I.Real estate investors are a mixed bag. Some withdraw at the first sign of headwind, others are only really attracted. The Berlin housing market, which has been making headlines across Germany since the rent cap was introduced, is also causing such reactions.
The Swedish real estate company Heimstaden spends around one billion euros on apartments in the capital a year. The Swedes recently announced that they would buy around 3,900 Berlin rental apartments for 830 million euros.
At the beginning of the year, the Skjerven Group announced that it had bought 599 apartments for Heimstaden for 125 million euros in Berlin and Bielefeld at the end of 2019. Heimstaden also appeared as a buyer before. The company already owns 1,458 rental apartments, most of which are located in Berlin.
The big ones are waiting for Karlsruhe
“The situation irritates many investors, but people are still buying like crazy,” says Thomas Groth, Chairman of the Berlin / Brandenburg State Association of the Federal Association of Independent Housing Companies (BFW). Large companies, however, are sitting on the reserve bank. “Everyone is waiting for Karlsruhe.”
Several lawsuits against the Berlin rent cap are pending at the Federal Constitutional Court. Since February 23, the rents for 1.5 million apartments have been frozen at the June 2019 level and have to be adjusted downwards for new rentals if they are too high.
The second stage will kick off on November 23, when the obligation to adjust also applies to the rents of existing rental agreements. According to the new Berlin Senator for Urban Development, Sebastian Scheel (left), around 340,000 apartments are affected. According to the BFW, the reduction is on average 92 euros per month per apartment, which corresponds to 1.40 euros per square meter.
The rent cap, like the older rent brake, only applies to houses that were built before January 1, 2014. New buildings are excluded. “But many investors are skeptical that the limit will be raised from 2014 to 2019,” says Groth. That is why there is restraint in the new building too.
“Investors are seen as an enemy in Germany”
Heimstaden doesn’t care. The company, which is headquartered in Malmö in southern Sweden, owns around 100,000 apartments, mostly in Scandinavia – and instruments such as rent caps are not unknown there. 58 percent of the apartments would be in regulated rental markets, according to the company.
“Business is getting more and more difficult in Berlin,” says Jakob Mähre, founder and CEO of Mehre AG, a Berlin housing company. For a long time, the capital was the sole field of activity for the investor.
Five to six years ago he looked around East Germany and later nationwide, now also in the USA and Austria. “Real estate business is much faster and easier. Binding agreements are common and there is not too much bureaucracy. Investors are seen more as designers and less as enemies. You grasp your head, on the other hand, everything that is needed in Germany when you want to buy or build a house. “
Environment protection drops prices
The situation on the capital’s housing market is ambivalent, says Moravia. “The city is booming and the demand for housing is high, but the supply doesn’t grow with the demand. Corona has not changed that either. ”In addition, there would be unrealistically low rental requirements.
“How can I rent an apartment that costs 5,000 euros per square meter for eight euros? The back and front don’t go together. The logical consequence of this development: More apartments are offered for sale and no longer rented. “
Investors would have to look for their niches, then you could still buy in Berlin. But that has become more difficult. In addition to the rent cap and rent brake, there is also what is known as environmental protection. In the affected quarters in Mitte, real estate prices have fallen by up to 30 percent, according to Moravia.
The milieu protection statutes prohibit so-called luxury renovations, which also include the installation of a guest toilet or the conversion of rental apartments into condominiums.
Private homeowners are selling now
The Swedish Heimstaden Group’s commitment in Berlin is only understandable if one takes very long investment periods of up to 45 years as a basis, according to Moravia.
But this real estate business is currently the exception in the capital, says Jürgen Michael Schick, President of the Real Estate Association Germany (IVD). Big investors are more cautious. “What they lack is a positive commitment by the state government to the growing city of Berlin.” But while the big buyers wait, medium-sized real estate investors now have opportunities that they did not have before.
“In many transactions we find that private apartment owners mainly sell their apartment portfolios to professional investors who are likely to cope better with the requirements of the Berlin rental market,” says Schick.
The sellers would still get good prices and would no longer be in the mood for constant regulation. Apartments that were purchased for old-age provision have now been transferred to professional investors. “Red-red-green displaces the small landlords.”