Author Archives Tanya Yujelevski

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Real estate in Germany – Current situation isnt a housing crisis

The reasons why you can’t call the current situation in Germany “housing crisis”

While there is a shortage of supply, it does not equate to a crisis in residential housing

Dr. Gunter Vornholz of the School of Business publishes a report on real estate in Germany, stating that the current situation is not the same to what we are used to consider a crisis. In this report he compares the situation in residential real estate immediately after the war – a real crisis – and the situation today, and its conclusion is that we should not be alarmed by the headlines in the newspapers, but understand that the situation is driven by the reality of the market.

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Real estate in Germany

Real estate in Germany – decrease in sales volume of healthcare

A shortage of assets in the healthcare market in Germany leads to a decline in the volume of transactions

The decline represents 52% in the first half of 2019 compared to last year

Lack of large-volume deals is the main reason for this figure, according to experts from the brokerage firm CBRE. While many investors are looking to invest in real estate designed for health care, the market is suffering from a shortage of supply.

However, some momentum can be seen beyond the sales of a large portfolios. In those years without large transactions, the current volume of transactions this year would have been the volume of the entire year. The lack of major deals is felt in the proportion of transactions made by international investors, which fell by 31 percentage points to 53%. International investors tend to be more interested in large portfolio transactions.

Yields for nursing homes remain unchanged compared to the first quarter, standing at 4.75%. Thus, yields in the healthcare market are higher than those offered by office real estate, with yields barely exceeding 3%. However, this figure should also decrease in healthcare real estate.

Despite the high demand, especially from international investors, large portfolio transactions are not expected in the second half of 2019. Experts expect the total volume of transactions in this area in Germany to reach around € 1.25-1.5 billion this year.

One company that has invested heavily in the industry is a Belgian healthcare company called REIT Aedifica, which recently signed another € 20 million deal. In addition, the company previously purchased a health care complex in the state of Saxony and built another campus in the town of Schwerin in northern Germany at a cost of 12 million euros.

Posted by Tanya Yujelevski  |  0 Comment  |  in Berlin, Development and growth, general, Uncategorized @en
Real estate in Berlin

Real estate in Berlin – office space shortage

Lack of office space in Berlin is pushing rents up

Real-estate investors who are aware of the low yields, see nonetheless the potential for sharp increases in value

Every company that has recently searched for office space in the German capital is aware of the dismal state of supply in the market today. Supply has shrunk drastically over the past two years. Today’s situation is radically different from that of five years ago, when plenty of attractive offers in prime locations in Berlin could be found, which attracted a large number of established companies and young start-ups.

The lack of office space in Berlin means that investors from all over the world are interested in this market in the city. In the first half of this year, foreign real estate investment in Berlin rose by 160% inspired by Berlin’s long-term growth potential. In general, Berlin experienced a rise in foreign capital invested in it in the first half of 2019, with 70% of the total of $ 5 billion coming from outside of Germany. A real estate expert from a local real estate company JLL says it is a sign of global capital looking toward Berlin while believing in its future growth in the coming years.

The percentage of vacant office real estate in the city currently stands at only 1%, and while there is currently 900,000 square meters of new office space to be built by the end of 2020, half of this space has already been rented out. Rents have risen from € 22 to € 35 per square meter from 2013, and experts expect another 10% increase in the coming years.

Since the beginning of this year a private equity group invested € 116 million in an office project in Kreuzberg, Berlin; Google bought an office in the city center for self-use, and several large and influential companies chose to invest in office real estate in the city. All of them are attracted to the sector and believe in its future development, despite the plummeting yields. However, due to the diminishing supply, investors are forced to look for new properties in more remote locations, less central than Mitte or Kreuzberg: reality pushes them to areas such as Spandau and Adlersdorf. But investors focus on the long-term perspective and realize that with population growth in Berlin, these areas will soon become just as desirable.

Posted by Tanya Yujelevski  |  0 Comment  |  in Berlin, Investing in the city
Real estate in Germany

Real estate in Germany – Residential prices rise

The German Office of Statistics publishes fresh data: prices of apartments and private homes are on the rise

Supply is insufficient, and interest rates have never been lower

The German National Bureau of Statistics released fresh data last week, confirming the fact that German housing prices continue to rise in the periphery, similarly to the major cities. On average, the increase in prices across Germany was 5% compared to the same period last year. In the “Big 7” the prices of apartments rose by 8.6%, and of private homes by 6.9%. These figures for peripheral areas were 1.7% and 4.5%, respectively. According to the data, prices have increased by an average of 22% since 2015, with prices in major cities rising by 41% for apartments and 36% for homes. In less central areas, figures stand at + 21.4% for homes and + 16% for apartments.

High demand from both private and institutional investors is pushing the prices up. Ernst & Young conducted a survey showing that many insurance companies purchase mostly office real estate, but also residential real estate, and 70% of companies that participated in the survey plan to continue this trend. Investments in shares, as compared to real estate, are considered to be a higher risk.

Experts from Europace say prices are rising because supply is simply unable to meet demand, but this is not the only parameter. In addition, an increase in income and favorable financing conditions contribute to the significant increase. In analyzing the data, it can be seen that in practice, it is only in Munich that buyers will have to spend more of their monthly income to finance their real estate: this is due to higher income levels and significantly lower interest rates than in the past.

In addition, the amount of building permits that the state grants does not satisfy the demand. This year, the number of permits distributed decreased compared with last year. This is in addition to the estimate that the gap between the amount of permits that corresponded to the level of demand compared to the actually distributed permits is about 100,000.

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real estae brokers in berlin

Real estate in Berlin – Metropolitan area of Berlin

Berlin‘s suburbs in development, rental growth

Many choose to live outside of Berlin and commute every day for work, causing increase in rents

About a million people live in the metropolitan area of Berlin. The level of prices and rents in these areas is determined by their geographical location, size and overall attractiveness. In the metropolitan area of ​​Berlin there are about 55 towns, 35 of which are more distant, 19 are closer to the capital and Potsdam is the largest city outside of Berlin. For comparison, in the last three quarters of 2018, the median rent in Potsdam was € 9.86 per square meter, the number being just € 0.48 lower for a comparable property in Berlin.

In about twelve other picturesque places surrounding Berlin, the rent is € 9.00-9.99 per square meter. These are towns such as Birkenwerder, Stahnsdorf and Teltow with a green and quiet environment and a pleasant scenery. A short gap with median rent of € 8.00-8.50 per square meter can be found in Oranienburg and its peaceful surroundings.

Places with rent of € 7.00-7.99 per square meter are usually smaller towns with a population of slightly more than 20,000 people, which are farther away from Berlin. This category includes places like Ludwigsfelde, Hennigsdorf and Strausberg. While they are all well connected to Berlin by train, their commute from the city center will take between half an hour and an hour.

In terms of price increases, Berlin’s suburbs have been following trends in the big city: in the past five years rents have risen in double-digit numbers as well as real estate prices in these areas. This is especially true of private homes and duplexes: purchase prices for these properties have crossed the border of € 4,000 per square meter.

With the rise in demand for housing in Berlin, so does the towns surrounding Berlin. And the more difficult it is to find an apartment outside of Berlin’s center, the higher is the out-of-town migration. This causes rents increases, increases in value and growth in new construction in the area.

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invest in apartments

Real estate in Germany – Rent differences in center and outskirts

Gaps in rents in central Berlin and the city’s margins

Berlin’s historic center is the most expensive, but other neighborhoods continue to come close in price

Officially Berlin is divided into 12 major neighborhoods, but the real estate reality is much more complex. We have collected data on the demand for rents in the 190 postal codes of Berlin according to which the current situation in the city can be better understood.

At first glance, the picture is clear: 9 of the ten most expensive rental areas are located in the historic center of Berlin, Mitte. However, much of the new construction in the city is being built in other neighborhoods (for example, just north of the main station – in the Wedding and Moabit neighborhoods), while there are many old buildings in Mitte where people with very low purchasing power live. New construction is one of the main drivers of rise in rents: in areas with new construction, until 2015 asking rent was under 10 euros per square meter, and by 2018 it rose to an unprecedented rate of 15 euros per square meter and above.

The only area in the top ten in terms of rental levels that is outside of Mitte is the neighborhood around Lugwigkirchplatz in Wilmersdorf (postcode 10719), south of the famous Ku’damm Avenue. Other neighborhoods with a high rent of € 13-14 per square meter are the popular Kreuzberg-Friedrichshain neighborhood, Prenzlauer Berg and the Grunewald villas area in the west of the city.

Not far behind are the Charlottenburg-Wilmersdorf, north of Neukölln and Schöneberg neighborhoods. 42 additional zip codes make up the largest share of the city areas in terms of rent, where it stands at € 9.00-9.99 per square meter. The unifying feature of all these areas is the relatively big distance from the city center. There are only six zip codes in the lowest category of asking rents today with a rental price below € 7 per square meter.

Purchasing power is not uniform in all areas considered relatively expensive in terms of rent. For example, you will find households with high purchasing power in Mitte, Charlottenburg-Wilmersdorf and in Prenzlauer Berg – meaning people living in these areas can afford to pay the high rent and still have a good balance for extra expenses. Households with lower purchasing power but high rents are mainly located in the Kreuzberg-Friedrichshain and Neukölln neighbourhood.

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invest in berlin

Real estate in Berlin – Trends in construction

New construction of residential real estate in Berlin: trends of 2019
An increase in new construction projects in all parts of Berlin

As of this moment, there are 286 projects already in various stages of construction or in advanced planning stages of new construction in all 12 districts of Berlin. Almost 43.000 apartments are expected to be built in these projects.

Despite the issues such as the difficulty in obtaining a building permit and a significant increase in construction costs, construction in Berlin does not stop for a moment. Recently, a clear trend of expansion of new construction projects in the city has been seen geographically: a lot of new projects are also being built in the areas outside of the Berlin Ring.

As demand for housing in Berlin rises and prices in central regions increase accordingly, more and more people choose to leave to the more remote parts of the city. For example, the Lichtenberg district is in second place in terms of the number of residential units expected to be built (6,000).

This is not to say that the Berliners are neglecting the center: about 9,000 real estate units are expected to be built in Mitte where more than half of them are built especially for rental. The TempelhofSchöneberg district, which is partly in the city center, is also developing rapidly. The emphasis here is on small to medium sized projects with less than 100 apartments each, and the main building is focused at the sub-district of Friedenau.

The pace of new construction in Friedrichshain – Kreuzberg is not particularly impressive, but at the same time, housing prices continue to climb upwards, with some prices only starting at € 5,000 per square meter.

In the northern part of the district of Neukölln, too, a lot of construction is planned: about 2400 apartments in 14 projects in the district are under construction or advanced planning – a significant increase compared to previous years. However, most of the construction will take place in the north of Neukölln with few projects south of the Stadtautobahn road.

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Real estate in Germany

Real estate in Germany – Trends in real estate prices Berlin

The various trends in real estate prices in Berlin 2019
Real estate prices in Berlin have been rising steadily and fast, but not uniformly

Housing in Berlin is still considered cheaper than this of the bighest cities in Germany such as Düsseldorf, Munich and Hamburg – but prices are rising at a dizzying pace. Even though the level of unemployment in the city is relatively high, the positive migration and the lack of new construction are forcing Berliners to spend more and more on the living within the city.
Significant increases were recorded last year in the city’s most expensive segment (a 7.1% increase to rent of € 17.13 per square meter), as well as in the cheapest segment (up 4.7% to € 6.46 per sq.m.).

As expected, the geographical location of the property in the city still plays an important role and greatly affects the asked rents. The three inner districts of Berlin, Friedrichshain-Kreuzberg, Mitte and Charlottenburg-Wilmersdorf (in this order) are at the top.

In terms of the percentage of year-on-year rent increases, Friedrichshain-Kreuzberg is at the top, while in terms of price per square meter, Mitte bypassed the other districts with prices that pass the 20 euros per square meter.

In terms of real estate purchase prices in Berlin, similar trends were recorded: in the Mitte district, the median price first passed the price of € 5,000 per square meter. Not far behind, prices in the Charlottenburg-Wilmersdorf district now stand at 4,873 euros per square meter, and even in the cheapest housing the city is now difficult to find housing cheaper than 2,000 euros per square meter.

Only in neighborhoods farther from the city center, one can still (rarely) find real estate with price that does not exceed the 2,000 eur/m2 limit. Prices in the Neukölln district, which is partly located within the city center, rose relatively slowly with an average increase of 2.6%.

Only in the most distant districts of the center of Berlin – Marzahn-Hellersdorf and Spandau, located in the most eastern and western parts of Berlin respectively – there was a drop in prices, albeit quite small (-0.8% in 2019 compared to 2018).

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Real estate in Germany

Real estate in Germany – Grundsteuer

Changes in German real estate tax laws?

The German government is considering a new land tax law

According to the new law, the land taxes (Grundsteuer) that is being paid in Germany every quarter will be calculated based on a combination of the following parameters: artificial rental income, value of the land based on data from the municipality, and the age of the building. The proposal of this method caused mixed reactions throughout Germany.

It is a problematic issue, partly due to the fact that municipalities benefit from income from land taxes, but it is the government at the federal level that determines the binding laws.

Both the owners and the tenants pay land tax on real estate in Germany, and both groups will be affected by it: the owners pay directly to the municipality, while the tenants pay the amount as part of the additional payments to the basic rent, the Nebenkosten.

On the one hand, the proposed method of calculation of Grundsteuer is logical because all the data are related and dependent on each other. On the other hand, there are a number of problems with it.

First, the value of land in East Germany is based on data from 1935, and on data from 1964 in the West. In addition, the importance of several areas in Germany has changed in terms of real estate, such as the Bavarian region.

Secondly, the new process will involve a huge and full-time labor force. The mayor of Düsseldorf in Nord Rhine Westphalia objects to the move and says the land tax should be based on the value of the land alone, and the proposed method is a plot to create jobs for employees in the tax system. It is estimated that at least 2,500 new full-time employees will be required to renew the tax value, and from the moment the law is passed, it might take longer than two years until new prices are implemented.

Many in real estate in Germany is almost certain that the law will pass by the summer, even though the arguments on the issue will not cease to exist. But if the law does not pass, there is a danger that the land tax will stop to exist, which will seriously damage the municipalities in Germany. The move will require a lot of effort and time, but it is likely that it will lay the foundation on which the land tax in Germany will now be calculated.

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shopping centres

Shopping centers as a solution to the shortage of office space

As malls are emptying of customers and retailers are abandoning stores, the space that is quickly being perceived by the spaces of co-marketing and start-up offices

The shopping center Forum Steglitz is one of Berlin’s most famous malls, located in the southwest of the city. It has been a center of attraction for many customers for decades – the forum was built in the 1970s on Schlossstr., a main street with three shopping centers and countless other retailers alongside it. A decade ago Forum Steglitz was purchased by Europa Capital, and after upgrading its occupancy from 80% to 99%, it was sold to Real I.S. in 2013. The acquiring company expected high, safe and long-term yields due to the constant flow of customers to the stores and the dining area offered by the mall, but the reality did not match the optimistic plan.

Whether it’s due to preference for online shopping or the passivity of retailers trying to fit into the digital age, the shops are slowly being abandoned. As successful as they may be, food courts cannot save the situation on their own. Within a few short years the world has become completely different for retailers, and the days when they could sign a ten-year lease with full confidence have already passed.

It seems that the directors of Forum Steglitz were also exposed to the sad reality, which led them to declare recently that the concept of the place will change. For example, the Lidl department store will be replaced by its more prestigious competitor, Edeka, and from 2020 on the second and third floors of the complex will be occupied by offices and co-working spaces.
Similarly, a huge shopping center that opened in Frankfurt a decade ago has never been able to rent out its entire territory and is now looking for tenants from a different field – the flexible office space that is replacing the retailers.

The trend is clear – a sharp shortage of office real estate in Germany, and Berlin in particular, pushing companies into an area that was not natural for them until now, and gaining momentum. The combination of office space and retailers can prove to be a successful symbiosis and thus solve both problems at once.

Posted by Tanya Yujelevski  |  0 Comment  |  in Berlin

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