Donnerstag, 27. November 2008

Berlin rental yields and real estate market in the financial crisis


Though there was a construction boom in the 1990s after the unification of East and West Germany, the property market in Germany has been relatively flat over the past decade, according to Tobias Just, head of real estate research for Deutsche Bank. Prices are growing slightly in desirable markets like Berlin and Munich, but Mr. Just said most markets were holding steady or experiencing a slight downturn. “We haven’t had a rapid growth period like other markets,” he said, “so there is nothing to correct.” The stability may also be ascribed to Germany’s conservative mortgage system. Over 90 percent of the mortgages issued in Germany have fixed interest rates, and borrowers typically put down 30 percent of the purchase price. “This is a nice cocktail to prevent prices from going through the roof,” Mr. Just said.

Germany’s tenant-friendly laws are another factor in keeping property prices down. Rent control is strict, and evictions are slow and expensive for property owners. The laws favor tenants because “most of the electorate is renting,” he said. Roughly 50 percent of all residential units in Germany are rentals, and many are owned by the government or by nonprofit public welfare agencies. Although there was an influx of foreign investors buying rental units from 2003 to 2006, prices stayed stagnant because of an oversupply of rental units.

The market for luxury homes in the Munich area is small but strong, according to Christian Ehbauer, owner of Re/Max Exclusive in Gruenwald. Older luxury condominiums in Munich cost 6,000 to 9,000 euros per square meter ($695 to $1,040 per square foot), but some new units sell for as much as 12,000 to 16,000 euros per square meter ($1,390 to $1,850 per square foot).
Well-appointed single-family homes in Gruenwald or Starnberg, suburbs south of Munich, cost 1.4 million to 2.8 million euros ($1.7 million to $3.5 million), but Mr. Ehbauer has seen mansions with lake frontage in Starnberg sell for as much as 8 to 12 million euros ($1 million to $15 million).


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