Ausländer Raus

Mayor suggests locking out foreign investors from Berlin real estate

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And they both have TV towers too: Auckland, New Zealand, on the right and Berlin on the left. Source: DPA / Wikimedia Commons

Germany’s capital is looking into preventing foreign real estate investors from buying Berlin real estate, the city’s mayor has told a German newspaper. Berlin Mayor Michael Müller appears to have got the idea from a law in New Zealand that the tiny country hopes will curb rising home prices.

“We are thinking about that too,” Mayor Müller told the Frankfurter Allgemeine Zeitung. “The [Berlin] finance senator is researching suggestions on how to impede speculation in the housing market.”

This month New Zealand decided it would only allow citizens or permanent residents to buy existing single-family housing in the country. Foreigners may still buy into new apartment constructions and are also allowed to buy new single-family homes.

Although foreigners buy up only around 3.3 percent of property in New Zealand altogether, in certain areas – such as the country’s largest city, Auckland – that share could be as high as 60 percent, depending on how numbers are interpreted.

Berlin, the best prospect

Interestingly, Berlin currently has a lot in common with the market in the far-smaller country on the other side of the world. According to the Berlin senate, up to 68 percent of Berlin apartments were sold to foreigners in 2015: That adds up to around two-out-of-every-three apartments sold. And that’s a massive increase: In 2009, only 14 percent were sold to foreigners. It’s also a higher percentage than the rest of the country: Handelsblatt research indicates that up to 40 percent of all German apartments and around 50 percent of business properties are sold to international investors.

In New Zealand, places like Auckland have also seen huge increases in property values for several years now. Prices there rose a whopping 75 percent over just four years and in 2016, the average price for a house in Auckland hit NZ$1 million (around €573,839) which took it higher than the average property price in London, still one of the most expensive cities in the world to buy a home.

Berlin’s real estate market hasn’t been that wild – most likely due to German rent controls, which New Zealand doesn’t have – but it has now started to compete with those inflated numbers. According to property consultancy Knight Frank, average property prices in the German capital rose by 20.5 percent in 2017, and have gone up by more than 120 percent since 2004.

German real estate – and not just in Berlin, but also in Hamburg, Munich and Frankfurt – is seen as attractive to foreign investors for a number of reasons: social stability, government services, a central European position, good living conditions and the threat of Brexit all increase the appeal. The trend to invest in property here does not appear to be diminishing either.

Consultancy PWC put Berlin, home to 3.7 million people, at the top of its list for investment prospects in 2018 and named it as the second-most active property market in Europe, after London. And while the Bundesbank has warned that the city’s property is overvalued, an ever-growing population, apartments that still cost less than in other major European capitals and cheap interest rates mean Berlin’s appeal isn’t going away anytime soon either.

18 p29 German Real Estate High-01

Berlin’s reputation for creativity and its burgeoning start-up scene are increasingly making an apartment here into something of a “status symbol” for Chinese investors, one German real estate agent told local media. A few years ago Germans doing business in China were still explaining where Berlin was, he added. Not any more.

Mr. Müller’s administration sees all that as a little problematic. In a report published earlier this year, the trade-union-linked Hans Böckler Foundation found that Germany was missing 1.9 million affordable apartments, of which 310,000 are lacking in Berlin. In New Zealand, Auckland is apparently missing around 45,000 affordable rental units. As a rough percentage per head of population, Berlin’s housing shortage (8.93 percent) is actually worse than Auckland’s (around 1.6 percent).

Could anti-foreigner rules work here?

But does this mean that Berlin will now go so far as to impose the same sorts of anti-foreigner rules that New Zealand has? New Zealand’s so-called Overseas Investment Amendment Bill, which should take effect within the next two months, is part of a promise the country’s new center-left Labor party government made to deal with the country’s shortage of affordable housing. And in terms of political philosophy, Berlin does indeed have a lot in common with the small South Pacific country: It is also being run by a left-wing administration made up of Social Democrats, the Greens and the Left party.

But in Berlin’s case, it would be a lot trickier to impose those kinds of rules. For example, property buyers from other European Union countries cannot be stopped: That’s one of the conditions of bloc membership.

This is more about hedge funds and big business, Caren Lay, the Left party spokesperson on rent and construction, told Berlin-based daily, Taggespiegel. When they’re buying up whole streets, it doesn’t matter whether they’re German or international.

Additionally you often can’t tell who actually owns a property, or if a shell company is involved, politicians say. Which is why the property register should be changed so that it is clear who really owns a property, adds Lisa Paus, a spokesperson on financial matters for the Green party.

More likely than a ban on foreign buyers right now, are more rules and possibly more taxes. The Berlin Senate is currently working on closing several tax loopholes and looking into amending property tax and construction permissions to discourage speculators. They already passed a law in 2016 that gives state housing associations precedence – right of first refusal – when it comes to real estate sales. Foreign real estate buyers can probably expect more to come.

Cathrin Schaer is an editor with Handelsblatt Global. To contact the author: schaer.handelsblatt@gmail.com

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