Our Berlin Wall is coming down!

It’s time to tear down our Berlin Wall! The paper-thin walls built after WWII in our 1914 Altbau must go! They alter the original plan of The Flat and we want to restore the prussian beauty of the magnificient ceiling (almost 4m) and boiseries.

We have checked the materials: the big walls are very sound, the ceiling structure is very traditional and is in pristine condition, it looks as it was put together yesterday, with its bamboo light structure. That one is going to stay there. The ugly 70s plastic fake wood ceiling cover is going.

Also the beautiful old oak parquet is ok and is definitely going to stay. The heavy iron heating system is fabulous…as the arched window is one of the reasons why we bought this flat…but first of all, let’s get rid of those walls added 60 years ago…

Location, location, location!

Just back from beautiful Berlin dressed up for Fall, and here is an article on the real estate market.

Location is the most important factor. This is why you need good shoes (and a bike) when looking for flats. You can indeed find something very expensive and hype, or very cheap but in no-man’s-land.

My personal feeling is that during this phase of the financial crisis Sellers who are individuals are waiting before parting with their properties, because they do not feel so confident about holding cash.

At the same time, there could be financial institutions who had borrowed in order to do big developments who may give up. So…the market is in wait-and-see mode. Keep your options open, then…

If you click the title you will see also many comments to this article. You already know AflatinBerlin’s view…

a) Berlin is a value story, not a speculation one – that was a few years back…no quick bucks here.

b) Berlin Maklers are very professional. It is true that the majority do not speak English but the Expose’ are so detailed and the descriptions so close to the reality that you can do your scouting even if you do not speak German. When you get closer to the transaction you will ask for a professional translator’s help…the German Embassy provides always a list of professionals you can trust.

c) there is not just Plattenbauten (=monotone apartment blocks), so…look for location, location, location!

d) there is more to it than Prenzlauerberg!! (we are going West)

Timesonline October 17, 2008

Berlin is cool and property is remarkably affordable

Apartments in the trendy parts of the German capital go for as little as GBP 45,000

Berlin is pinning its hopes on the young. More than half its population is below the age of 35, media companies are flocking to the city and, with three excellent universities, it is establishing itself as the biotech and research capital of Germany.

The Government has invested €75billion (£59 billion) to improve the infrastructure of the city, enticing expatriates to find a home there or invest in residential properties. This, combined with numerous cultural and scientific places of interest, is only adding to the city’s attraction.

The recent privatisation of the public housing stock has led to a small increase in the number of homeowners. However, the city has a strong rental culture – only 14 per cent of local people own their home – and with the rents low and laws heavily favouring the tenant, there is little to drive the domestic market.

Charles Peerless, a director of Winkworth’s international department, concurs: “Berlin is exactly what the current housing market needs. With its huge rental market, it is a safe investment. The ‘less risk and less reward’ strategy is what most long-term investors are choosing.”

The choice in Berlin ranges from the former East German high-rise blocks near Alexanderplatz and the experimental living communities of Kreuzberg to the Neo-Classical buildings of Prenzlauer Berg and Friedrichshain. The latter are the most popular with foreign investors.

These large apartment blocks, with their elegant stucco façades, were built in the early part of the 20th century and offer spacious, high-ceilinged accommodation that is usually ranged around an enclosed garden square. Most of these properties have been sold off in volume to investment companies that are extensively refurbishing, adding central heating, double glazing and modern kitchens and bathrooms. The buildings have been re-roofed, the communal gardens landscaped and all interiors redecorated, with the aim of increasing rents and, in turn, improving capital values.

Andreas Pichotta is one such developer. As a passionate Berliner and admirer of the city’s architecture, he makes his projects as much a labour of love as an investment, although he knows what will make him money. “The most important part of the investment business is getting the right location,” he says. “There is an abundance of very cheap, unrefurbished property in the city but if you buy in the wrong place you are doomed.”

He uses his local knowledge to choose the buildings that he buys and refurbishes with great care. He has made good investments in Prenzlauer Berg and Friedrichshain. Prenzlauer Berg is an area of the city undergoing a renaissance. There is an abundance of restaurants, cafés, bars and eclectic boutiques. Many of Berlin’s media, arts and student population live here. It was not bombed in the Second World War so there is a wealth of old-style apartment blocks. Many have been restored to enhance their traditional features, creating picturesque squares where regular farmers’ markets attract affluent locals.

The area has the highest birth rate in Germany. It became very fashionable in the late 1990s and those who moved there then are now in their 30s, young professionals with families, looking for larger apartments. The location is perfect for commuting into the city and, accordingly, rents are beginning to rise.

Perhaps an even better investment might be the slightly shabbier area of Friedrichshain, in East Berlin, which contrasts with the more gentrified and expensive areas of Prenzlauer Berg and Mitte. After the Berlin Wall came down, Friedrichshain began to develop a reputation as a young district. Its lower rents attracted artists and students; its multitude of empty flats also attracted the attention of West Berlin squatters. It retains its slightly run-down atmosphere – which gives it its character.

(excerpt)

Zehlendorf and the 60s

In the New York Times, an article with a nice slide-show about a refurbishing done by an american couple. Excerpt…

Within Berlin, a Modern Suburban Home

Richard L. Harbus for The New York Times

Harvey Friedman and Cynthia Barcomi-Friedman live in a modern, two-story building in the Zehlendorf district of Berlin.

It isn’t every day that you find a wild boar and its 10 babies wandering around a city neighborhood.

But for Harvey Friedman, a Pittsburgh-born actor, life in Berlin has included a series of such encounters. And when he describes them, his theatrical background comes in handy. (Mr. Friedman will soon be seen in American theaters as Joseph Goebbels, the Nazi propagandist, in “Valkyrie,” starring Tom Cruise, which is scheduled for release Dec. 26.) Mr. Friedman stands and flaps his arms to re-enact the flight of a giant crane, which recently descended from the roof of his house in the Zehlendorf district. He has also seen foxes rummaging through the trash.

Mr. Friedman has been a resident of this upscale neighborhood — and an acquaintance of its wild inhabitants — since 2005, when he bought a home here with his wife, Cynthia Barcomi Friedman, a Seattle native who owns two popular Berlin coffee houses, both called Barcomi’s.

In stark contrast to the sumptuous villas that line the streets in Zehlendorf, the Friedmans’ home is a modern two-story building in white. A boxy room that juts out from the first floor is in the Bauhaus style, Mr. Friedman said. “Bauhaus only went to 1933,” he added. “However, the influence is completely manifested here. There is nothing ostentatious. Form follows function. This is just a living room with a view,” he said pointing to the herb garden through the window.

Built in the 1960s, the property was only the second place that the family viewed after deciding to buy into Berlin’s bargain-filled housing market. “You couldn’t buy a one-bedroom flat in London for what we paid for this house,” said Mr. Friedman, who declined to disclose the purchase price.

Houses in the neighborhood average around 3,000 euros per square meter ($390 per square foot), according to area real estate agents, who note that redevelopment of a former United States military base in Zehlendorf has attracted foreign investors.

“Prices in Zehlendorf have always been pretty stable,” said Brian O’Connor of the Berlin-based AdHoc Immobilien. “It has always been a middle-class West German neighborhood. But in private home sales, you are more likely to see foreigners invest in more central areas like Mitte or Prenzlauerberg.”

The 250-square-meter (2,690-square-foot) home sits on 1,400 square meters (a third of an acre) of land, along with 13 pine trees.

The Friedmans have retained the house’s ’60s-style décor, with Mrs. Barcomi Friedman bringing period artwork and furniture from her late mother’s home in Seattle to fill the living room.

Outdoors, in addition to the herb garden, there is a pond, and a garage that houses Mr. Friedman’s 1979 MG Midget. There also is a long stone structure that the family uses to hold firewood and other odds and ends. Mr. Friedman suggested, over a cigar on the patio, that it must have been built as a bomb shelter. “It is so solid,” he said. “I’m sure that is what the original owner had in mind.”

The neighborhood is close to the Schlachtensee and Krumme Lanke lakes and sprawling local forests, where Berliners often come to swim and hike. The Friedmans say the large houses in the district and its slow pace of life remind them of American suburbs.

But there are differences. “It is not as hectic here as in the U.S.,” Mrs. Barcomi Friedman said. “I feel the kids are really safe, and you don’t have the fear factor you have over there.”

Flight to quality: long-term investors eyeing Berlin?

An interesting article about the not so sexy, not so leveraged, not so spectacular Berlin real estate market. There was no bubble, there is value for money, and in these uncertain times Germany is perceived as being the uber-safe location in Europe. The prudent authors of AflatinBerlin agree with this view! ;D

German property may soon lure sovereign wealth

The Guardian

By Dave Graham

BERLIN, Oct 9 (Reuters) - Sovereign wealth funds (SWFs) from Asia and oil-rich nations may be set to jump in to the German real estate market, helping to support a sector which has been knocked down but not out by the financial crisis.

Sales of commercial property surged to record levels in Europe’s biggest economy last year, but they slumped in the first half of this year as bank losses, the credit crunch and fears about the economic outlook dampened investor appetite.

Banks and other institutional investors have scrambled to hoard cash as money markets froze, which should open the door for cash-rich funds from China, Singapore and oil producers in the Gulf region, said DZ Bank analyst Christine Schaefer.

“You have these big state funds considering acquisitions,” she said. “And the Russians may be looking to make strategic investments here too. Germany is a stable option.”

Peter Starke, head of the investment division at real estate firm Aengevelt, said the publicity-shy funds were probably already buying in Germany via specially created holdings.

“I can think of two players from the Arabian region whom I strongly suspect are backed by wealth funds,” he said. “But the thing is, they don’t exactly walk around with signs around their necks saying ’sovereign wealth fund ABC from country XY’.”

If SWFs invest enough to support or even boost property prices, it should help stabilise investment and domestic consumption, said MM Warburg economist Carsten Klude.

In contrast to countries like Spain, Britain and Ireland, Germany did not experience a major housing boom in past years. As a result, its residential market has held steady in 2008, helping offset a big drop in commercial property transactions.

Marcus Lemli, capital markets chief for property services firm Jones Lang LaSalle in Germany, says commercial turnover could drop to as little as 20 billion euros ($27.4 billion) in 2008 from a record 55 billion last year.

NO MORE LEVERAGING

The correction has been felt right across the country.

In the first half of 2008, revenue from sales of office, retail and other business premises were down by 75 percent in Berlin, the biggest single market, official data show.

Investment in offices in Cologne fell 82 percent over the same period, and by 68 percent in Munich. In Duesseldorf, spending on all types of real estate was down by half.

The drop in activity reflects the disappearance of highly leveraged foreign financial investors, who bought up big German portfolios before the credit crunch hit.

Even if liquidity returns to credit markets soon, some observers say investment will be tailored to long-term returns of the kind favoured by SWFs and German open-ended funds.

For now, though, investors remain cautious and prices may need to fall further before SWFs part with big sums of money.

“A lot of people also think we’re heading for a recession, though we’re not actually there yet,” said Tobias Just, a property expert at Deutsche Bank in Frankfurt. “These new investors will need more certainty about this before they move.”

A government source told Reuters on Wednesday that Berlin would soon cut its 2009 growth forecast for Germany to below 0.5 percent from a current estimate of 1.2 percent.

For now, the property market itself is giving little away, said Berlin estate agent Gottfried Kupsch.

“Basically nothing else will be sold this year,” he said of the capital. “What we’re hearing is that banks have closed their books for the year. It’ll probably last till February at least.”

INDIRECT STAKES

Germany’s housing market, where the majority of homes are rented, is also seen as a safe, if unspectacular bet.

House prices fell in Britain by over 12 percent in August year-on-year, and in Spain by nearly 5 percent, industry figures show. German house prices, by contrast, were broadly flat this summer, according to data from financial services firm Hypoport.

JLL’s Lemli said the SWFs which enter Germany are likely to buy stakes in property management firms rather than invest directly — a strategy that is already underway in Europe.

On Tuesday, the Singapore government’s wealth fund said it had raised its stake in U.K. real estate company British Land Co Plc to more than six percent.

SWFs could invest as much as $725 billion in global commercial real estate by end-2015, CBRE forecast last month.

One source of bargains may be asset sales by cash-strapped firms as the credit squeeze reaches the corporate sector.

“I think there will be more deals where owner-occupier retailers are pushing the margins and keen to sell their real estate,” said Iryna Pylypchuk, an analyst at property consultancy CB Richard Ellis (CBRE).

“And I think there is going to be more pressure from the banks. So I think market activity will pick up later this year.”

(Editing by Patrick Graham)

Frugal times

Yesterday I was in Madrid and…I did not buy a single thing. It would not normally be clothes or shoes. But books…I cannot resist buying a book when in an airport (especially at beautiful Barajas). Or a dvd of a film which did not come in the italian film circuit. The fact is, I could not do it. The ambiance is just too bad.

The only thing I fancy buying now are tiles for The Flat…

Renovierung, ristrutturazione, refurbishing!

Today there is an interesting article on Deutsche Welle, about an italo-german pair refurbishing flats in Prenzl’berg on a big scale. It’s all about mixing Prussia and italian style, affordable prices in Berlin and entrepreneurial flair. It’s also about a lot of money, and a lot of property.

On a much smaller scale over the next weeks Mein Mann and I will start working on the refurbishment of The Flat. We now have The Project, we need to understand exactly the operational details, order the materials in Berlin (shop locally!) and off we go.

We did our share of number crunching, magazine-reading, scenario-building now we’ve got to start. Also because…the Wohngeld is running! So, we’re reassured of the fact that:

- YES, it was a good idea to buy a flat in Berlin, the price was right and the value was great;

- YES, with the present market turmoil it is even a better idea to invest a bit of extra money in refurbishing The Flat and bringing it to extert its full potential, in the beautiful Kiez;

- YES, in these uncertain times, with such negative newsflow, it is nice to be working on a HARDWARE project, in parallel with those daily worries (inflation, bad news, economic meltdown und so weiter).

One year ago we were emotionally in the no-man’s-land in between our August enthousiastic scouting trip to Berlin (cum-badly-failed-attempt to buy a flat), and the November trip to the Hauptstadt, when Mein Mann found the hidden gem, The Flat.

So we were floating in that lukewarmish atmosphere. We had invested all our holidays on the project. We were disappointed by the first unsuccessful attempt. But we were determined to get over it and be proud owners of our flat by Christmas. We signed our contract on December 20th!

Sometimes in between signing the contact and paying the price/getting the ownership of the flat a few MONTHS can elapse, rather than a few weeks, and that was indeed the case for us. A bit frustrating but worth waiting. After getting the possession of the keys and of The Flat, we’ve been paying taxes to the Finanzamt, opened a bank account, set up utility accounts, have the project prepared and now we’ve just to sign an insurance contract, then the refurbishing can start.

Needless to say we’ve seen many many other flats in the meantime. That is always a lateral and nosy way of visiting the town, plus it’s a very useful exercise. Each time we were reassured on the price-quality relationship of what we had bought. That is a nice feeling indeed. Especially when you’re still facing costs and no revenues yet are flowing in your hands.

We think we “prüften die Angebote sehr genau und pickten uns aus den vielen Objekten am Markt die Rosinen heraus“, we had done our homework, carefully analyzed the market, and cherry-picked successfully.

If you are interested in buying a flat in Berlin, go and see as many flats and as many Kiez as you can. This is the best way to find really what you are looking for. Exercise your personal Guts Feeling, endure a few disappointments, get a feel for the Sense of Place and stick with your list of criteria. Be they sultanas or cherries, you will find the ones you are looking for.

That said, we’re no real estate magnates like the Stoffel or fashion heirs like the Stefanel, but we have an idea or two about refurbishing without destroying. Leveraging hidden beauty without arm-twisting the sense of place.

We want to make the prussian linear beauty of the The Flat blossom, it’s concealed behind a few post-war thin postiche walls, hideous wallpapers and plastic flooring but you can feel it’s definitely there. Yet The Flat must also feel contemporary, and user-friendly too. And the costs must remain down to earth.

Coherence is our guiding muse: with the Altbau, the Kiez, the history of the Bayerisches Viertel, our own taste…and our budget.

Transaction costs

Transaction costs in Germany are indeed scary if you look at them purely in % terms: up to 13%! But in absolute terms, that depends on what sort of amount you apply the % upon…so back to square one…if your target is 1,000eur/sqm, that is not so expensive.

We found that this website is quite clear in explaining the cost structures and comparing countries. Have a look. Not so many articles but useful tables and information about tenants, owner, legal framework etc.

Roughly speaking you must reckon with about a 13% extra cost if you are buying with the help of an agent (Makler). Flats are good value for money, but include that transaction cost in your budget. If you are buying from the seller it will be cheaper of course, in that case you will pay just the taxes and your Notar and registration fees…plus those cheap Easyjet/Ryanair/AirBerlin/GermanWings air tickets, and probably one or two professional translation services, if your legal German language skills are a bit dusty.