Posted at 24.03.2017 | | in Market news, News, Press
Achim Amann, an inspirational property entrepreneur who set up the first international flat fee online estate agency in London – and who now heads up Black Label Berlin, is calling for greater honesty and transparency in the property market following a series of recent developments in the city.
Here are his key observations on current trends in the Berlin property market and what international buyers need to know before investing.
- Property prices are rising too quickly. This isn’t healthy as there’s now too much speculation on the market. For example, landowners who sell their projects to developers who then build and sell to clients are pricing future growth in potential rents and income into their prices. This isn’t fair on the developer nor the potential buyers, as it’s pure speculation. These are big investment decisions for our clients so we have to advise that there is a big risk in not getting the rents that you think – or have been told – you will get. We have clients who have bought properties and are trying to let them, but are having difficulty as most locals who are looking to rent can´t afford these high rents anymore.
Yields are currently very low for anyone considering a buy-to-let investment in Berlin (net yield after deduction of costs can be as low as 2% in the city centre), which in the long run, may not be a bad thing as it might prevent the problems the UK market is experiencing.
- Furnished vs unfurnished property. There are pros and cons to buying furnished and unfurnished apartments, and we have noticed high vacancy rates for furnished lettings (sometimes even more than 35% per year). We want to educate buyers about realistic rents and the risk of the high vacancy rate for this type of letting. If you do a furnished letting, please be aware that you may not be able to achieve the rent the seller has promised. We have our own lettings department to tackle this issue and make things less risky for international buyers. We also partner with leading furnished letting agencies in Berlin. Please make sure you get a precise quote on either furnished and unfurnished lettings for that particular property you are looking to buy.
- A shortage of housing stock. We have noticed that developers are not putting new stock on the market in the range between 3.5K – 5,5K EUR per sqm, which we consider to be a reasonable investment price. Nearly all new builds in the city centre are priced at 6K per sqm or more, which is fine for those who are purchasing for self-use as a first or second home, but it’s not a sustainable price on the market for smaller units (35 sqm), which have the potential to generate high rental returns. There is a huge demand for this type of apartment in the city centre.
- The government is putting more pressure on rents. In 2015, the Berlin government introduced a law called Mietpreisspiegel (capped rental income) for existing buildings that are not refurbished, which means owners cannot charge rents above the set market value for the area. The law hasn’t yet been enforced by local government, but this may change as the new Berlin government has promised to put more pressure on rents. People who plan to let out their flats when not using them as a second home should be aware of the potential risk. As a rule, we advise people to consider new builds if they are purchasing a buy-to-let investment. Also furnished lettings will be restricted more and more by Berlin politicians to avoid further supply of furnished lets to the market and to create more standard letting contracts for locals.
“Our aim and ethos at Black Label is to be transparent and honest about current market trends to help people make an informed decision,” says Black Label’s Director & Co-founder, Achim Amann. “We have noticed several trends which are a concern. We are surprised at how much prices per sqm have increased over the past years and what high promises on future rent or capital growth are being made. There is a very high increase of rents and demand is still growing but the speed of growth compared to the Berlin lifestyle, average wages and the city culture is not really healthy for the city spirit. We believe in a stable growth of rents for Berlin that goes align with people’s earnings. Please use the classic rental income per sqm when making an investment decision into a buy to let property in Berlin, not the furnished version. Also speak to more than one estate agent before making your investment decision, talk to a couple of letting agents in town and make sure you are using an international property law firm beside the agent you pick to manage your transaction.
We want our clients to be aware of these issues and to raise awareness within the property industry generally”.