By Daniel Preis, CSO Domicil Real Estate AG
The homebuyers of tomorrow
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De facto ban on condominium conversions
With the adoption of the Building Land Mobilisation Act into law, Germany’s 16 federal states can now introduce further measures to restrict the conversion of rental apartments into condominiums in tight housing markets. In particular, the subdivision of houses with more than five residential units will now be subject to a municipal approval. In practice, this requirement for municipal approval is tantamount to a ban on condominium conversions, as there are very few, and very narrow, exceptions. These include, for example, a requirement to approve conversions if two-thirds of a building’s tenants want to buy their apartment. In reality, this will very rarely be the case. Experts predict that the tightening will further reduce the supply of apartments on the real estate market over the next few years and that, as a result, prices for new apartments and apartments that have already been approved for conversion will continue to rise.
The rise of the ’burbs
The suburban and exurban areas of Germany’s major metropolises are becoming ever more attractive. As a result of the coronavirus pandemic and rising prices for condominiums in more central areas, a growing number of families are opting to move to more peripheral neighbourhoods. This trend has not only boosted demand for residential properties for sale in the suburbs, but increasingly also townhouses and single-family homes for rent. Property owners in the suburbs can, as a result, expect increased demand, with not only property developers and end consumers but also investors increasingly interested in such properties.
Landlords need to be more sustainable
It is already clear that sustainability and climate change mitigation in the residential real estate sector are set to become increasingly important across Europe over the next few years. In particular, owners and landlords will increasingly need to replace aging heating systems, insulate the facades of their buildings and even generate their own building energy. Although subsidy programmes are being launched to support the necessary retrofitting measures, implementation will be cost- and time-intensive, particularly for smaller landlords. In France, for example, owners of low energy-efficiency apartments – levels F and G on the energy certificate – will no longer be allowed to rent them out from 2028. Based on developments in other European countries, landlords in Germany should be prepared to expect mandatory energy refurbishments in the near future.
