.

I love Berlin as it is. Id hate to see it turn into another Frankfurt. It's fine just as it is, and yes I have been there more recently. I thought the new museums were wonderful, as well as how they have refurbished many buildings which were in poor shape. The Sony Center, well it looks nice at night, but otherwise it is just another modern building which won't age well.

Sorry, for going on so long. I will cut this short. Maybe, I will meet some of you in the near future.

Just to get back on to the topic, maybe it's because I live in Leipzig but Berlin isn't that cheap any more. A nice flat in Berlin is much more expensive than it was even a couple of years ago whether you're talking renting or buying. Prenzlauer Berg and Mitte especially are much more expensive to buy a flat than than they were just a couple of years ago. I remember there was loads of flats for less than 100 K when I visited Berlin in 05, now they seem much harder to find. I know the property market here isn't anything like as crazy as the UK, but prices in the liveable parts of Berlin are going up and by German standards quite fast.

I said FASHION, not finance, industry.

The thing I wonder about is the future of the western part of Berlin, particularly Charlottenburg/Wilmersdorf/Grünewald. When I walk around my neighborhood, I pass dozens of empty storefronts. New businesses and cafes come in and fail within 6 months, then stay empty for another year before someone else comes in and fails. It's relatively difficult to find decent residential property, but prices are reasonable overall, at least compared to the overinflated, cookie-cutter renovation projects in Mitte and P-Berg. Is the tony western part of the city atrophying into a has-been? Will the BBI airport kill it off?

rick_de, i think at the moment people are growing more flexible. but in germany if you have too many employers listed on one's CV i think it equals job hopper and businesses may tend to toss these CVs into the bin.

re: the topic at hand:

germany is not paris, poland, the uk, hungary, etc. the country is completely decentralized and everything does not revolve around one city. west germany _never revolved around bonn when the capital was there. for a european country, it is unique in that sense. but there's a reason for this. read your history books.

unique in decentralization/revolving around a capital? what about italy and switzerland?

The fashion industry is definitely moving here. It's actually becoming a great place to work in fashion.

My argument with that has always been that Canada and the US are decentralized as well, especially Canada, and the Canadian economy is VERY strong at the moment. Look at Vancouver. It's not -THE- economic center of Canada, but real estate prices and rents have skyrocketed and there are tons of jobs.
You can't just compare everywhere to London.

The Berlin property scene will be foreign led. People looking for a cheap base and who cannot find rented places, people willing to share a place whilst getting a foot in the door. People who rent out to those not wanting to be officially registered. (the grey rental market)
There is enough cash around waiting to be legalised. As soon as the ruckbau work is complete the number of empty flats will be substantially lower, too many are statistically rentable but really dumps. thus artificially inflating the numbers.
Waiting for the germans to change their ways is senseless, but the banks will soon see money in them hills.
Even my modest self have been offered a chance to buy.

In Western Canada you used to need a minimum down payment for a mortgage and they only changed it a few years ago Things DO change.

i agree that the property scene is foreign led and will most likely continue to be. the average yearly salary in berlin is quite low. and prices are rising rather quickly at the moment. the average berliner can't afford to buy property, let alone pay their heating bills. http://www.spiegel.de/international/german...,521607,00.html

and as for Venus who continuously enjoys making the german/candian comparison. germans are socially on the left and fiscally on the far right. you are in the country of risk adverse people. germans have the highest savings rate in the world. most people don't have credit cars. and people love to pay for everything with cash. while in that other north american country, the u.s. people save in the negative digits:-)

You REALLY don't know anyone under 30 do you?

People change from generation to generation, and my social circle (German friends I mean) are a new generation. There are a few that will probably be lifelong renters, but most have strong aspirations to own property, and many already have credit cards.

Most people don't turn out exactly like their parents and 'Generation Me' is taking over here too. We are a generation that wants it all. and can you blame us?

Well Venus (in furs - real or synthetic?), I do know a number of people - both expats and natives - who`ve bought property in Berlin. I mean, to live in for themselves as owner-occupiers. Some even for 100% cash. Given what are very low prices compared to UK, plus the fact that you get a good standard of property for your money - fully renovated altbau or brand new neubau complete with keller and all the trimmings, its a good deal. They have the satisfaction of knowing they own their own place, only have nebenkosten to pay and no more rent, or in some cases mortgage, and a permanent place to live in.

But the problem that stands out in all of these cases that I personally know, is that each and every one of them has had employment problems in Berlin - continually made redundant, firm going bust, periods of unemployment, having to retrain etc etc, over and over again. They dont want to leave Berlin, and having bought a flat or house and made it their own, I cant say I blame them. If they were still renting it would be different. It costs a great deal to sell up and start again in Germany, moving as an owner-occupier is a lot more protracted and expensive than in UK. So for all that they are more or less stuck in Berlin, job or no job.

I also bought a flat actually, which I will occupy when it is finished (it's new.)

I'm not really a real 'expat' though because I'm a German citizen. I realize that there are employment problems here but the city is changing, especially in certain fields. I, for one, work in fashion and I think it's a great city for that.