German House Price on Fire!

Germany’s housing market price rises have been accelerating for several months. In a country where the housing market has historically been extraordinarily stable, this is a significant shift.

The reasons?
Strong economic growth, 1.1 million refugees, high work-related immigration, weak construction supply and low interest rates.

The German housing market was one of the few that avoided a slump in the wake of the 2008-2009 global financial crisis.

German house price changes:

In 2009, the price index fell by 1.9% y-o-y (-2.7% inflation-adjusted).
In 2010, prices bounced back, rising by 3.6% y-o-y (2.2% inflation-adjusted).
In 2011, house prices rose by 4.7% y-o-y (2.7% inflation-adjusted).
In 2012, house prices rose by 4.6% y-o-y (2.5% inflation-adjusted).
In 2013, house prices rose by 3.2% y-o-y (1.8% inflation-adjusted).
In 2014, house prices rose by 3.7% y-o-y (3.5% inflation-adjusted).
In 2015, house prices rose by 5.6% y-o-y (5.3% inflation-adjusted).

Statistics of price rise during the year Q2 2016:

In North-East Germany:

In Berlin apartment prices rose by 7.7% to a median price of €3,036 (US$ 3,301) per square metre (sq. m.). The median price of one- and two-family houses rose by 4.6% y-o-y to €2,104 (US$ 2,287) per sq. m.

Hanover had the strongest y-o-y apartment price hike in Q2 2016, rising by 10.02% to €2,172 (US$ 2,361) per sq. m. However, one- and two-family houses increased by only 1.33% to €1,719 (US$ 1,869) per sq. m.

In Dresden, median apartment prices rose by 1.79% to €1,987 (US$ 2,160) per sq. m., while one- and two-family houses increased by 6.35% to €1,995 (US$ 2,169) per sq. m.

In Hamburg, median apartment prices increased by only 1.41% to €3,480 (US$ 3,783) per sq. m. One- and two-family houses rose by 2.57% to €2,325 (US$ 2,528) per sq. m..

In West Germany:

Dusseldorf had the highest apartment price increase in the region, rising by 7.62% to a median price of €2,261 (US$ 2,458) per sq. m. In contrast, the median price of one- and two-family houses fell by 1.57% to €2,163 (US$ 2,352) per sq. m.

In Cologne, median apartment prices rose by 5.79% to €2,474 (US$ 2,690) per sq. m. One- and two-family houses had a price increase of 1.92% y-o-y to €2,099 (US$ 2,282) per sq. m.

In Dortmund, median apartment prise fell by 3.05% to €1,300 (US$ 1,413) per sq. m. Prices of one- and two-family houses also fell by 1.06% to €1,872 (US$ 2,035) per sq. m.

In South Germany:

Frankfurt had the weakest y-o-y apartment price hike in South Germany, increasing by 3.29% to €2,600 (US$ 2,827) per sq. m. The same is true for its one- and two-family houses, which rose by only 1.44% to €2,219 (US$ 2,413) per sq. m.

Apartments in Munich enjoy the highest y-o-y price hike in the region, increasing by 10.52% to €4,821 (US$ 5,241) per sq. m. One- and two-family houses had a price increase of 5.75% to €3,627 (US$ 3,943) per sq. m.

In Stuttgart, apartment prices rose by 9.07% to a median price of €2,519 (US$ 2,739) per sq. m., while the median price of one- and two-family houses rose by 8.29% to €2,525 (US$ 2,745) per sq. m.

Berlin’s still cheap, but….

Berlin’s rising rents and overstretched supply of living units is a problem that’s not going to go away on its own. While rents in the German capital are still comparatively cheaper to rates one would find in London, Paris or major US cities, Berliners also generally earn less than their counterparts in other world metropolises.
But Berlin is playing catch-up with its global peers –and the current tightness on the rental market is just a symptom of that.
“Since reunification in 1990, and structural problems have existed for a long time, and now the city is transforming into a world-class city,”

Berlin Workers seeking Home away from Home

Short term employment contracts on the rise as Berlin booms
Millenial contract workers seeking home comforts face reduced options since AirBnB ban

An interesting survey was recently conducted by a travel expenses company showing that alternative options for business travel were becoming increasingly popular and that Berlin was the fifth most popular business travel destination across all cities in the UK, France and Germany.

Given that we are in a day of disruptive innovation, it is no surprise that workers, as much as tourists, want to stay in less conventional accommodation or locations when they travel and use platforms such as AirBnB to find them.

It might be for the home comforts of a bedroom, lounge and kitchen or to get a better sense of the area in which they’re staying. It may simply be to save money. Unfortunately for Berlin, these options have been on the decline since the restrictions brought in last year, making it harder for short term contractors looking for a home away from home.

There is a real possibility that the city of Berlin will become the victim of this change. It’s a burgeoning city with falling unemployment, a rising population, strong educational facilities and significant investment into the city’s infrastructure. The tech companies are arriving and booming, new industries are opening up; as a united city it is still in its infancy, but we mustn’t forget that it is a capital city and to fuel its growth it needs to provide flexible solutions to maintain social mobility and give entrepreneurial companies the opportunity to grow.

This means, as much as anything, providing affordable accommodation for short term workers, often drafted in to fill skills gaps for specific projects or corporate objectives. The recent survey made it clear that whilst hotels were still popular, the demand for alternatives from Millenials in particular, is driving a booming market in alternative business accommodation.

Hotels, as much as they try to evolve, still lack basic home comforts. Hotels will forever sit firmly on the side of tourism and short-term travel, not residence, and many young contract workers want to feel as if they are living in the real Berlin, in a comfortable apartment that has been furnished like home, with their own food in the fridge, neighbours to speak to and local amenities to enjoy. If Berlin doesn’t fill the gap in supply for such accommodation, Berlin’s industries will struggle to bring in the talent they need for the time they need it. Six months of living in a hotel is not what many workers want these days, not to mention the exorbitant cost for the company.

Companies like AirBnB have launched into business travel successfully but Berlin’s restrictions are making it harder for the city’s companies to house short term workers. The situation is exacerbated by the fact that many landlords are seemingly unaware of the option available to them to provide short term, furnished accommodation to the city’s workers through alternative means, such as Buy Berlin’s Corporate Furnished Service.

If landlords fully furnish their apartments, they can be rented out to companies seeking fixed, short term rental contracts for their employees. The tenancy agreement is different to your standard tenancy, allowing landlords to have more control over their property and the rental price. It is a highly successful model that benefits all parties involved and is proving particularly popular in city centre districts and those located near to major project hubs, such as the airport.


Buy Berlin Investments is an independent property company that provides turnkey services to global investors, both individual and institutional, who wish to purchase real estate in Germany’s capital city, Berlin.

Established over ten years ago, the company recently expanded into Asia with the opening of its Hong Kong office, providing on the ground customer service in English, German and Chinese.

BuyBerlin supports its clients every step of the way – it seeks the very best properties, assists investors through the intricacies of financing, taxation and German legalities, and provides ongoing asset management in the form of property management, rentals, furnishings and eventual resale.

Real Estate in Germany Growing as Wave of Mergers and Acquisitions Rise

German real estate is seeing a wave of mergers and acquisitions rise with low interest rates offering investors an open window for growth.

Mergers and acquisitions are on the rise in Germany’s real estate segment as industry players look to capitalize on low interest rates and a virtual standstill in property prices. Unlike neighboring countries who are experiencing unsteady growth rates. In a report by Gulf News, Vonivia, the top dog of real estate joined the fray and revealed plans of offering €14 billion or $16 billion for its nemesis Deutsche Wohnen after its failed bid to acquire LEG Immobilien.

Spain Remains Top European Property Investment Target, Germany Second

According to Knight Frank, active investors see Spain as the top investment target in Europe, with Germany following close behind in 2015.

Knight Frank’s recent European poll showed 27% of over 150 investors identified Spain as their preferred investment target for next year, clearly indicating the strength of its recent recovery with values still well below their previous peak.

Humphrey White, Head of Capital Markets at Knight Frank Spain, comments “The fundamental rationale behind investing in Spain is even stronger than this time last year. Prime CBD office rents have risen by 20% over the past 12 months, but remain nearly 40% below the 2008 peak, and both footfall and sales have been increasing in dominant shopping centres for six consecutive quarters.”

Over a quarter (25.4%) of attendees chose Germany as their preferred target.  Results mirror the buoyant investment activity seen in the country, with a total of €30 billion invested in property during H1 2015, an increase of 35% compared to H1 2014.

Joachim von Radecke, Head of German Desk at Knight Frank in London, comments “The increase is driven by the rising flow of foreign capital into the country and the 50% increase of domestic investor activity.  Foreign investors’ share of the German market continues to grow, and now accounts for almost 60% of all transactions in H1 2015.

“We saw the usual trend towards the “big five” markets – Berlin, Frankfurt, Munich, Hamburg and Düsseldorf, with 78% of total office transactions recorded in these cities.”

The UK again featured strongly in this year’s poll, attracting 17.4% of the votes, on the back of the continuing recovery which has now extended to the UK regions.

Chris Bell, Managing Director of Europe at Knight Frank, comments, “The UK is well ahead of the rest of Europe in terms of the property cycle and has already seen significant yield compression.  However, it is encouraging that rental growth is beginning to re-emerge more widely across Europe, helped by the strengthening of occupier demand and the steadily falling availability of good quality space exacerbated by the lack of development over the preceding recessionary years.”

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Rent rises turning investors to German property, says agency

As demand for German property shifts with more renters looking to buy, international investors are also showing more interest in the market, says a top overseas agency.

With rents in Berlin rising 9% in and low purchase options of around €100,000, there is interest from worldwide buy-to-let investment, says Property Frontiers.

“We’re experiencing a real upturn in demand from investors for property in Germany and in particular in the capital. As the Berlin market shifts its focus, international investors are seeing a new and realistic exit strategy open up before them. Combined with the stability of Germany as an investment prospect, Berlin has quickly become one of the most exciting residential property investment destinations in Europe.”

Germany – and in particular Berlin – has been a nation of renters for decades. Just 18% of the city’s residents are owner-occupiers due to the housing subsidy legacy of the old East German government, according to agent, Buy Berlin.

Across the country, ownership remains low, with only around half of Germans owning a home. The only country with a lower home ownership rate in Europe is Switzerland.

A national shift in perspective means increasing numbers of renters are becoming buyers, giving the property market a new lease of life.

Berlin2As the housing market takes on a new dynamic, buy-to-let properties like Stadtpark Steglitz, pictured,  have become increasingly appealing, with the more active market offering a realistic exit strategy says Frontiers’ Ray Withers. Studio, one, two and three bedroom apartments there start from €109,600, with gross yields of up to 5.6%.Rent rises are one of the factors behind the new German interest in buying property. According to Jones Lang LaSalle, rents in Berlin have risen from €5.50 per square metre in 2005 to €9 per square metre in 2014. From 2013 to 2014 alone, rents rose by more than 9%. While Berlin has responded by introducing a rent cap, many tenants have already had their heads turned by the prospect of property ownership.

Continuing low interest rates across Europe and Eurozone-related uncertainties have also caused many Germans to look at buying property, as they seek out the best ways to make their savings work for them in this post-Great Recession world.

Andrew Groom, of JLL, says, “We’re at the start of a re-pricing period of anywhere between two to five years. Prices in Germany have tended to be stable for long periods of time, and have then been driven by bigger macro-economic political events. We’re going through a macro-economic situation now, which is driving Germans back into bricks and mortar.”

Apartment Construction Market Thrives in Berlin

The BUWOG Group, a German-Austrian residential property developer, recently held a topping-out ceremony for its new Uferkrone apartment community in Berlin-Köpenick.

The project comprises a mix of 198 new residential units across 12 buildings located just minutes from Köpenick’s historic old town center at the confluence of rivers Dahme and Spree.

The new community, built on a site of about 207,000 square feet (19,200 square meters), will offer living concepts that cater to a variety of lifestyles—from house-in-house concepts perfect for families, to garden apartments, units with a view of the river Spree, and penthouse apartments. Upon completion, all of these buildings will meet the energy standard KfW 70.

Construction on the project’s initial phase will be complete by next spring. So far, about 65 percent of the units included in the first batch are under contract. The new two- to five-room apartments range from about 538 square feet (50 square meters) to more than 2,150 square feet (200 square meters). Purchase prices average about $371 per square foot (or 3,600 euros per square meter). As for the second phase of construction, more than a third of the apartments have already been sold or reserved.

“With ‘Uferkrone,’ new apartments are being created that the city of Berlin needs. The district of Treptow-Köpenick is a great example of Berlin’s impressive growth, offers an ideal infrastructure and a very high quality of life,” said Alexander Happ, head of Development Germany at the BUWOG Group.

BUWOG Group holds about 5,000 existing apartments in Berlin. The company is currently building several other projects in the capital city. Its total development pipeline here comprises approximately 1,700 residential units, with an investment volume of around $580 million (EUR 530 million). Meanwhile, three other projects in Pankow and Lichtenberg are on the drawing board.

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IREIT Global buys Berlin property for S$217.7m; undertakes rights issue to fund deal

Singapore-listed IREIT Global Tuesday said that it had reached a deal to acquire a property in Berlin for 144.2 million euros (S$217.7 million), marking its first acquisition since its initial public offering.

The property is located in the district of Lichtenberg, and the company said this place had been witnessing a strong growth of both commercial office development and occupancy demand.

The property comprises two fully connected building sections of 8 storeys and 13 storeys, respectively, the company said in a statement.

It is located six kilometres east of Berlin’s city centre and near the Media Spree area, which is popular with internet, media and technology companies.

IREIT said it was was attracted to this property due to the strong principal tenant – Deutsche Rentenversicherung Bund –  a federal pension fund and the largest of the 16 federal pension institutions in Germany, and the opportunity for rental and value growth in this increasingly popular location. The principal tenant DRB occupies 98.8% of this property’s total lettable area on a lease expiring in June 2024 and contributes 99.6% to its gross rental income.

Choo Boon Poh, Chief Financial Officer of IREIT said, “As part of our strategy, we intend to fund the acquisition through a mix of equity and debt. IREIT has announced a rights issue to raise gross proceeds of approximately S$88.7 million. The balance of the funding for the acquisition will be through a bank loan facility, from which it intends to draw down a gross amount of approximately €102.0 million.”

With this acquisition, IREIT’s total portfolio value will increase significantly to €438.0 million (S$661.4 million) from €290.6 million (S$438.8 million).

Regarding its renounceable rights issue, it will offer 189.6 million new units at 46.8 cents, and shareholders will be entitled to subscribe to 45 rights shares for each 100 shares held.

Tong Jinquan, Lim Chap Huat and IREIT Global Management who own a total of about 76.5% of the existing units have demonstrated their commitments by subscribing to their allotment of rights units, the company said.

The REIT closed 0.5 cent higher at 80.5 cents on Monday.

As of 31 March 2015, IREIT Global’s portfolio comprises four freehold properties in Germany valued at approximately €290.6 million (S$438.8 milion). The four properties are located in the key German cities of Bonn, Darmstadt, Münster and Munich with net lettable area of about 121,506 sqm and 2,945 car park spaces.

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Dresden now the city of choice for real estate players

Real estate junkies looking for what’s hot in Germany are increasingly eyeing a city in the east that’s become one of the main successes of reunification: Dresden.

“Munich is too expensive, Hamburg is too expensive, Berlin is getting too expensive, so investors are looking for the next best thing, and that’s Dresden,” said Ronald Fiedler, head of the Engel & Voelkers real estate agency in the city.

Dresden — the capital of the state of Saxony located 200km south of Berlin — is undergoing a real estate boom that picked up steam as German companies expanded following the global financial crisis.

Prices for newly built apartments in the city have gained 47pc in the past five years, outpacing the national average of 30pc and Berlin’s 33pc, according to research firm Bulwiengesa.

The city’s success is a chief reason why Germany chose it to host a meeting of Group of Seven finance ministers and central bank chiefs starting next Wednesday.

Since reunification, the historic centre has been stitched back together around the Church of Our Lady that was rebuilt from a pile of rubble — left from the gutting of the city by Allied bombings at the end of World War II.

The image of the Church of Our Lady looking out across a devestate central Dresden after the city was firebombed towards the end of the war, bu the city has recovered and rebuilt since 1945 and that process then accelerated after the rejuvenation of of Germany in 1991.

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Colossal Nazi holiday camp converted to luxury seaside apartments

With estate agents waxing lyrical about the “smell of the sea, the scent of pines and panoramic views of nature” you could almost be forgiven for forgetting the sinister past of the luxury Baltic seaside apartments at New Prora, which were purpose built for 20,000 members of Adolf Hitler’s Aryan “master race”.

Comprising a single and monstrous five-storey concrete housing block stretching almost three miles along the sand dune and pine-studded coast of the east German island of Rügen, the former Prora holiday camp is one of the longest buildings in Europe. It was designed as the Nazis’ answer to Butlin’s.

Now, 76 years after it was built,  the first full-time tenants are moving in to the so-called “Colossus of Rügen”. After decades of inaction and shame about its Nazi past, the complex is being gradually turned into luxury flats. Fifty-seven have been sold, the lowest priced costing €176,000 for  a small three-room apartment.

The knowledge that the site of his flat was meant to provide “quality time” for the German masses under the Nazi “Strength Through Joy”  recreation programme did not seem to worry its new owner Roland Glöckner.

“It may sound peculiar, but it was love at first sight,” said the 51-year-old Berlin advertising executive after moving in to his 60sq metre flat.

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German property über alles

Is your home your castle or just the place where you live? The British are well known for being a nation of beloved homeowners, but that aspiration rarely comes without chalking up a spot of personal debt in the process.

Embarking on a hefty mortgage for the best part of a person’s working life is likely to cause most people a sleepless night or two. Germans tend to be significantly less focused on the home-ownership goal and are much happier to rent.

According to our research, Germany has an owner-occupation rate of just 44 per cent – the lowest ratio in Europe, after Switzerland. The German residential sector is heavily regulated, meaning that rents are more affordable in comparison to other European countries; in general, housing costs, including heating, represent only 20 per cent to 23 per cent of net household income. Demand is high for rental properties and this is providing good opportunities for investors. Here are a few reasons why we like this sector.

In comparison to other countries, German house prices have shown the lowest levels of growth and volatility over the last 20 years. Although there has been sharp growth in the past three years, this follows a long period where prices were extremely stable. German house prices are currently only 6 per cent higher than they were in 1994, in comparison to the UK where they are three times higher. As a result, good investment opportunities are still relatively easy to find.

Germany has a mature population and it continues to grow. Population growth has accelerated in recent years – with net migration of 400,000 people in 2013 alone – as strong economic growth has encouraged immigration from other parts of Europe. At the same time, the German population is becoming increasingly urbanised, with the major cities growing much faster than the national average. Berlin, for example, has had positive net migration of 200,000 people (100,000 households) since 2005, while only 40,000 new homes have been built over that period.

German households have benefited from the country’s strong economic position: unemployment was just 6.3 per cent in October 2014 and the workforce is at an all-time high. Net salaries have been growing as a result. Attitudes towards debt, meanwhile, remain very conservative. German households have some of the lowest debt levels in Europe at just 160 per cent of gross domestic product – the UK is 204 per cent, the Netherlands is 252 per cent and Sweden is 295 per cent. And while Germans are not keen on taking on big mortgages, they also have much more limited access to finance. The prevalence of loans available to low-income families or high loan-to-value mortgages remains limited, and buy-to-let levels are negligible in comparison to the UK, for example. We believe that these limitations have helped prevent the strong speculative appreciation in prices that we have seen in other countries.

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