2023-03-27 | Reshuffling the cards in Berlins real estate developer market
Reshuffling the cards in Berlins real estate developer market
Against the backdrop of rising real estate prices, developers have built new construction projects in recent years. At their own risk, they have bought plots of land, developed them and built on them. After completion, they now want to sell the individual residential units at the planned prices. But can that still work in 2023? Hasn’t the purchase of a property moved into the unattainable distance for Berliners due to increased inflation and high financing costs?
And what happens when the developers can no longer sell their apartments? How long can they survive without sales? Do they then stop their business? In that case, what then happens to the buyers of a new construction property? Should they be afraid? These and other questions are asked by many customers.
Black Label Properties
With approx. 30 to 50 new-build apartments that we sell on average per year, we are one of the medium-sized brokerage houses in Berlin. Since the turnaround in interest rates, we have observed that demand for new-build apartments has slumped significantly. The prices are too high for most locals. However, many developers are unable to lower prices because construction costs and land prices are too high.
What does this mean? The developers can now either finance longer-term and rent at market rents (it starts at about 18 € cold the m²) or you sell to capital-strong package buyers with a still presentable discount. Individual buyers hardly get a discount. Rather still provide developers a kitchen, help with the purchase incidental expenses such as taxes or brokerage fees and if it goes, is built energetically so that the KFW takes over part of the financing. Keyword passive house and KFW 40.
However, not all developers will realize this. Especially if a lot of mezzanine capital has been used and/or there are investors in the background who expect high returns.
We will be very happy to refer you to good lawyers for real estate law, who will carry out the checks and review the purchase contracts for you.
If you intend to buy a new built property, then that developer has a strong track record and good credit scoring. You can get information about this through Creditreform and references.
Sales contracts in Germany are very well structured and protect buyers. Thus, developers do not start until a minimum number of sales have been realized. Banks usually do not release funds for construction until a sales quota of 30 to 50 % has been reached. You also pay in stages and only pay after a certain construction phase is completed. This is good for buyers, because as long as the construction costs do not run-away during construction and the developer is serious about business, you will receive your apartment.
We expect a number of developers to leave the market in the summer and fall of 2023, the sparrows are already whistling it from the rooftops. This makes it all the more important for you as a buyer: Become active now and investigate the current offers on the market. You as an international client have the strong advantage that you will buy with a larger deposit than most locals. Anyone who believes that it will be cheaper for you as a buyer after developers are leaving the market is mistaken.
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Discuss your questions about the purchase or sale of your property individually, without obligation and free of charge
with Achim Amann | Managing Director of Black Label Immobilien.