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Karl-Marx-Allee in Berlin
Karl-Marx-Allee in Berlin © [bli]

WHAT EFFECTS DO THE REPURCHASES IN KARL-MARX-ALLEE HAVE ON THE BERLIN REAL ESTATE MARKET?

The topic has been on everyone’s lips for weeks and is not only hotly debated in the Berlin real estate industry.

According to a recent → article in the German newspaper the ‘Tagesspiegel’ from 10.01.2019, the repurchases of the apartments in the Karl-Marx-Allee could cost the urban housing company ‘Gewobag’ up to 100 million euros. This has occurred following the ongoing → protests by tenants over the last few weeks against the sale to the property giant ‘Deutsche Wohnen’. The tenants were afraid of being exposed to unsustainable rent increases following the sale.

At a → press conference on 11th January, the Governing Mayor Michael Müller (SPD) announced he wanted to buy back the entire housing stock of the former housing company GSW from the controversial real estate group Deutsche Wohnen. If these plans were to be implemented, it would cost the country at least seven billion euros.

But let’s first look back at recent events in Berlin.

At the end of last year, the state-owned Gewobag bought back 316 apartments in Friedrichshain following one of the Berlin Senate’s most unprecedented campaigns ever in order to ensure that those properties would not go to the speculative real estate company. This unusual state deal to save urban housing however is not widely praised. Achim Amann, co-founder of Black Label Properties says: “For the 100 million euros which it will cost the state, only rented apartments are bought back. I calculated what could be rebuilt with this amount of taxpayers’ money. With 100 million euros, the state could create new living spaces totalling 28,571 square meters with a price per square meter of 3,500 euros. If you take a 70 square meter apartment as an average size, 408 new apartments could be created – if you assume three people would live in each apartment, then an additional 1224 people in Berlin would be able to rent an apartment at an affordable price”.

In recent weeks, there has been a strong and clear response to this controversial issue of Berlin tenants and investors international real estate agent’s office:

“The consequence of the Karl-Marx-Allee making front covers for weeks in Berlin shows that many other tenants in Berlin now understand how uncertain their own leases can be given that the city is even willing to buy back rented living space for 3,500 euros per square meter for individual tenants. We have more and more inquiries from tenants who want to buy their own apartment or even from investors who like to buy and then rent out an apartment in Berlin. We are therefore currently experiencing a real estate market that is being driven by the Berlin Senate, which is further fuelling the demand for property. For the Berlin taxpayer, the current process is a scandal. In the end, who will pay for the repurchased flats and what will happen to the rents? The state will not be able to avoid significant rent increases in the near future to justify to the taxpayer its investment in the housing market” argues Achim Amann.

As has been said time and time again, new housing urgently needs to be created. This is the only solution to solve thr problems of the current Berlin property market.

The Berlin government needs to quickly emerge from its dusty administrative apparatus. The example in Karl-Marx-Allee has shown that the Senate is more than capable of reacting unbureaucratically and quickly to current events. Time and time again, Berlin politicians have been advised to prioritise the creation of small and medium-sized apartments in the low-price range. “We wonder when the Berlin Senate will finally listen to us” concludes Achim Amann.

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