German Real Estate News

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1 16-18 Volume XIII, Issue 16, Date of Publication: COMMENT New Strategy for Empty Apartments Stuart Metzler PB3C IMMOBILIEN ZEITUNG recently devoted extensive coverage to the variety of approaches adopted by municipal authorities as they try to cut the number of apartments left unoccupied. Hamburg has appointed a trustee to refurbish and subsequently find tenants for six apartments that had been unlet for an extended period of time. As soon as the trustee has completed these measures, control of the apartments will return to their owner, who will have to bear the costs of the compulsory refurbishment. Sections 12 and 12a of Hamburg s Housing Protection Act (HmbWoSchG) provide the legal basis for this procedure, which is being used for the very first time in this instance. There are currently approximately 5,000 vacant apartments in Hamburg and the city s approach has clearly motivated other metropolitan authorities to follow the city s lead. Berlin s red-red-green state government is currently examining the feasibility of using Hamburg s trustee model in Berlin. Authorities in Munich have called on their citizens to anonymously report any unoccupied apartments. At the start of the year, there were between 34,000 and 44,000 vacant apartments in Berlin. There are a whole host of reasons for apartments standing empty for lengthy periods. These reasons include property speculation, but it is often simply the case that many private property owners cannot cope with organising refurbishment or

2 modernisation works, or manage the reletting of their apartments. Many owners fear that the costs involved will be too high, or there may be disputes between heirs who inherit apartments or apartment buildings. The fact that large numbers of apartment buildings remain unoccupied for lengthy periods is partly because municipal authorities, including Berlin s Senate, have so far failed to take appropriate action. Carsten Brückner, from Haus & Grund Berlin, complained that authorities threaten to confiscate apartments rather than simply offering competent advice. There are so many regulations that many of the private landlords who own 66 percent of Germany s rental housing stock don t dare to let the apartments they own. Michael Voigtländer from the Cologne Institute of Economic Research (IW) has suggested that the current property transfer tax should be replaced by a land value tax, which could also be levied against the value of undeveloped land. He categorised the current debate surrounding vacant apartments as nothing more than a side issue and cautioned that tougher approaches and harsher sanctions will do little to solve the current housing shortage. Do you have any questions? Feel free to get in touch with editor Stuart Metzler Metzler@pb3c.com

3 MARKET NEWS Germany's largest project developer According to this year's bulwiengesa project development study, the three largest project developers in Germany are the Zech Group, Bonava and the CG Group, measured by the respective development volume in the A cities. This is what the IMMOBILIEN ZEITUNG wrote on The most important reason for their success had been the good employees and business partners of all three companies. People are proud and pleased about the award, says Andreas Fohrenkamp of Bonava. Although size is not an end in itself, the resulting degree of awareness helps to find well-trained employees. Reputation and downto-earthness are crucial, Fohrenkamp emphasized: "Words and deeds must match" Among the rising stars in the seven A cities are Pandion and the Groth Group, among others. CA Immo and ECE, among others, are no longer in the top 10, although this is usually not due to a decline in business activity, but to a reorientation in the field of activity. CA Immo, for example, which took second place in last year's ranking, was so far behind this time because the company had started to retain part of its projects in its portfolio, so that CA Immo now appears less as a developer than as a portfolio holder. Price increases continue The BÖRSEN ZEITUNG on July 18 and the IMMOBILIEN ZEITUNG on July 19 report that, according to LBBW Research, the price increase on the German real estate market will continue, albeit at a somewhat slower pace. Prices on the market as a whole had risen by an average of around 8% in In terms of asset classes, residential properties increased by 8.3% and commercial properties by 7%. In a European comparison, this is a moderate increase, and there is still room for improvement. In Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart we could speak of overvaluation, but not of a price bubble, because other key figures are below average and above all credit growth, at 4.7%, is currently well below the long-term average since January The BÖRSEN ZEITUNG gives figures from the Association of German Pfandbrief Banks on the price increases, especially for residential real estate. These would have increased on average by 15.6% in Berlin from the end of 2016 to the end of 2017, followed by Frankfurt/Main with 12.5%, Hamburg with 11.4%, Stuttgart with 11.3% and Cologne with 10.8%. The basis of these calculations were actually concluded purchase contracts.

4 Number of energy-related renovations declines According to the Dachverband Deutscher Immobilienverwalter (DDIV), the number of energy-related renovations is falling, writes the SÜDDEUTSCHE ZEITUNG on In the annual survey, only about one in three respondents stated that they had accompanied energy-related renovations in 2017, compared with 44% in Because the size of an administration obviously plays an important role, it can be assumed that small and mediumsized administrations with their limited staffing levels are overtaxed in the long term by the time and technical expenditure of such measures, while larger companies with more personnel and ideally construction experts in their own companies would find it easier to meet the requirements of such companies. Other reasons for the decline in renovation activity are the increased construction costs and lack of specialist personnel in the administration as well as the disinterest of many condominium owners in energy-efficient renovations, as the financial savings effects are not always obvious. Apartments are in high demand According to Dr. Lübke & Kelber, commercial investments in German apartments almost doubled to EUR 11.8 billion in H compared with the same period last year. The FAZ reported on July 20 that German investors accounted for four-fifths of the transaction volume. The average volume per transaction had risen to EUR 35.7 million. According to Dr. Lübke & Kelber, at least 20 billion euros are to be expected for 2018 as a whole. New building projects shortly before completion as well as student and micro residential complexes were in particularly high demand. Building child benefit noticeably relieves families According to a study by the Center for Real Estate Studies (Cres) on behalf of the German Real Estate Association (IVD), building child benefit can significantly relieve young families in acquiring property and, depending on the location of the property, enable savings of 5% to 63% in financing. This was reported by IMMOBILIEN ZEITUNG on The acquisition possibilities and relief effects in Berlin, Hamburg, Leipzig, Nuremberg and Krefeld were examined in different locations, whereby the average income values and real estate prices were taken as a basis. The IVD and Cres assumed that around 2.4 million families in Germany could benefit from child benefit for building construction. Studies that had only identified a minor effect of the child allowance for building construction were too shortsighted because they did not take into account the different locations in the cities. In rural areas, the building child benefit could help reduce rural exodus.

5 Frankfurt prices continue to rise, rents stagnate Supply and demand on the Frankfurt real estate market are becoming increasingly divergent, writes the IMMOBILIEN ZEITUNG on Various recently published studies suggested this, according to the housing market report of the city of Frankfurt on the years 2016 and 2017, a study by Dahler & Company and the regional member survey of the German Real Estate Association (IVD). According to the latter, the average detached house with a good residential value in Frankfurt has increased in price by 100,000 euros to around 950,000 euros within a year. With very good residential value, the price increase even amounted to 400,000 euros. Condominiums in good locations would have increased in price by 400 Euro/sqm to now 4,200 Euro/sqm, newly built apartments in good locations cost 5,000 Euro/sqm. According to IVD figures, rents for apartments stagnated at around 13 euros/sqm with a good residential value, while rents for the average remained almost unchanged at euros/sqm. Logistics market sets new record According to BÖRSEN ZEITUNG on According to BNPRE in H1 2018, around 3.43 million square metres of logistics and storage space have been realised in Germany, which represents a new record. In the major logistics markets of Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and the Ruhr area, however, noticeable declines in turnover could have been observed, which were attributable to the shortage of land and higher land prices. Will the metropolises become priceless? On 27 July the HANDELSBLATT writes in detail about the growing countertrend to urbanization in Germany. It was less internal migration, but rather the influx from abroad that caused the population of German cities to increase. Ulrich Jacke of Dr. Lübke & Kelber, on the other hand, says that the first noticeable effects of the high prices in the metropolises are what we are experiencing on internal migration: "As a result of the strong price increases of recent years, people with small salaries in particular could no longer or would no longer afford to live in the big city, especially as rents have risen, albeit mostly only half as quickly. Last but not least, young people just starting their careers are reorienting themselves, which, according to Empirica, is reflected in the fact that the group of 20 to 30- year-old metropolises such as Munich are increasingly staying away. Medium-sized cities in particular could benefit from this trend, as rents there developed more stably, presumed

6 jacket, and cite Fulda as an example, which, although relatively far from Frankfurt, is still interesting for commuters thanks to ICE connections. Homes overhaul condominiums According to F+B's residential index for Germany, prices for detached and semi-detached houses rose more strongly than those for condominiums in Q Compared to Q1 2018, the price of owner-occupied homes would have increased by 2.6 %, compared to the same quarter last year by 6.5 %. By contrast, prices for condominiums rose by only 1.2 % compared with Q and by 4.5 % compared with the same quarter of the previous year. Berlin rents are rising faster and faster According to F+B, rents for apartments in Berlin are rising faster and faster, writes IMMOBILIEN ZEITUNG on A standard apartment in Berlin was offered in Q at an average price per square metre of 9.33 euros, compared to 8.57 euros in the same period last year. This is an inflation rate of almost 9 %, while in Q it was only 5.7 % compared to the same period last year. The fact that Berlin's supply rents are still well below other top locations can be explained by the below-average level of income and purchasing power in Berlin. In other metropolises, the increase in supply rents has not continued at the pace seen in previous years. Logistics Space Desert Berlin According to IMMOBILIEN ZEITUNG, rental turnover with warehouses and halls in Berlin fell in H BNPPRE by almost half to 135,000 sqm, reports Realogis on 26 July, reporting a result of 183,000 sqm (- 37 %), CBRE comes to 134,000 sqm and thus half of last year's result. The reason for this is "a continuing lack of suitable rental properties", as Colette Bodendorf of CBRE says in agreement with her industry colleagues. By the end of the year, a volume of 320,000 square meters could come together, says Bodendorf. First warnings based on DSGVO About the first warnings with reference to the new data protection regulations and which reaction to it is to be recommended writes the IMMOBILIEN ZEITUNG on According to the IVD, at least nine real estate brokers have already been confronted with corresponding demands so far. The use of an online contact form without SSL certificate,

7 which permits the encrypted transmission of data and thus meets the requirements of the DSGVO, was criticised. Warners speculated on uncertainties in dealing with the DSGVO, but high monetary claims due to 'immaterial damage' are hardly enforceable before German courts. GERMAN REAL ESTATE NEWS Only the contributions titled Comment reflect the editor s opinion. Responsible: Holger Friedrichs. The facts represented in press items are not checked for accuracy. Copyright for GERMAN REAL ESTATE NEWS: PB3C GmbH, Rankestaße. 17, Berlin, Germany. Copying or electronic forwarding of the newsletter, except by contractual agreement with PB3C GmbH, constitutes a violation of applicable copyright laws. PB3C GmbH PB3C GmbH is Germany s leading consulting company for the positioning and communication of real estate companies and fund companies. It advises national and international clients in the areas of strategic press and public relations work, capital market communication, and positioning. Other spheres of activity include the compilation of track records and statements of account, surveys and research documents, as well as the conceptualising of, and copywriting for, customer newspapers, newsletters, Internet presentations, and brochures. PB3C GmbH supports the market entry of foreign companies in Germany, and brokers collaborations for real estate and fund companies. For detailed information about service spectrum and reference customers of PB3C GmbH, please visit or send an inquiry directly to info@pb3c.com.