Friday, 13 April 2018

Berlin, March Against Displacement and Rent Madness

More than 180 organisations and group initiatives have called for a "March against gentrification and rent madness". The march starts at Potsdamer Platz in Berlin on 14. April 2018 at 2 p.m. and was registered for 4,000 participants but 10,000 have already announced their participation via facebook.



Photo by Darko Pribeg on Unsplash

85 % of Berlin's population are living in rented accommodation which makes changes is rent levels felt by the overwhelming majority. Families have to leave the areas where they have lived for years, where they have formed social ties and where their children have been going to school. They just can't afford the rent increases anymore and in some cases have to move out of the city altogether.

Most of the declining numbers of newly built apartments are in the luxury segment out of financial reach for the local working population. Social housing has been neglected, affordable housing is not available.

Of the existing apartments many have been modernized in recent years and the organisers of the march are criticizing that those modernisations play a big part in the rent increases and displacements. E.g. a new lift and energy saving new facade easily run up to 20,000 € per apartment which will allow the owner to raise the rent by 11% or 2,200 € per year for this apartment.

Regulations like "Milieuschutz" are trying to put a limit on the type of modernisation that will be allowed in protected areas amongst other things, more details here: http://germanproperties.blogspot.de/2018/03/the-can-do-and-cant-do-renovating.html. But the organizers say that there are not enough protected areas especially in the inner city districts.

The federal government has already announced a new initiative to increase social housing but also to expand the regulations for local authorities to protect social structures in their cities.


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Wednesday, 28 March 2018

Rental Price Break in 16 Town and Cities in Hesse Unlawful

The Frankfurt District Court (Landgericht) has ruled that the Rental Price Break (Mietpreisbremse) in 16 towns and Cities including Frankfurt has not been sufficiently substantiated and is therefore invalid. This follows similar court rulings in Berlin and Bavaria.



The main feature of the Rental Price Break is a regulation that the rent for new contracts is not allowed to be higher than 10% above the rent table (Mietspiegel) for the area.

This is another blow against attempts by Federal and State Governments to slow the rent increase mainly in urban areas. The legal discussion is not focussing on the regulation itself but on the determination of the areas it should be applied and the data provided to prove the need for the measure.

However, it is not the time for property owners to lean back and take whatever rent they can get. All court rulings are on their way to the next level of appeals up to the Federal Constitutional Court (Bundesverfassungsgericht).


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Monday, 26 March 2018

The Federal Government Plans to Tighten The Restrictions on Rent Increases in Germany

Katarina Barley, new Justice Minister, about future Housing Policy of the Federal Government

ARD "Bericht aus Berlin" 18.30 , 25.03.2018

Immediately in Barley's area of responsibility, is the rental price brake, which is to be tightened according to the coalition agreement. Barley announced that in the future the landlord should provide information about the amount of the previous tenant's rent. If it turns out that the new rent is too high according to the rental price break regulations, tenants should get the opportunity to reclaim the rent, including retroactively and have the current rent adapted. The Minister intends to present a draft bill before the summer break.


The Interview in German


"Outmodernizing" can be expensive

Barley also wants to prevent tenants from being burdened with modernization measures "beyond reason". In many cities, one can see that long-term tenants are specifically "modernized out" of their apartments, the minister said. Such a "targeted" procedure should be punished in the future as a violation. Tenants should also be given the opportunity to assert claims for damages.

Barley rejected the argument that this would impede housing construction. The apportionment of "normal modernization" should even be facilitated, that is, stripped of hampering bureaucracy. The minister suggested fines in a range of up to 10,000 Euros. She also emphasized: "Where luxury modernization is abusive, we will make it harder, and that's right."

Commentary

Rental Price Break and limitations on "luxury" modernisation are at the top of the agenda of Germany's new Justice Minister Katarina Barley. It seems to be a tribute to the political base of the SPD for joining the coalition against a substantial number of members wanting to stay in the opposition.

Both topics are full of legal traps. While the current version of the Rental Price Break has been challenged by lower courts and is on it's way through appeals, a new version is being hammered out. An upgraded version is planned to be presented to parliament before the summer break.

The limitation of "luxury" modernization seems an even bigger legal minefield. The definition of "luxury" depends on many factors. Most likely it will pick up on the norms used in regulated urban development areas called "Milieuschutzgebiet". These norms are orientated on average sizes and standards, e.g. a new balcony added in a modernization is not allowed to be bigger than 4 m². More details here: https://germanproperties.blogspot.de/2018/03/the-can-do-and-cant-do-renovating.html.


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Saturday, 10 March 2018

The Can Do and Can't Do Renovating Apartments in Certain Areas of Berlin

Preservation Statute Areas -. “Mileuschutzgebiete” in Berlin. What can I do, what can’t I do with my property.

The prevention of so-called “gentrification“ is a central issue for the Berlin city government. The term “gentrification” is describing the process of displacing parts of the current population of inner-city areas through rent increases beyond their reach. This development completely changes the social structure of entire boroughs and destroys social networks and the associated support functions for its members.
The Federal Building Code (Baugesetzbuch, BauGB) includes a regulation that provides local authorities with a tool that is intended to avoid such a development. More details about the split of apartment blocks into individual condos and the English version of the building code can be found here:
https://germanproperties.blogspot.de/2018/03/thinking-about-dividing-apartmentblock.html

Section 172 of the code allows for the definition of protected areas under certain statistical conditions and for a specific time period of up to 5 years. There is a widespread consensus that after 5 years another 5 year period can be proclaimed and so on. It would be highly speculative and dependent on political significant changes to expect a change after 5 years.

There are two different criteria for protection which can be applied separately or in combination,
Social Preservation area § 172 (1) Nr. 2 BauGB and/or Erhaltungsgebiete with unique urban character § 172 (1) Nr. 1 BauGB

The map below shows the Berlin areas that are currently covered by individual Preservation Statutes (Milieuschutzverordnungen)

Source: Senatsverwaltung für Stadtentwicklung und Wohnen
For detailed information about the individual districts please visit our Blog: https://propertylocations.blogspot.de/

Social Preservation area § 172 (1) Nr. 2 BauGB

Examples of renovations or modernizations that are not allowed (examples)

  • Floor plan changes
  • Merging or splitting apartments
  • Extension of balconies, conservatories, loggias or terraces with more than 4 m² of floor space
  • Extension of second balconies, conservatories, loggias or terraces
  • Fitted kitchens
  • Installation of a second toilet, complex bathroom renovations

Examples of renovations or modernizations that are allowed (examples)

Refurbishments that only produce the "state-of-the-art" equipment of an average apartment must be approved. The resulting rent increases must be borne by the tenants in most cases.
To be approved by authorities (among others):

  • Initial construction of a central heating with hot water supply
  • Initial construction of a bathroom
  • Upgrade of an existing bathroom with modern equipment
  • Basic equipment with plumbing, water and electrical installations, antenna, cable TV and intercom systems
  • Replacement of existing windows according to the Energy Saving Ordinance (Energieeinsparverordnung EnEV)
  • Obligatory energy conservation renovations
  • Attic conversion and new construction
A post like this one is always restricted to general examples and can never provide an all-inclusive overview of all aspects. Before any action is taken and money spent we recommend a consultation with the local authorities.
We provide advice and guidance for these types of projects for our clients from the first steps of a feasibility study through to a business plan and completion of the project. For inquiries about our services please use our contact page .



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Sunday, 4 March 2018

Thinking About Dividing an Apartment Block into Condos in Berlin? What Could Possibly Go Wrong?


A growing number of owners of apartment blocks in Berlin are contemplating selling their property to take advantage of the high demand and increased prices. Instead of selling an apartment block in its entirety in one go, the sale of single condos is seen as a way to achieve higher prices per sqm and ultimately for the building in total.

The main issue I want to discuss here is the subdivision of an apartment block into single apartments in inner-city areas in order to be able to sell them individually.

Certain district administrations of Berlin, which are the local government in this context, have declared certain regions of their district “Milieuschutzgebiet”. These are areas where a Preservation Statute applies. Every area has a specific boundary and will quote specific regulations from Section 172 of the Federal Building Code (Baugesetzbuch).

These are the districts that already have preservation areas in place or are in the process of raising the empirical data needed to declare such an area:
  • Charlottenburg-Wilmersdorf
  • Friedrichshain-Kreuzberg
  • Lichtenberg
  • Mitte
  • Neukölln
  • Pankow
  • Tempelhof-Schöneberg
  • Treptow-Köpenick 

What is the impact on the owner?

In order to convert an apartment block into condos or individual freeholds (Eigentumswohnung) a permit from the district is required. In March 2015 the Berlin city government has released a regulation called “Umwandlungsverordnung” which allows the district to refuse the permit to divide (Teilungsgenehmigung) in areas under the Preservation Statute. Since preventing the “gentrification” of these areas through conversions is one of the purposes of declaring these areas “under protection”, the permit will be denied.

However there is another aspect to the story of the Preservation Statute which is not related to the division: The owner will not get a permit for what is seen a luxury modernization, e.g. new balconies bigger than 5 m², luxury bathrooms (definition in the regulation), join small apartments into big apartments, lifts and many other major works usually leading to rent increases.

What should I do?


If you are happy with your building and don’t plan to sell it in the near future you just need to keep your building in good shape and well managed, there is nothing you need to worry about.

However, if you are considering selling your property I recommend getting experienced local advice. There are different aspects of the business plan that might lead to different decisions when looked at in isolation as opposed to the total picture. Just to name some of these aspects, permits, tax, cost of marketing, timeline, first refusal rights of city and tenants (condos only) etc.. And it’s worth mentioning that sold individually you might not sell some units for years, at least not for the price envisaged.

Call me. We are specialized in guiding international investors through the ever-changing picture of market developments and regulations. Phone number

Academic / para-legal background.


The Federal Building Code allows local authorities to define specific areas for protection. This is done by means of local government procedures within the framework of the Federal Building Code. The regulations are spelt out in Section 172 of the code. All specific regulations will have to relate to this section.
Section 172 The Preservation of Physical Structures and of the Specific Urban Character of an Area (The Preservation Statute)

You will find an English version of the code here germanlawarchive.iuscomp.org




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Tuesday, 13 February 2018

The price boost on the German real estate market has further accelerated 2017




VDP-Real Estate price indices: The price boost on the German real estate market has further accelerated slightly 2017. With the results for 2017 The VDP also publishes the development of purchase prices n the top 7 cities for the first time.

The Association of German Pfandbrief Banks (vdp) represents the interests of the Pfandbrief banks in dealings with national and European decision-making bodies, and of a wider expert public.

Main findings of the report:


  • Residential real estate prices rise 6.9% year on year
  • Commercial property prices increase by 6.5% compared to the previous year
  • Expansion of the vdp real estate price indices with information on the housing markets of the TOP 7 cities in Germany
  • Housing markets in metropolitan areas remain strained: TOP 7 index rises 13.7% over the previous year
The full report in German is available here:


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Saturday, 27 January 2018

The German housing market in 2018

Price and rent outlook for Berlin, Düsseldorf, Frankfurt, Hamburg, Munich and Stuttgart

The following information was provided by Deutsche Bank Research in their Germany Monitor.

Metropolitan areas in Germany are booming. The current real-estate cycle started in 2009 and has led to significant price increases for residential property in many cities. Prices for apartments have as much as doubled in some cities. Strong population and employment growth and declining unemployment rates are driving demand, and supply elasticity is low. New construction is slow to pick up, and vacancy rates are declining. As a result, rent growth is accelerating. Regulatory measures are unlikely to provide sufficient relief. House prices and rents look set to rise markedly in 2018.


Data from a number of cities confirm that demand is high and supply insufficient. In Munich, the vacancy rate is near zero. In Berlin, employment increased by c. 4% in 2017. Frankfurt was already 40,000 residential units short in 2015 – which suggests that 2017’s 15% yoy apartment price increase was not just Brexit-related. Stuttgart’s location in a basin restricts construction activity, contributing to the doubling of apartment prices during the current cycle.
Prices in Hamburg and Düsseldorf have risen strongly as well, even though demand growth has been slower in these two cities than in other metropolitan areas. The local housing-markets might therefore be more sensitive to interest-rate changes than their peers. Still, as our baseline scenario foresees only marginal interest rate increases during 2018, Hamburg and Düsseldorf should experience
price and rent uptrends, too.
Overvaluations are rising, and the risk of a price bubble in the German housing market is increasing. The price uptrend is likely to continue for several years, at least in most major cities in Germany.









The full report is available for download here: >>> The German housing market 2018 - DB Research


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