Property market Berlin shifts from renters to buyers
More apartments for sale than for rent
A new property market study (DW reports) shows that more and more people are buying apartments in the German capital, squeezing out low-income renters. Investment groups are also making more large-scale "portfolio" purchases.
Berlin's property market is shifting inexorably from renters to buyers, putting increased pressure on the German capital's cramped rental market, according to the state government's latest property market report. In many inner city districts, there are now more apartments for sale than to rent.
The new report shows a 53-percent increase in the number of conversions from rental properties to owned apartments, and a "soaring increase" of such conversions in central districts like Kreuzberg, Charlottenburg and Schöneberg.
"The massive increase in turnover shows there is an outright run on apartments and buildings in Berlin," said local Left party Bundestag member Caren Lay. "Capital is fleeing to property following the financial market crisis, and profits are being turned due to low interest rate policies."
The report also showed an increase in so-called "portfolio or package purchases," when several separate properties are bundled into one deal. In 2015, the number of package purchases increased by 12 percent compared to 2014 - while the overall amount of money spent increased by as much as 51 percent. This is a relatively new trend, since the same figures both decreased by 15 percent the year before.
"That can't be good for renters," said Wibke Werner, deputy director of Berlin's Mieterverein, the city's tenant association.
Eldorado for property investors
"It's hard to tell [who is buying the apartments], but one part will certainly be investors who are trying to earn money out of the huge demand in Berlin's housing market, because there is still potential for rents to go up in Berlin," Werner told DW.
"This is evidence that big investors and groups of investors are forcing their way onto the property market," said Lay. "Unfortunately, we have to conclude that Berlin has become an Eldorado for real estate speculators."
Werner also believed that the relative lack of low-risk investment opportunities elsewhere was leading renters to buy apartments as a way of securing their pensions. "And of course if it's not a private owner but an investor, then they have a profit interest, and will try to use the potential for raising rents," Werner said.
Rent caps and legal brakes
Berlin still has laws in place that dampen the kind of rampant property investment that exists in London. Apart from a rent cap, property developers can't simply buy up real estate and change its use. "You're not really allowed to leave flats empty for speculation anymore," Werner said.
But the tenants' association has also noted an increase in empty land being bought up and then not built on - an indication that the owners are hoping to sell for higher prices. "But it's relatively complicated to penalize that," said Werner.
Lay doesn't think that Berlin's laws are doing enough - the rent cap introduced last summer has not halted the overall rise in rents. "We have a rent brake that isn't working," she said. "And we have social milieu protection areas which haven't been particularly effective. That's why it would be very important for the state to significantly increase its stock of social housing; that means they would be reserved for those of lower incomes."
Berlin's property prices have recovered rapidly in the past few years following a general depression since the mid-1990s, which left the market looking undervalued to many potential foreign investors.
But the Berlin population itself is still relatively poor compared to other major European cities, making it hard to break the traditional rental culture. "I think things won't change so quickly in Berlin, just because the income situation of the Berlin population won't allow for that," said Werner.
On top of that, as the report noted, there has been a rapid rise in the overall population (around 40,000 new Berliners per year, according to a recent survey), as well as a disproportionate number of single-person households. All this has created a shortage of affordable housing in the city.