Berlin’s Newest Plan to Curb Rising Rents: Build Higher

For Berlin, it seems the only way is up. Faced with rocketing rents, the city is hoping to build a new neighborhood of 4,700 apartments – but rather than spreading out, the city is building high. The new development will be barely two miles south of the Brandenburg Gate, and its apartment buildings will reach up to 11 floors.

This would hardly make them skyscrapers, but they would be considerably higher than existing buildings nearby, which are mainly early 20th century tenements about five floors in height. While this apparent throwback to Berlin’s postwar mega projects won’t please the anti high-rise brigade, the plan is an opportunity most city mayors could only dream of. The ability to create a big chunk of new, high density housing in a central area already blessed with good transport links seems too good to be true.

And in a way, it is. In a city, there’s never really such thing as an empty space. Saying hello to a fresh crop of apartments would mean saying goodbye to a slab of (scarcely less new) parkland. The neighborhood’s proposed site is the remarkably central former Tempelhof Airport, where flights finally petered out in 2008 due to the short runway and closeness of residential buildings. The airfield has since become a huge park commonly called the Tempelhofer Feld, one many Berliners are so keen on that a city referendum on the building plans is scheduled for May. A potential 2.5 million Berliners will be able to vote directly on the plan, thanks to city laws stating that a referendum must be held if a 173,000 signature threshold is reached on a petition demanding one The Tempelhofer Feld petition reached over 185,000 signatures.

But despite the strong feelings involved, the building work is likely to happen in some form.  A recent survey in the Berliner Zeitung shows a narrow majority in favor of development, while parties critical of the plans – namely the Green and Left parties – are demanding changes rather than a blanket ban.

It’s easy to see why many people love the Tempelhofer Feld as it is. At 878 acres, it’s larger than New York’s Central Park, a wide prairie whose largely treeless expanse has a sweeping openness extremely rare in the heart of a big city. There’s an informal, improvised feel to the place. Kitesurfers now career down the old runway, while fenceless vegetable plots planted by locals create a checkerboard across its lawns. The park is busy all year round, partly because its openness makes it a good place to enjoy Berlin’s limited hours of winter sun.

The city doesn’t really want it gone either. Their plan is for what Germans call Randbebauung, or “round-building.” It involves placing a curve of apartments around its edges, as well as commercial space and a new central library, leaving around 66 percent of the space untouched. The new crescent of buildings may shorten views and shadow some parts, but the park’s central steppe will survive. The decision to construct at double the height of surrounding buildings suggests the course Berlin planning may be taking in the future. By European standards, it’s long been a fairly high city, with 1970s apartment blocks big as ocean liners flanking central streets in East Berlin. A hiatus came after the Wall fell, when Berliners spread out into the Brandenburg region, often to single family houses. Now however, tall is back, and the city is planning a Frank Gehry designed skyscraper, its tallest yet, in the heart of East Berlin. A future Berlin shaped by projects like this may well be yet taller and spikier, but at least it should be more dense than sprawling.
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Berlin’s housing boom has lessons for London

Berlin is becoming a bit more Londonesque. While the buses in Germany’s capital are still yellow, not red, and the locals remain grumpy, the behaviour of housing prices has a British accent. According to property website, asking prices for one-bedroom flats have risen 53 percent in three years. The Bundesbank has warned that property prices are roughly a quarter higher than fundamentals justify. But Berlin’s boom is much less likely to last than London’s.

The main difference is attitude. British policymakers see rising house prices as vote-winning. In Germany, big increases are considered socially disruptive and an electoral danger, because they lead to higher rents. Only 42 percent of Germans own their homes, well below the British two-thirds. German renters are protected from inordinate rent increases and are hard to evict.

The national bias against property speculation is reflected in law and business practices. British-style deposits of merely 5 or 10 percent of a property’s value are unheard of. German banks are legally required to restrict lending to 60-80 percent of value. Mortgage rates are fixed for up to 15 years and transaction costs of up to 10 percent of the purchase price discourage flipping.

Still, supply is reacting far more vigorously to rising demand in Berlin than in London. In Germany’s capital city, new building starts in 2013 equalled 0.7 percent of housing stock – a 40 percent higher ratio than in London. Berlin has the advantage of a large bank of underutilised land, but more important is the lack of the UK’s capital’s ultra-tight planning restrictions.

While the market response has been healthy, the usually stodgy German central bank has warned about excessive valuations. If these verbal interventions do not work, the central bank can turn to its new toolkit of macroprudential measures, including higher liquidity or equity buffers and lower risk limits for banks.

The Buba has left no doubt it is willing to use these instruments. That’s quite different from the Bank of England’s Mark Carney, who is talking down property risks. In the housing market, London could do with some German lessons.

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Berlin Airfield Is Battleground for Scarce Housing: Real Estate

Christoph Breit stands atop a squat lookout tower surveying the former Tempelhof airfield, now a vast park where windsurfers barrel down the runways that had been the city’s lifeline during the 1948 Berlin airlift.

Breit, 38, is in a fight to stop construction of almost 5,000 apartments and a library at the airfield, which since 2010 has served as a recreation area bigger than New York’s Central Park. Breit moved to Berlin 10 years ago and settled in the Neukoelln neighborhood adjacent to the park. He helped collect close to 200,000 signatures to force a May 25 referendum to block the housing, the city’s response to a home shortage.

“Would anyone try to transform Central Park into a housing complex?” he said on a sunny winter morning, pointing to skaters and windsurfers pulled by giant kites along the runways where American planes, nicknamed ‘‘Candy Bombers,’’ once delivered food to a city besieged by the Soviet Army. “There are many other places more suitable for building.”……. (Read full story here)

Low interest rates fuel rush for German ‘concrete gold’

Faced with low interest and savings rates, Germans, who normally prefer to rent, are taking up cheap, 10-year fixed rate mortgages and buying city property

Germany is traditionally known for its renting culture, but a combination of low interest rates and the ongoing uncertainty in the Eurozone is tentatively pushing the German people  onto the property ladder, reports the Financial Times.

The European Central Bank’s base rate of 0.25% has proved less than popular in a land where 10% of the national income is dedicated to savings.  However, this policy has also had the inverse effect of offering would-be homeowners the deal of a lifetime on Germany’s common ten-year fixed-rate mortgages.

Michael Stegerwald, a seller of kitchens in Frankfurt who, in 2013, had his most successful year yet said:  “This phrase ‘betongold’ (‘concrete gold’) is very common.  People here don’t want to own property. But they now feel they must because there’s no interest on savings. All you can do is buy real or concrete gold.”

In Frankfurt’s most expensive district, Westend, prices rose to €6,000 per square metre in 2013 – an increase of almost 25% on 2011 – according to property researcher, BulwienGesa.  Across the city as a whole, prices rose by 18% to €4,000 per square metre.  An apartment of a hundred square metres in Frankfurt now costs around €400,000 euros, up from €340,000 in 2011.

Many professionals in their 30s who, since the 70s, have tended to live in Frankfurt’s suburbs are now coming back to the city and ensuring that previously rundown districts on the city’s fringes such as Ostend, where the ECB’s new headquarters will be located, and Gallus also benefit from rising values.

The Frankfurt property boom is being replicated in cities across Germany.  In Berlin, one of Europe’s most famous low-cost property markets, prices have risen by 14% over the past two years to €3,700 per metre.

André Adami, manager of BulwienGesa’s Berlin branch, says, “In the centre, we have a lot of people who are buying an apartment as an investment. A lot of investors are coming from Spain and Italy. They think Berlin is more stable.”

Where Berlin is seeing investment from the troubled Eurozone economies, investors in Frankfurt are coming both from Europe and further afield.  BulwienGesa’s Frankfurt manager, Sven Carstensen has stated that Asian investors are now keen to own property in the city centre.  The website of one development project in Gallus, called Skyline Boulevard, is now available in English and Chinese, as well as German.

Some however, feel German property is in serious risk of a bubble.  Among these is Germany’s powerful central bank, the Bundesbank, which stated earlier this year that properties in the country’s largest cities are now overvalued by as much as 25%.

However others, particularly in Frankfurt, take a more positive view.  According to Sven Carstensen, there is already limited space in the city for future large-scale developments.  Additionally, the ECB has recently hired 1,000 highly-paid supervisory staff, which many believe will put added pressure on prices.

“Frankfurt’s still growing. That will keep prices high, at least in the central locations,” says Mr Carstensen.


EUR overvaluation contributing to German property boom? – Societe Generale

FXStreet (Barcelona) – Kit Juckes, Global Head of Currency Strategy at Societe Generale comments on Germanys property boom and the effects of rates and EUR overvaluation.

Key Quotes

“The most challenging piece in this morning’s FT though is the one about Germany’s property rush, which is based on concrete gold according to Claire Jones. Sebastien Galy and I have both written about the property boom in Germany before, and it is gathering steam.”

“Frankfurt’s population is growing rapidly. I can’t help thinking that for Germany, Fed policy has delivered rates that are too low.”

“Indeed, while overall Europe has monetary policy that is far too tight and an excess of savings that will continue to threaten deflation, the overvaluation of the Euro is a bigger problem than the level of rates. So is the de-leveraging of the banking system which prevents those rates being available to most borrowers (outside Frankfurt).”

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Germany rental law to put cap on rent hikes in some areas

Germany’s new rental law, due to come into force in 2015, will cap rent increases when properties change hands at 10 percent above average local rates, according to a draft of the measures seen by Reuters.

The law, which is being prepared by Germany’s Justice Minister Heiko Maas, will only apply in areas where the property market is particularly tight although it will exempt newly built and renovated flats, the document showed.

Apart from rent controls, the law will also put limits on brokers’ commission.

The rental law was an election promise of Chancellor Angela Merkel’s conservatives, although it was originally put forward by the centre-left Social Democrats (SPD) before last September’s vote.

Some 40 million people rent property in Germany. Rents have been rising sharply in big cities such as Berlin, Hamburg, Munich, Cologne and Frankfurt, and some people are finding themselves priced out of the market.

Relatively low rental costs have helped to keep the home-ownership ratio low at 46 percent, leaving most people to rent. ($1 = 0.7189 Euros) (Reporting by Holger Hansen; Writing by Madeline Chambers; Editing by Raissa Kasolowsky)
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Berlin has more to offer than you know

It’s easy to get bogged down in the history of Berlin.

Not many towns have so many stories to tell – the Berlin Wall, as well as the legacy of Nazi Germany tend to be the first things that come to mind when people think of one of Europe’s most famous – and infamous – cities.

What many people probably don’t know is that an incredibly eclectic underground culture exists behind the tourist hotspots and museums. This is what makes Berlin so interesting.

Driving around, it’s hard not to notice the graffiti on the walls. This is just one element of the alternative vibe that can be found if you look a bit closer. Riding the underground trains, you find yourself surrounded by young, hip commuters, who seem to come from everywhere but Germany.

When I asked for information from a couple of city kids, I was given an answer in the broadest of New Zealand accents.

As I walked across the buzzing town square of Hackescher Markt, an American girl with wild curly hair and a serene smile caught my eye as she created gigantic bubbles with nothing but string and a kiddie pool filled with water and what must’ve been detergent. Her son, a cute kid with a beanie, made smaller bubbles on the side-lines as people passing by stopped and happily threw coins in a hat.

A few metres away, an Asian man was being questioned by a couple of policemen on patrol. He had a permit to sell T-shirts, but had decided to take advantage of the ornate manhole covers on the square to make prints with paint and paper for eager tourists. They allowed him to finish on condition that he cleaned up and didn’t return the next day. I left carrying a rolled-up print awkwardly under my arm – happy that my Berlin souvenir wasn’t a clichéd snow globe with a piece of the Wall in it.

Later that night we headed off on a “gastro rally tour”. Our tour guide was an Australian woman who has relocated to Berlin because, quite simply, she loved it. Our group was expecting to find ourselves at another run-of-the-mill spot. We couldn’t have been more wrong. Our taxi deposited us outside the uber-snazzy Westin Grand Hotel and as we all headed towards the entrance, our guide ushered us into the alley behind it. We found ourselves surrounded by trash cans and dumpsters, with not another soul in sight.

Everyone giggled nervously as we walked, our South African instincts making us wonder when the big burly guy would jump out and demand our wallets. At the end of the alleyway, a huge chandelier hung from the rooftop. Our guide knocked on a door, which swung open to reveal a club.

This was Cookies Cream, a popular hangout in the city centre. The restaurant epitomised all that is Berlin – a kaleidoscope of different cultures set against the grandeur of a place rich in historical and cultural value.

People visiting the city to get their picture taken at Checkpoint Charlie, which has been recreated as a Disney-style attraction, may never get to see this side of Berlin. However, I’m sure those that have chosen to make the city their home are the ones who relish its extraordinary side.

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