German Real Estate News

11-18 Volume XIII, Issue 11, Date of Publication: 22.05.2018 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

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 MARKET NEWS Housing Policy From Mountain Top The Union and SPD s high-level conclave on the Zugspitze was the subject of coverage by the SÜDDEUTSCHE ZEITUNG, FAZ, DIE WELT and the HANDELSBLATT on 08.05.2018 and the IMMOBILIEN ZEITUNG on 11.05.2018. As well as focussing on team building and refugee policy, housing policy was one of the most important topics on the agenda. The government s policy resolutions included an agreement to promote housing construction and to make life easier for homebuyers. The help-to-buy scheme for families with children, amounting to EUR 1,200 per child per year, will be introduced retroactively from 1 January 2018. The money will top-up buyers equity when they buy or build owner-occupied real estate in Germany, but only if the household s taxable income does not exceed EUR 90,000. For each additional child in the family, this limit increases by EUR 15,000. In order to give rental housing construction a boost, the government is introducing an accelerated tax depreciation allowance, which will be valid until 2021 and can be used for housing developed for the affordable rental market. As revealed by the IMMOBILIEN ZEITUNG on 11.05.2018, the government has also decided to tighten Germany s rent control legislation, the Mietpreisbremse, and will require landlords to disclose the rent paid

by a previous tenant so that new tenants can check whether their rents are excessively high. However, according to the resolutions passed during the conclave, landlords will only be obliged to pass this information on if they made specific reference to the Mietpreisbremse in their new tenants leases. Precisely how this will work in practice has yet to be fully specified. Prices Rise as Buyers, Tenants Head to Exurbs According to F+B s figures for Q1/2018, year-on-year increases in advertised rents suggest a significant shift in the volume of buyers and tenants looking for residential property on the outskirts of major conurbations, reported the IMMOBILIEN ZEITUNG on 11.05.2018. The largest rental price rises were registered in and around Munich, with the greatest increase in Germering, where the average new contract rent increased by 18.8%, to EUR 13.00/sqm, compared to the same period last year; in Munich itself new contract rents increased by 11.7% to EUR 16.30/sqm. The largest price increases for condominiums were reported in Münster (+ 10% to EUR 3.472/sqm), Landsberg am Lech (+9.7%), and the trio of Berlin, Norderstedt near Hamburg and Dreieich near Frankfurt (all around + 8%). Counterproductive Social Protection Policies On 11.05.2018, the SÜDDEUTSCHE ZEITUNG examined the advantages and disadvantages of neighbourhood social protection areas. Across Berlin, 44 protection areas have so far been established in seven of Berlin s twelve districts, and Berlin s Senate Department for Urban Development and Housing is already looking at creating another 16 areas. It looks likely that the number of protected areas in Berlin will increase to well over 50 within the next 12 months. The real estate industry has sharply criticised the Senate s plans. Jacopo Mingazzini of Accentro, for example, said: Making owners obtain approval for refurbishment measures hampers their initiative and undermines the goal of upgrading energy efficiency across the city s housing stock. In addition, municipal authorities are spending considerable sums exercising their rights of first refusal and buying individual properties to add to their housing portfolios, instead of using the money for new housing. Property Ownership Boosts Asset Values In Q1/2018, the value of houses, shares and other assets was 8.3% higher than in Q1/2017, according to an analysis by the Flossbach von Storch Research Institute, which was the focus of an article in the FAZ on 15.05.2018. The significant increase is primarily due to increases in the value of houses and apartments owned by German households,

which, based on data from the Association of German Pfandbrief Banks, have risen by 9.1% over the last 12 months. According to the study, the major winners are the wealthy and the elderly, who tend to own more property and rely less on savings deposits. Disappointing Building Permit Figures According to Germany s Federal Statistical Office, 77,800 building permits were issued for apartments in Germany in Q1 2018, equivalent to a 1.7% decrease compared with the same period last year. On 18.05.2018, the SÜDDEUTSCHE ZEITUNG reported that the overall decline is largely due to the 42.9% decrease in the number of apartments being developed in dormitories, hostels and halls of residence. When these figures are excluded, the number of building permit approvals actually rose by 1.2%. Industry Initiative Aims for More Building Permits On 17.05.2018, the IMMOBILIEN ZEITUNG devoted extensive coverage to the ongoing challenges facing planning authorities across Germany. In many municipalities, the main problem is still a serious lack of personnel. And the situation is getting worse as the number of building applications continues to outpace staffing levels. The situation owes much to past job cuts, but has also been exacerbated as many authorities have been unable to fill vacancies quickly enough because they frequently pay less than private sector employers. Alongside fierce competition from the construction and real estate industries, some municipalities have created their own problems by alienating good potential applicants. Creative solutions are clearly required if the problem is to be effectively addressed. Bonava s Nils Olov Boback, for example, has suggested that the five largest companies from Germany s construction and real estate sectors should get together and consider what services we can provide to help municipal authorities. The companies employees could help building, nature conservation, monument protection and other offices involved in property developments, and so help to overcome bottlenecks pragmatically, until the authorities have added the necessary personnel. Serial Solution to Boost Homeownership On 18.05.2018, the HANDELSBLATT reported on the new popularity of single-family homes, which are attracting growing interest from families with average household incomes who have been priced out of city-centre areas by sharp price rises. Using serial production techniques, developers are now able to offer terraced houses at comparatively affordable prices. However, prices do vary considerably from city to city, depending on the cost of

building land. According to Bonava, new terraced houses are in great demand, especially among young couples and families. Last year, the developer from Fürstenwalde built and sold 906 residential units to institutional investors and over 1,500 residential units to private buyers in Germany, including just under 300 terraced houses. Young families with children made up 80% of the buyers. Strong Demand for Student Apartments According to Cushman & Wakefield (C&W), student apartments worth around EUR 13.6 billion were transacted across Europe in 2017, an increase of 29% over the previous year. This was reported by the IMMOBILIEN ZEITUNG on 17.05.2018, which examined student housing markets in nine EU countries (excluding the UK). The lowest peak yields were registered in Germany (3.75%) and Sweden (4%), the highest in Portugal (6%) and Poland (7%). In Germany, demand for newly developed units is growing as the student population swells, with the same also applying to large cities in smaller EU states, such as Warsaw in Poland, Dublin in Ireland or Stockholm in Sweden. According to CBRE, a total of 12,300 student accommodation units are currently being developed or renovated in 50 cities in Germany, with a further 19,500 at the planning stages. Nearly 90% of these are being developed for the premium segment. Rents in Berlin Rising Fast According to the 2017 Housing Market Report from the Investitionsbank Berlin (IBB), the median advertised rent in Berlin rose by 12% to EUR 10.15/sqm last year, equivalent to an increase of more than EUR 1.00/sqm, reported the IMMOBILIEN ZEITUNG on 17.05.2018. Only 2,056 apartments, or 3.4% of all listed apartments, were offered for less than EUR 6.00/sqm; only one in ten was offered for an average net rent of less than EUR 7.00/sqm. Rents in Pankow (EUR 10.86/sqm), Charlottenburg-Wilmersdorf (EUR 11.86/sqm), Friedrichshain-Kreuzberg (EUR 12.50/sqm) and Mitte (EUR 12.77/sqm) are all above average. Marzahn-Hellersdorf has the lowest average rent at EUR 7.16/sqm. In contrast, rents for apartments in newly developed buildings have plateaued at EUR 13.00/sqm for the last four years. Asking prices for new and existing condominiums, on the other hand, have continued to rise and reached a new high, averaging EUR 3,924/sqm in Q4 2017. The increase was largely driven by prices in new condominium developments, which rose by 26.5% to an average of EUR 4,819/sqm within a year. Existing apartments have become 13% more expensive in the same period and now cost an average of EUR 3,612/sqm.

Momentum Up on Commercial Property Market In 2018, the major commercial property brokers got off to a strong start, reported the IMMOBILIEN ZEITUNG on 17.05.2018. CBRE increased its turnover by 16% in Germany and 15% globally, generating revenues of USD 4.7 billion. Thanks to the ongoing strength of the general economy, and the real estate market in particular, in the first quarter of the new year, we have built on the growth we achieved in 2017, said Alexander von Erdély of CBRE. A growing number of customers have come to appreciate, and are taking advantage of, the value added by multidisciplinary, fully-integrated services across all asset classes and property life cycle phases. The company s growth is also being driven by growing demand for outsourced real estate services, institutional investors increasingly shifting their capital into commercial real estate assets and market consolidation. Berlin s Logistics Market is Getting Tight Due to a lack of product, Berlin s logistics real estate market suffered a significant reverse in Q1 2018, reported the IMMOBILIEN ZEITUNG on 17.05.2018. BNPPRE reported takeup of 80,000 sqm, compared to just 62,000 sqm registered by CBRE. During the quarter, CBRE brokered just 21,000 sqm of logistics space in the Berlin area. Demand in peripheral areas is expected to rise due to a shortage of logistics space in inner-city areas. The lack of existing properties within the city does not allow for any other development, said CBRE s Colette Bodendorf. Future demand is set to focus on new logistics developments in areas around Berlin. According to BNPPRE, the average rent in the sector increased by 15% to EUR 4.70/sqm. 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, 10789 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 www.pb3c.com or send an inquiry directly to info@pb3c.com.