Real estate investment advisor Brigitta Mühlhans on why it’s time to join the gentry and where to start.
You love this city so much that you are ready to commit to your own four walls. Or you’ve got the stomach to become the landlord and want to invest, pull your savings together, buy and rent out. But how do you go about playing the property game? Which areas are up-and-coming? And above all: does it still make sense to invest in a flat in Berlin?
What happened to Berlin’s reputation as “poor but sexy” and those great real estate deals that came with it? Seems that prices are nearing those of Cologne or Munich…
Depends on where you look! On average, we are not as expensive as Cologne or Munich but, due to the city’s fragmented structure, some parts of Mitte or Charlottenburg are very close to those prices, with F’hain soon to follow. Other parts of town are up-and-coming, such as Lichtenberg. You can get reasonable rates there, even though it’s within city limits.
Berlin’s real estate prices have gone up by 20 percent in the last three years. What should we expect to pay for a flat these days?
You have to distinguish between Altbau and Neubau. The cheapest average rates for renovated Altbau flats on the city’s outskirts are between €2500 and €3000 per sqm. However, if we go inside the city ring, prices lie between €8000 and €12,000. There are moderate prices in parts of town like Wedding, and there are luxury locations like Tiergarten, or parts of Charlottenburg, where you usually pay €10,000 and up per square metre of real estate. Those are new flats, right? Exactly. But some luxury refurbishments also reach the €10,000 mark, even though prices above 10k are Neubau in nine out of 10 cases. I know of an extensively renovated penthouse apartment in Charlottenburg, which is around €13,000 per square metre.
People who bought real estate 10 or 20 years ago have tripled or quadrupled their investments. Is it still lucrative to invest in a flat in Berlin?
An investment can have different exits. You can keep the property and rent it out – hoping for further rent increase within legal limits. Another exit may be to buy property, keep it for a while and sell with added value. This is a longer-term strategy. Berlin’s prices are still a long way from London or Paris or Madrid, though we’ve gained in quality of living. Chinese investors are interested in the market, Americans too, saying they would pay three times as much back home. There are waves: we’ve had Danes for a while, Brits, now it’s Asians and East-European investors.
Which parts of town are best for investments if you have around €200-300k to spare?
If you’re looking for a long-term return or an increase in value with resale: buy in the outskirts! Even better: go into the Speckgürtel, i.e. outside Berlin’s city limits. My insider tip: Schönefeld, where the new BER airport is being built. We’ve had great prices of €2300-2400 per square metre in Großziethen, but generally everything Southeast or East of Schönefeld is good. As soon as BER is up and running and creates 60,000 jobs, there’ll be a drastic price increase – we see this as a trend for 2020/21. People working at BER wouldn’t want to commute 70km.
Is that really a good strategy if you plan to rent the flats out? Would someone from Rio who stays in Berlin for a year want to move to Lichtenberg or even Schönefeld?
I agree. You can get an Altbau for around €3500-4000 in central areas of Berlin. And there’s also the possibility for these people to rent micro apartments, which are around 18-21 square metres. However, you need to be aware of the new regulations imposed on short-term rentals/holiday flats, the so-called Zweckentfremdungsverbot, a ban on misuse, which was updated last March. It says that if you are renting your flat out for less than two months, you have to declare it as a business with the city authorities. These permits are hard to obtain and are issued for a short time only. So long term tenants might be preferable.
And if you’re not looking to invest, but aim to buy for your own use?
I’d say the same, go for the outskirts! Some locations have great public transportation, being connected to an S-Bahn station for example. You won’t really get a Neubau within the city ring for €3500-4000. But in Northern Pankow, Buch, Kaulsdorf and Mahlsdorf you can find new single-family homes, duplexes or terraced houses for €3500-4000 a square metre. They’re popular with families. Lots of these houses are bought for personal use, but some are rented out at €12-13 a square metre. So, it’s worth it.
Especially with mortgage rates as low as 0.7 percent.
Exactly! You can get four to five percent of return on investment, especially if you go to Brandenburg.
Is there a standard down payment for a mortgage?
It depends on intended use and other factors. Banks consider the overall risk, but usually you’d have to pay around 30 percent of the total price.
Where would you start to look for a flat to buy? Would you browse websites like Immowelt or Immobilienscout24?
Many companies in Berlin specialise in flats and I would try to get an overview of the market, approach real estate companies and ask for their catalogue. But also go to websites like Immobilienscout24 and have a look online, browse real estate pages of local papers. Many private providers offer flats free of commission. This way, you’ll get a better feeling for the market prices and facilities and you can make comparisons.
Let’s say you want to buy a flat. What practical steps does one have to take, what should one look out for? Should you get advice or legal assistance?
If you’re completely inexperienced in terms of real estate, you can approach companies like ours for guidance. Moreover, you have experts to help you assess technical issues and building materials and I’d recommend hiring one if you’re interested in older property. In any case, you will need a notary to draft and sign the sale contract.
What is your forecast for the next five years? Will Berlin become as unaffordable as London, Zurich or New York?
I don’t believe we will see such drastic changes within five years. But even if we were to hit an economic recession, there wouldn’t be any price drop in Berlin. In the worst case, the prices would get a small dent, no more.
In a nutshell: is it a good time to buy?
It’s always a much better idea to buy property than to let your money sit in your bank account, especially given the low interest rates. There has not been any drop in real estate value since World War II and there won’t be one in the foreseeable future. By all means: invest!
Brigitta Mühlhans … is Head of Transaction of the Berlin office of real estate investment company Dr. Lübke & Kelber. She helps national and international private clients and institutions organise their investments and divestments.