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Salary to rent ratio

Where in Germany will the rents be low compared to the average salary?

The housing portal immowelt.de and the job portal StepStone jointly conducted a study to find out what is the ratio of salaries to rents in German cities

In the more popular cities in Germany, a significant portion of the salaries of those living there go to rental payments. In smaller cities, on the other hand, there are differences that enable professionals to choose the optimal ratio between the amount of the salary and the monthly rent. Professionals in Munich will earn an average of € 66,800 gross per year. An apartment of 80-100 square meters will cost them around € 1,500 per month (net rent). Thus, the rent will constitute about 27% of the salary.

The ratio of the two figures is also very similar in Frankfurt. The average salary in the city thanks to the many banks is the highest in Germany and stands at € 67,700. Relative to this wage, residents of Frankfurt can afford to spend only 21% of their total income on rent.

Many want to live in big, popular cities like Berlin, Hamburg and Munich, but not many can afford it. Employers in medium-sized cities can attract professionals with a very high level of training because of the relatively attractive rents.

In this respect, Dortmund is among the best places in Germany. Its half-million residents are forced to part with only 12% of their salary on rent, which is worth about € 580 a month. The city of Essen is also close to this figure with a rent of about € 590 per month, which is equivalent to 13% of the average salary in the city. In other regions, too, there are cities with an attractive rent-salary ratio: in Dresden and Stuttgart salaries are relatively low, but their rents generally do not exceed 19%.

The study is based on 15,100 apartments in the 14 largest cities of Germany. The reference is to gross salary and net rent.

Based on REFIRE Volume 10, Issue 170, July 30th, 2018 p. 12

Posted by Tanya Yujelevski  |  0 Comment  |  in Berlin, Uncategorized @en
real estate in germany

Co-working spaces

An increase in take-up of co-working spaces throughout Germany

The trend of “flexible office spaces” is gaining momentum and is reflected in the seven major cities of Germany

Interestingly, co-working is a fairly new trend in Germany, which was virtually nonexistent in 2016. Today, we see about 360,000 square meters of such offices in Germany’s major office real estate markets. According to experts, in the first three quarters of 2018 the number of flexible offices was 170,000 square meters in the seven major cities of Germany (Berlin, Hamburg, Munich, Düsseldorf, Cologne, Frankfurt and Stuttgart), representing 6% of office areas in that period. Occupancy in Berlin stood at 20,000 square meters, 50,000 square meters in Munich and 43,000 square meters in Frankfurt.

The real difficulty is finding suitable space for renters within the “big 7” boundaries, especially for those looking for an office space of 4,000-10,000 sq.m. When it comes to Berlin, experts believe that if there was more space available occupancy would rise accordingly, since the main problem is availability rather than demand.

The amount of flexible office space has risen by 25% in the last year, which is equivalent to an additional 500,000 sq. m of office space, of which about 75,000 sq. m have been leased in Berlin over the past year, in contrast with 14,000 the year before.

In addition, WeWork is expected to expand its offices in Berlin. Start-ups need spaces of this kind because they cannot predict exactly where they will be in five years. However, demand among established companies remains high as well.

As of now, 1% of the office space in the real estate market of the seven largest cities in Germany is made up of co-working offices, compared with 2% -4% in London, Singapore, San Francisco and Amsterdam’s markets, but more companies are expected to move larger parts their offices for co-working spaces, and even if this number gets to 5%, there will be severe commercialization of vacant spaces of this kind.

“Part of the problem”, experts say, “is the unwillingness of property owners to rent their properties for this specific use, and instead they prefer working directly with companies.”

Posted by Tanya Yujelevski  |  0 Comment  |  in Berlin, general
real estate in german

Investment in kindergartens

An increase in investments in kindergartens in Germany
Investments in kindergartens are gaining momentum as investors try to diversify

Although this market is still considered very “niche”, more and more investors are deciding to invest in kindergartens throughout Germany. According to a senior executive at JLL, this is a natural continuation after investing in real estate such as senior housing and student residences – a trend where investors choose smaller real estate niches.

According to him, municipalities will probably want to sell more kindergartens as long as there is no change in the use of the property.
One of the investors setting his eyes on the kindergarten market is the company Omega Immobilien based in the city of Cologne, Nord Rhine-Westphalia. The Rhineland, which includes the middle and lower Rhine regions, is one of the most densely populated areas in Germany with about 10 million inhabitants. Omega Immobilien focuses on ongoing projects with professional kindergartens as well as existing day care centers. The lease is for a long term of 20 to 30 years and is protected by government agencies.

Already there is a shortage of more than 70,000 day-care centers or kindergartens in Nord Rhine-Westphalia due to rising birth rates and rising demand for places. Municipalities are expected to seek more kindergartens as a result of the legal right to such a place, which makes the project interesting, according to Omega Immobilien.

However, kindergartens are usually sold for between 1 million and 3 million euros, which means they are below the threshold of € 5 million for many institutional investors. “For this reason, retirement homes can be more attractive as an investment because they are larger, and the kindergartens offer equally safe income because local authorities pay part of the rent and have long-term leases.”

Taken from REFIRE – Volume 11, Issue 175, December 20th, 2018

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

Increase in office rents

Experts predict that office rents on the outskirts of Berlin will jump by over 50% in the next five years

Dizzying pace of price increase and lack of availability in the city center force companies to move to the city outskirts

Due to the fact that rents in the center of Berlin are rising at such a rapid pace, coupled with the fact that there is almost no supply for vacant office spaces in the city, it is very difficult to find a space of 6,000-7,000 square meters in the center of Berlin.

It is estimated that over the next few years a shortage of 1.5 million square meters of office real estate will be created in Berlin, and then companies will have to compromise on less central locations, such as Teltow, which has an estimate of 6,000 sq.m of free offices.

In addition to that, the renting prices there are half the amount required in the city center. Rents now stand at 9-10 euros per square meter in an old building, or € 14-16 per meter in new construction.

For the sake of comparison, in the center of Berlin companies will have to pay at least € 28 per square meter, and even in Potsdam, which is a fairly small sub-market, the price will not be less than € 20 per square meter.

Not only are the rent for office space in central Berlin extremely high, they are also constantly rising. In prime locations in the city, such as the Charlottenburg-Wilmersdorf district, rent rose to 32 euros per square meter in the third quarter of 2018, compared to only 21 euros in 2013.

The rise in rents in Berlin is also the highest among other major cities in Germany. While the rise in prices from second to third quarter in 2018 was relatively high and stood at + 1.9% in Hamburg and Düsseldorf, and + 1.3% in Munich and Frankfurt, Berlin led with an impressive increase of + 3.2%.

Another factor that makes Berlin’s outskirts a more desirable place is a relatively low business tax. In Germany this tax consists of a federal tax base and a tax that is imposed by the municipality independently. Thus, in Munich or the center of Berlin this tax will amount to about 30%, while in remote areas such as Teltow, half of the amount can be paid.

The only problem is finding funding: many German lenders will refuse to finance the development of offices outside the city center, even despite price increases.

Posted by Tanya Yujelevski  |  0 Comment  |  in Berlin, Uncategorized @en
השקעות נדלן בגרמניה

Price increase in Berlin

The high demand and rising building costs are causing additional increases in the prices of residential real estate in Berlin

Decline of prices for residential real estate in Berlin does not seem a likely scenario in the near future

The total amount of residential real estate transactions in Berlin doubled between 2008 and 2017 to 4.84 billion euros. Interestingly, what emerges from a recent study is that the number of real estate transactions has shrunk by one-third over the last four years, pointing out the level of price increases and how they contribute to the current market situation.

One of the real estate experts in Germany says that the main reason for such dramatic increases is an increase in construction costs, which caused a 10 percent rise in residential property prices only in the last year.

The demand for housing in Berlin has not risen significantly lately, but even as it has been constant over the last few years, the possibility of solving the problem through a matching supply is only getting farther away from reality. According to official statistics, the cost of building an average apartment rose by 4.6% between August 2017 and August 2018.

This costliness can be explained by the increase in the prices of raw materials – cement, plaster, insulation materials, etc. – prices rose in all cases by no less than 3.7% per year.

In addition, in recent years, many regulations have been introduced in the area of construction and safety: their amount has increased four-fold since 1990. All these factors, in addition to the high demand for housing, cause inevitable price increases.

Berlin’s Senate estimates that by 2030 there will be a shortage of about 194,000 housing units in the city, whereas the CDU, which is not a part of the local Berlin government, is now afraid that in reality the deficit will be closer to a quarter million units.

The party is also demanding that the local government approve more construction on agricultural land, distribute more permits for the construction of taller buildings, and put back on the table the construction at the former Tempelhof airport after Berliners voted against building in the area in the 2014 referendum.

Combination of all the above mentioned factors leads most experts and investors to believe that prices for residential real estate in Berlin are not expected to fall, or, for that matter, even to balance in the foreseeable future.

Posted by Tanya Yujelevski  |  0 Comment  |  in Berlin, Development and growth
דירה להשקעה

Berlin municipality plans to invest 28 billion euros in improving public transport

The Berlin senate has decided to invest an additional budget of 28 billion euros in public transport over the course of the next 15 years

At the end of February 2019, a debate was held in the Berlin senate on the state of public transport in the city, at the end of which a plan was adopted for the next four years, and a decision to invest a budget of just under € 2 billion per year for the next 15 years.

The ruling coalition of the state guarantees transportation that is “cleaner, more attractive, more convenient and more reliable.”

For public transportation users in Berlin these are not solely good news due to the fact that travel costs are expected to rise. The Berlin Transport Company (BVG) expects to raise its revenues by 3 billion euros by 2035, which means that prices of all types of tickets will probably climb up.

The BVG said at this stage that they expect their revenues to increase an average of 3.4% per year. This figure is based on an estimate of a 1.8% increase in ticket prices and an additional 1.4% due to an increase in the number of users.

The changes that are expected to occur include innovations and improvements in the existing subway, tram and bus systems, as well as the addition of new services and lines.

Berlin’s subway is expected to expand significantly. The U5 line will be extended by 2020. In addition, BVG are soon expected announce the extension of the U7 line in the direction of West Berlin, the extension of the U8 line and two additional extensions to facilitate access to the city’s airports: to the new airport from Rudow on U7, and to Tegel from U6.

Berlin’s tram will be the center of reform, because the costs of adding electric railways are significantly lower than the construction of subway lines. Altogether, 16 new construction projects are planned on tram tracks.

Finally, the plan includes, inter alia, a promise to reduce the use of buses running on fossil fuels for the addition of buses running on electricity.

Posted by Tanya Yujelevski  |  0 Comment  |  in Berlin, Development and growth
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Real estate investors in Germany are trapped between two opposing trends

While Berliners are pushing for a referendum to lower rents, investors are in no hurry to leave the market

On the one hand, trends in the global economy indirectly lead to the fact that the annual interest rates remain low and the financing conditions in Germany are very attractive.

On the other hand, due to significant increases in rental prices throughout the country, residents continue to try to apply pressure against large companies that own a considerable number of housing units in order to ease the rent burden.

Recently, it has become increasingly difficult to ignore the atmosphere of a trade war hovering over Washington and Beijing, which has a great impact on the world economy, and Germany is no exception in this respect. In the current situation, many international giants are experiencing new restrictions such as imposing a customs duty of 25%, fearing the immediate future and therefore exercising more caution in other arenas.

This could mean that existing agreements or future transactions will not materialize. It is a matter of time before Germany, as a giant exporter of machinery and industry, will feel the consequences.

Accordingly, many economists are forced to change their prognosis for the coming year for Germany. The stock market in Germany took this into account and for a time real estate stocks experienced a certain decline, but since then they have strengthened and returned to the upward trend. If the ECB had to change its forecasts so abruptly downwards, it probably will not raise interest rates quickly.

In contrast to this positive trend for German real estate investors, there is a trend that is rapidly gaining momentum – the local tenants are unwilling to remain silent in the face of the drastic rise in prices in the real estate market, and therefore call on the government to intervene.

According to them, tools designed to protect consumers in Germany are no longer enough, so waves of protest have recently swept cities such as Berlin, Frankfurt and Munich.

The main call is heard against the huge companies in Germany that hold large amounts of apartments and do not allow the lowering of housing prices, and the request to the government is to return to its ownership apartments from companies that hold more than 3000 housing units. Public unrest in recent months has reached a level where politicians find it difficult to ignore it, which could hurt the giant companies including Deutsche Wohnen, Vonovia and Akelius, whose common market share is 33 billion euros.

Therefore, with the relatively optimistic forecast in the area of interest rates, it must be taken into account that today’s public resistance is well organized and ready to defend its rights.

Posted by Tanya Yujelevski  |  0 Comment  |  in Berlin, Development and growth
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Elderly housing: a real estate market in Germany that hasn’t been fully explored

The population in Germany is growing older. This is due to a combination of factors such as low birth rate and improved medicine that is constantly improving life expectancy.

And while most of the retiring generation is living in their own housing being assisted by family members or professionals, 29% of them (as of 2013) are moving to specialized nursing homes. In addition to that, the socio-economic status of the currently-retiring population creates a previously unexplored demand for more luxurious housing.

The baby boomers generation born in Germany between 1955 and 1969, and it currently constitutes the population segment that drives the demand for better solutions for elderly housing. This generation grew up during the post-war economic expansion and it has been raised on values of individualism and self-reliance, and as a result they are considered to be relatively well off in terms of finances.

Therefore, in case they opt for assisted living facilities instead of an at-home solution, they are able to afford a more luxurious option that is currently quite scarce on the German real estate market.

Investors tend to rely on payments from German insurance companies for building such housing since it is very reliable and easily predicted. When, however, an elderly housing complex offers more services and amenities than required by law, it is up to the customers to pay for those extras and the investors are fearing the risk.

At the same time the demand for such facilities continues to grow, creating a gap in the market that has not been filled yet due to reluctance of both German and international real estate investors. Thus, it might be a good time to keep up with the demand and offer a more varied supply of elderly housing in Germany.

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

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