INSIDE VIEW GERMANY 2017 Overview
A tale of two cities At a time when the noticed a surge in enquiries since Alps. Budget is not a concern; their machinations of world politics the start of 2017 from British and purchase is all about location. But feel like a rollercoaster ride US buyers. Of the 50,000 people almost all of Munich’s 7,000-10,000 – one that takes in Britain’s who move to Berlin each year, 75% new builds each year are located on uncertain journey towards are aged under 35, drawn by the the outskirts, with virtually no scope Brexit, an unpredictable new exciting start-up scene, buzzing for new city centre development. era in the US under Trump nightlife and culture. Munich’s high demand and and the scandals and scare constrained supply has led to much tactics that surround various Such population growth puts pressure on the existing housing talk of a price bubble. Property elections in Europe in 2017 prices have doubled in the last – Germany stands tall as the stock - Berlin needs 20,000 new units a year and currently builds decade and rents have struggled to strong, stable political and keep up. But while we can’t expect economic force in Europe. 10,722 – but there is land aplenty. Major areas of new construction to see property prices continuing Eyes are naturally on Germany’s include Mediaspree, the huge new to rise at 10% a year, we predict a own federal elections in Autumn, telecommunications and media hub flat-lining of prices for the next two or three years, not a bubble bursting. particularly in a climate in which that spans both banks of the river ultra-right parties are seizing the Spree and is home to headquarters A burgeoning population demands spotlight across Europe, but the belonging to Coca Cola and the new, improved infrastructure – and result is unlikely to throw up major German online giant Zalando. Munich’s major projects that are surprises. The two leading parties Europacity, a new 40-hectare underway or planned include a new – Angela Merkel’s CDU (as well as quarter around Berlin’s main €3.84bn underground line that runs its sister party the CSU) and the train station, and the redeveloped east to west below the city centre, centre-left SPD – are politically close, Potsdamer Platz are similarly and tunnels beneath the congested while the far right AfD, an anti-EU revitalising the city centre, Middle Ring Road, one of the busiest party, is failing to gain momentum. leading empty-nesters to roads in Europe. Germany’s property market has swap their suburban detached In different ways, Berlin and resisted the overheating and homes for central apartments. Munich could be seen as big subsequent slowdown seen in other construction sites – the first awash European markets in recent years, In Munich, the population is also with new residential and mixed-use and its stability is unlikely to on the rise but the market is largely development, the latter beefing up its be rocked by the election result. domestic, either from within the city or elsewhere in Germany. The infrastructure to cater to the growing What does remain a phenomenon 20,000 newcomers to Munich population’s new demands. What in Germany’s property market is its each year - a significant addition both cities inspire is confidence. low level of home ownership – one to a population of 1.5 million – are While the world’s rollercoaster of the lowest in Europe. In Berlin, invariably wealthy and well- hurtles past, these German stalwarts 15% of the population own their educated, often working for IT provide reassuringly firm ground. home; in Munich, 21%. Renting is companies such as Google or a social and cultural norm, but also Microsoft or business owners who a financial imperative for a growing relocate for the high quality of life. number of young Germans. Their preferred addresses Foreign buyers, however, are fuelling are in the old town, in genteel demand for property in Berlin, where Lehel or Schwabing, vibrant Paddy Dring they account for 20-25% of its Glockenbachviertel or the museum Head of the market today. Property prices have quarter of Maxvorstadt. They want International Residential risen by about 10% a year for the to walk home from the opera, spend Department past five years, the city is becoming weekends by the lakes and be within ever more international and we have easy reach of Italy and the Swiss For sale - UPSIDE Berlin. Computer generated images for indicative purposes only
02 Knight Frank Inside View Knight Frank Inside View 03 Lifestyle
Lock up and leave luxury in Berlin Berlin in the early 1980s bore little relation to the vibrant, cutting edge and cosmopolitan city it is today. But then, as now, one of Berlin’s biggest property developers, Jürgen Leibfried, spotted the opportunity to do something new. By Zoe Dare Hall Am Hochmeisterplatz Computer generated images for indicative purposes only
When Dr. Leibfried, fresh from his its own spirit and culture,” says Dr. the rise, fuelled by demand from Kreuzberg, Ku’Damm, Mitte and and Trussardi Casa fixtures and “It’s the place to be university studies in Munich, founded Leibfried. For some years, more overseas investors and rising house Charlottenburg: “micro areas”, as fittings, and an interior design the property company Bauwert in people left the city than moved in. prices. “Rents are going up too, he calls them, with good shops, service available to owners. for young people. 1983 and began buying and selling Now, there are 50,000 new arrivals so Berlin offers better investment restaurants and public transport. It is still cheap As a passionate art collector, Dr. property mainly in the “traditional, a year and Bauwert has notched potential, and new developments Bauwert’s latest project, Am Leibfried is also keen to make art compared with established” area of Friedenau, it up more than 300 projects, worth – which is what we focus on – are Hochmeisterplatz, has such a a key part of this project, including international cities was a niche market to say the least. 5bn, in Berlin. exempt from the rent control laws,” € prized location, on one of the last with one-off works in the communal “There were some investors attracted says Dr. Leibfried. “Berlin is a mid such as London remaining buildable sites just 150 foyers by the Berlin-based sculptor by big tax breaks, but normal “It’s the place to be for young to long-term investment,” he adds. meters from the Kurfürstendamm Robert Metzkes. and Paris and other Berliners were not interested in buying people. It is still cheap compared “It offers the potential for attractive – the famous boulevard known as because it was so cheap to rent with international cities such German cities such as margins as prices are starting from the Champs Elysées of Berlin. The “More and more galleries are due to the rent controls introduced as London and Paris and other Hamburg and Munich.” a low base and any risk is tempered building, which overlooks the green opening in this area and I like in the 1970s,” he says. “Berlin was a German cities such as Hamburg by a high level of transparency and expanse of Hochmeisterplatz park, to bring a connection between Dr. Leibfried completely different city in those days and Munich,” says Dr. Leibfried, good governance.” also brings a new type of product to property buyers and artists,” and West Berlin was effectively an who for 20 years commuted he says. “Home-owners in the What Berlin lacks, however, is a the city. island in the Soviet-run GDR.” between Munich and Berlin, but 18th and 19th centuries used to good supply of modern flats of now calls Berlin home. Externally, the development has represent artists on the walls and Many expected the city to boom good quality. “It’s a big city with the patina of the elegant, turn of the we should do it in this century, when the wall fell in 1989, “but it is a The level of home ownership in lots of stock, but very little of any century buildings that characterise making art a part of the building.” young city. It needed time to develop Berlin is still low at 15%, but it’s on quality was built from the 1960s this Charlottenburg area of Western to the 1980s,” says Dr. Leibfried. Berlin. “It will be reminiscent of This new product is likely to “The biggest part of our housing Berlin’s great townhouses. You appeal to a new type of buyer stock is prefab buildings in the will walk around and say ‘what a that Dr. Leibfried has spotted. eastern part of Berlin and public wonderfully restored building’, but “They are aged 55-60, have a nice housing in the west, which do not it is 100% new, inspired by the house, play golf, but they want meet the demands of many buyers traditional style of Paris and Vienna,” the buzz of the city centre – the today, and there is not enough new says Dr. Leibfried. top restaurants, galleries, theatre. development still. The Government Maybe 10 or 20 years ago, buyers is very tenant-orientated and it is Inside, it offers the kind of modern, of this age would have wanted to difficult to get building permission.” luxurious lock up and leave lifestyle slow down. Now they want to be that is still hard to find in the German connected to all of that.” Given Bauwert’s track record, capital. The apartments, with one Dr. Leibfried and his partner Mr. to six bedrooms and priced from There is perhaps no one better to Staudinger have clearly found the around €400,000 to €3.4m for the bring them that lifestyle than Jürgen key. Their projects – typically of penthouses, variously come with Leibfried, a man who has watched around 20 apartments – focus on balconies, gardens, rooftop terraces Berlin grow and change around him Dr. Leibfried well-established areas such as and loggias. There are Fendi Casa over the decades.
04 Knight Frank Inside View Knight Frank Inside View 05 Research
The safest of havens? Germany’s key cities have been on the radar of global investors for more than a decade bolster market confidence and within the luxury sector, overseas from China, the US and the Middle but their appeal goes beyond just firm economic fundamentals. minimise risk. interest not only increased but East together accounted for more became more diverse. European than 42% of sales to overseas The introduction of a permit By Kate Everett-Allen buyers continue to represent a key buyers in 2016, a trend we expect system for short-term rentals via component of demand but buyers to continue throughout 2017. Germany’s top cities have been looked to Germany when returns with lengthy void periods. Add to Airbnb and the designation of well-placed to benefit from capital in their own markets started to this the vibrant technology and 33 neighbourhoods as “urban flows at times of economic and diminish and now Brexit sees start-up industries in the city which conservation areas” where owners political turbulence over the last Germany’s key cities back under together are attracting a younger, are prevented from converting decade. Investors from southern the spotlight. But what makes entrepreneurial generation and their rental properties to luxury Key cities at a glance… BERLIN MUNICH FRANKFURT Europe shifted their assets Germany’s top cities so appealing Berlin’s credentials are self-evident. condominiums to sell on, reinforces Home ownership rate* 15.0% 21.0% 20.0% northwards during the Eurozone for foreign investors? again the council’s commitment to Delve deeper though and there GDP growth* (% yoy) 5.4% 4.4% 5.4% debt crisis, Asian and US investors the city’s rental sector but at the The simple answer is high demand is more to Berlin’s appeal than same time constrains the supply Population forecast (2015-30) 6.0% 12.0% 8.0% and low supply. Using Berlin as just demand, supply and good of homes available to purchase. Luxury house price growth, 2016 8.7% 8.0% 4.5% 2011 2016 Berlin’s prime market expands an example, the city’s population economics. Numerous safeguards Source: Ziegert, Knight Frank Research PRIME SALES 18 80 expanded by 40,000 in 2015, and have been put in place – partly Luxury living *latest available SUPER PRIME SALES 2011 household numbers are forecast to to avoid a repetition of the boom SUPER-PRIME SALES 5 18 2016 PRIME SALES Analysis of sales by price band increase by 74,000 between 2015 and bust scenario seen in the Berlin’s luxury overseas buyer profile 18 18 highlights the extent to which and 2020. late nineties and partly to ensure 2016 (% of overseas buyers) Berlin’s largely nascent luxury POPULATION housing remains affordable for Completions, however, are not residential market has shifted gear local residents. BERLIN MUNICH FRANKFURT 5 5 over the last five years. In 2011, 5% 2011 SUPER-PRIME SALES keeping pace. Estimates suggest Home ownership rate 15.0% 21.0% 20.0% 18 sales were completed above ISRAEL the city needs to build 20,000 new Mortgage lending is now highly GDP growth (% yoy) 5.4% X.X% X.X% homes each year to satisfy new regulated. Capital gains tax is €7,500 per sq m, but by 2016 2016 2016 Population forecast (2015-30) 6.0% 12.0% 8.0% and pent-up demand and although charged on all properties sold this figure had jumped to 80 16% 5% Luxury house price growth, 2016 8.7% 8.0% 4.5% building rates almost doubled within two years of purchase, or transactions. Although not on a par EU (EXCLUDING UK) OTHERS PRIME SALES PRIME SALES with global cities such as London 80 80 between 2012 and 2015, only in the case of buy-to-let homes, and New York, the city’s super- 14% 9% 13% 10,722 new homes were brought 10 years, to discourage speculation. CHINA UK UAE to the market in 2015. Berlin has also gone one step prime market, which we define as further than other German cities by sales exceeding €10,000 per sq m, 14% Aside from the economic SWISS 18 18 introducing a new rent cap which, is also expanding with sales up 5% fundamentals, Germany’s cities means that the rent specified in a from five to 18 in the last five years. SUPER-PRIME SALES SUPER-PRIME SALES still have some of the lowest home 9% UHNWIs LIVING WITHIN 4 HOURS new tenant contract cannot exceed RUSSIA ownership rates in the world. 39,000 the local average by more than 10%. Who’s buying? Numbers are rising, in part due to
UHNWIs LIVING the ECB’s historically low interest But far from deterred by such Data from our partners in Berlin, WITHIN 2 HOURS 2011 rates, but with only 15% of homes stringent regulations, landlords and Ziegert Immobilien, shows that 10%
SINGAPORE USA 18,100 PRIME SALES Source: Ziegert classified as owner-occupied, investors instead see the measures whilst German buyers still account 80 Prime sales correspond to €7,500 per sq m+, 2011 Super-prime sales are €10,0002016 per sq m+ landlords in Berlin rarely struggle as pillars of support which help for a large segment of demand Source: Ziegert database UHNWI RESIDENTS 1,600 Berlin: Mind the gap PRIME SALES PRIME SALES 80 RESIDENTIAL COMPLETIONS80 POPULATION 35,000 3.6m 30,000 3.6m 3.5m 18 18 25,000 3.5m 3.5m 3.5m 3.5m 3.5m 3.5m 3.5m 3.5m 3.5m 3.5m 3.4m €5 SUPER-PRIME SALES 20,000 SUPER-PRIME3.4 SALESm 3.4m 3.4m 3.4m 3.4m 3.4m 3.4m 3.4m 3.4m 3.4m 3.4m 3.4m 3.4m 3.4m 3.3m 18 3.4m €18 €18 €80 15,000 3.2m POPULATION SUPER-PRIME SALES
2011 2015 RESIDENTIAL COMPLETIONS 10,000 3.1m
PRIME SALES SUPER-PRIME SALES 5,000 3.0m
0 2.5m 2015 2015 11,068201110,717 10,906 9,415 11,377 15,852 22,744 32,965 17,729 12,589 9,061 7,093 5,182 3,418 3,751 3,536 3,126 3,718 3,833 3,815 4,321 4,491 5,417 6,641 8,744 10,722 PRIME SALES PRIME SALES 1990 PRIME SALES1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 18 18 Source: Office for Statistics18 Berlin-Brandenburg
5 5 SUPER-PRIME SALES 06 Knight FrankSUPER-PRIME Inside View SALES Knight Frank Inside View 07 5 SUPER-PRIME SALES
2015 87%
2014 63% Buying Guide
The purchase of real Advantages for the buyer: • Notary costs around 1% to 1.5 %
• The seller/property developer • Registry charges for property, estate in Germany is only permitted to receive approximately 0.5 % of the money from the buyer when a A Berlin Focus valid contract exists purchase price
This guide refers specifically to buying property in • The seller/property developer • Estate agent’s commission, Berlin, for other locations please seek alternative advice. is only permitted to receive approximately 5.95 % incl. VAT. We would always recommend that you engage the services money when planning of a reputable agent who can assist with understanding the permission has been given The commission is payable after tax and legal structure, finding a suitable financial institution signing the purchase contract. The • The money received may only and eventually managing your property investment. purchase price and the property be used for the project transfer tax are to be paid after • The money received must be The legalities of buying a German institution. Once noting the transferral of ownership held strictly separate from the new build property in Berlin confirmation of finances has been in the registry. Only once these private assets of the buyer/ received, an appointment with property developer sums are paid will the apartment Reservation a notary is arranged. For further be recorded as the property of the If the buyer needs some time to information on comprehensive and • Payments must correspond to buyer in the registry. think about their offer or seek independent financial packages progress of construction work advice from a third party, the buyer please contact us. Handover can reserve the property for up to Purchasing costs four weeks. The non-refundable Appointment with notary When purchasing a property Once the property is built and the charge for this service is 0.3% of the in Berlin, the buyer bears the In accordance with German law, last purchasing stages have been purchase price and will be deducted additional costs. This includes: a contract of sale for a property completed, the final handover from the estate agent’s fee. must be certified by a notary • Property transfer tax, 6 % of the takes place. This concludes the purchase price in Berlin purchasing process. General power of attorney and the seller and buyer (or their authorised representative) By signing a power of attorney must sign the documents in the authorisation relating to the presence of the notary. If the buyer property, through an independent attends in person, an advisor from solicitor, the latter can subsequently the real estate agency will stay act as the buyer’s representative in throughout the appointment. If all legal matters and as authorised requested, a specialist interpreter recipient. After this, the real regulations governing estate purchasing process can begin. may be consulted. agents and property developers (see below). Draft contract Purchase A draft contract will be sent to the If the property the buyer wishes MaBV—regulations buyer for checking. According to to purchase is still under governing estate agents and German law, the draft contract can construction, the buyer’s real property developers be signed after the fifteenth day estate advisor will lead them step- These regulations serve to protect from receipt. The finished contract by-step through the rest of the the buyer’s asset interests when is then signed at a later date in the process up to its completion. This they purchase a property. Amongst presence of a notary. includes, for example, paying in other things, they regulate the instalments of the purchase price conditions under which the seller Confirmation of finances which corresponds to the progress can demand that the buyer pay the International clients can finance of the construction works and in purchase price as a lump sum or in their real estate easily using accordance with the MaBV—the specified instalments.
08 Knight Frank Inside View Knight Frank Inside View 09 Our Team
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