Booming times of the Berlin real estate market seem to come to an end. Why is it? Is it?
Booming times of the Berlin real estate market seem to come to an end although interest will be stable further, but compare to the “steep” increase of prices in the past years, Berlin in particular experiences a break. There are many reasons for this late development with one of them being the "Berlin Rent Price Cap" (Mietendeckel) which causes huge uncertainty and declining willingness to invest. In January 2020, the Berlin State Parliament passed the state law introducing the so-called Berlin rent price cap. As the topic is very complex, read here a great summary by law firm Greenberg Traurig with all important aspects to know about the new Berlin rent price cap.
Read the full comprehensive presentation by Greenberg Traurig here.
Uncertainty will rise further even the senate passed the law, but due to the upcoming legal actions being taken by diverse groups to challenge the rent price cap law before the State of Berlin constitutional court or even consider reviewing the room for injunctive relief (einstweilige Anordnung) in the context of individual constitutional court proceedings, an end is not in sight what still leaves property owner, landlords and tenants uncertain about the legal situation.
Therefore, my advice to my international investors - who own a property facing the rent price cap - is to think about selling. In many times, especially when the property was bought many years ago at prices we can only dream of these days, an imposing capital gain can be achieved even with capital gain taxes need to be paid though. Selling the property might be the best solution anyway, even if the Berlin Rent Price Cap will be rejected by either the State of Berlin constitutional court or the constitutional court. As the German economy is facing more difficult times and the annual influx of new Berliners slows down, we will see the supply of apartments rise. As a result, this will affect sales prices though as we see already a correction phase in the upper end property market with prices being negotiated and reduced in order to close a sale. On the other hand, this opens up more opportunities for buyers, especially wealthy foreigners who got a crush with Berlin anyway.
Be in touch...click here