Berlin’s Senate aims to introduce Faster Building Act in mid-2024

Christian Gaebler (SPD), Berlin’s Senator for Urban Development, Construction, and Housing, recently told the German Press Agency that the Berlin Senate’s new Faster Building Act is now expected by mid-2024. Previously, Governing Mayor Kai Wegner (CDU) had declared on 4 August 2023 that the law was due to come into force “this year”. Over the past few months, hundreds of comments, suggestions and proposals from associations and municipalities have been evaluated and sent to the respective administrations for feedback.

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Rents continue to rise rapidly in Germany’s major cities

An analysis by real estate service provider JLL shows that rent increases in German cities are still accelerating. In total, JLL analysed around 35,000 rental offers and 41,000 sale listings. In the second half of 2023, asking rents in Germany’s eight largest cities – Berlin, Hamburg, Munich, Cologne, Frankfurt, Düsseldorf, Stuttgart, and Leipzig – rose by an average of 8.2 per cent compared to the same period of the previous year.

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Signa’s construction projects in Berlin are insolvent

Having announced a halt to construction on several Berlin projects in November, the troubled Austrian real estate group Signa filed for bankruptcy for a number of these projects at the beginning of the year, reports the Süddeutsche Zeitung. The reason for the latest developments is “a cascade of insolvencies from top to bottom”, explains Gerhard Weinhofer, spokesman for the credit rating agency Creditreform.

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German Chancellor calls for more new development areas

Federal Chancellor Olaf Scholz (SPD) called for a radical shift in housing construction policy at an event organised by the Heilbronner Stimme on Sunday evening, reports FAZ. Scholz attributed the lack of affordable housing to a shortage of building land, rather than high interest rates. He proposed a solution: “Across Germany as a whole, we probably need twenty or so new city districts in the most sought-after cities and regions – just like those built in the1970s”. This represents a significant departure from traditional policies, which were, in part, designed to seal less land. Reiner Braun, CEO of the analysis company Empirica, offered a critical assessment: “We have been telling politicians for more than a decade that we urgently need more building land – so far largely without success”. Braun is by no means alone in recognising that the key lies not only in making increased use of previously developed and sealed areas (densification), but also in the development of entirely new areas. As densification is comparatively expensive, Braun explained, and the development of greenfield sites is less disruptive and less complex, modular construction could realistically be expected to deliver more affordable housing at rents of EUR 16.00-17.00 per square metre, rather than the standard EUR 20.00. Other industry representatives took up the Chancellor’s call and pointed to the new Seestadt Aspern district in Vienna as a positive example.

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Signa halts work on all Berlin construction projects

According to Rundfunk Berlin-Brandenburg (rbb), the Austrian property group Signa has suspended all of its construction projects in Berlin, adding a new dimension to the crisis engulfing the company founded by René Benko. A range of prestigious projects, including the planned upgrade of the Karstadt store on Hermannplatz and infrastructure projects such as the redevelopment of the Bremsenwerk at Ostkreuz are all affected. The construction freeze applies to all projects in Berlin, regardless of whether they are still in the planning phase or construction is already underway, as is the case on Passauer Strasse and Nürnberger Strasse (City West). Since the summer, the financial crisis engulfing Signa has prompted an exodus of investors. For example, Commerzbank subsidiary Commerz Real pulled out of a contract for the construction of a 32-storey tower block on Alexanderplatz. As the scale of the crisis escalated, Benko relinquished control of the Signa Group at the beginning of the month and is said to have transferred his voting rights to the restructuring expert Arndt Geiwitz, who has been entrusted with getting the group back on track. There a number of factors driving the financial turbulence within the Signa Group, including rising interest rates, which triggered EUR 1.17 billion of devaluations to the SIGNA Prime Selection AG portfolio.

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Residential property prices continue to fall in the third quarter

In mid-November, the Kiel Institute for the World Economy (IfW) reported continued price declines for German residential property in the third quarter. The latest update of the German Real Estate Index (GREIX), compiled in collaboration between IfW and ECONtribute, shows declining valuations in all housing segments. Compared to the previous quarter, prices for apartments fell by 1.5 per cent, prices for single-family homes by 3.2 per cent. and prices for multi-family homes by 5.9 per cent. Compared to the same quarter of the previous year, GREIX indicates even sharper corrections in valuations (prices for apartments down by 10.5 per cent; single-family homes down 12.1 per cent; and multi-family homes down 24.0 per cent). The number of properties sold also fell significantly, with around a third fewer sales across all market segments compared to the same quarter of the previous year. However, there are strong regional differences and outliers. For example, prices for apartments fell across the board in all of Germany’s Top-7 cities with the exception of Cologne, where they rose by 1.1 per cent. Berlin registered a moderate decline of 0.8 per cent.

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Adler Group resigns from Housing Alliance

Having joined other Berlin real estate companies, the Berlin Senate and other industry representatives as a co-signatory to the “Alliance for New Housing Construction and Affordable Housing”, the Adler Group has now announced it has left the alliance, DER SPIEGEL reports. The company’s exit is due to the recent rent increases it implemented that significantly exceed the framework set out in the alliance. In addition to new construction targets and agreements on tenant protection, the alliance also stipulated that private housing companies may only increase rents by a maximum of eleven percent over any three-year period. This was a voluntary concession on the part of the real estate industry, as the statutory leeway for increases in Berlin is actually 15 percent over three years, provided that any increase does not exceed the local comparative rent specified in the city’s official rent index. The Adler Group did not disclose the precise increases, but in several cases the company is said to have fully utilised the 15 percent cap. Of the approximately 26,000 rental apartments owned by the Adler Group at the end of 2022, around 17,000 are in Berlin.

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Condominiums in Berlin are becoming more expensive again

According to the Greix real estate price index published by the Kiel Institute for the World Economy (IfW), the downward real estate price spiral in Berlin has come to a provisional end, reports the Tagesspiegel. The index is based on prices achieved in notarised property sales. According to the report, prices for condominiums in Berlin rose by 1.3 percent between April and June 2023 compared to the same quarter of the previous year. For the first quarter of 2023, the Expert Committee for Property Values, which also prepares market analyses based on notarised property contracts, had reported a decline in prices as well as a dramatic drop in transaction volumes and numbers. The committee also presented an evaluation of transactions concluded last year and identified a year-on-year decline in Berlin of 21 percent compared to 2021. Nevertheless, the average purchase price for condominiums rose by five percent to EUR 5,646 per square metre. Commenting on these figures, Ulrike Hamann, Managing Director of the Berlin Tenants’ Association, said: “Despite the decline in sales and transaction volumes, we do not expect rents to ease, as purchase prices for condominiums in particular are still at a high level”.

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Berlin’s Faster Building Act to come before the end of 2023

Berlin’s governing mayor Kai Wegner (CDU) has announced that the Schneller-Bauen-Gesetz (Faster Building Act), which is included in the current CDU-SPD government’s coalition agreement, will be launched by the Senate this year. “The all-important thing is that we revive the housing market, that there are more vacancies, that there are more apartment listings”, Wegner said in an interview with 105’5 Spreeradio. To this end, he explained, the state’s building code needed be reformed to speed up approval processes and boost housing construction. In their coalition agreement, the CDU and SPD agreed on a new target of 20,000 new apartments per year, including 5,000 in social housing. The state-owned housing companies are supposed to build around 6,500 of these new apartments a year. Members of the “Alliance for New Housing Construction and Affordable Housing” are also to benefit from further incentives. The main goal, however, is to accelerate planning and approval procedures through shorter deadlines, faster procedures, use of Section 34 of the German Building Code (BauGB) for building permits and the examination of a possible presumption of approval for construction projects.

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Berlin real estate market is all set for the challenges of climate change

The Savills Climate Resilient Cities Index has named Berlin the most climate resilient real estate market among 23 selected cities. The other top spots go to Toronto, Paris and Madrid. The study focuses on how 23 of the world’s largest, wealthiest and most populous cities are fortifying themselves against climate-related events and analyses a range of factors, including geography, the proportion of ESG-certified properties and public authorities’ climate risk planning. Temperature and precipitation changes over the past decade, elevation, groundwater volume and potential exposure to natural disasters were also considered. Although all cities still have work to do and Berlin is also affected by periods of drought, severe weather and heavy rain, the German capital picks up lots of points for its location, having the second-highest proportion of certified properties at 1.5 per cent, and its strong climate policy measures.

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