“Buy on bad news, sell on good news,” goes an old stock market adage that people like John Templeton or Warren Buffett took to heart and got rich. For the time being, market players hear virtually nothing but glad tidings from the housing market in Berlin. While this does not necessarily imply that now is the time to sell your houses or apartments in Berlin, property owners are well advised to give it serious thought.
Week after week, the good news for investors keep pouring in:
- According to the recent survey “Emerging Trends in Real Estate Europe 2015,” Berlin is the most popular investment location for international investors. Since 2006, the Urban Land Institute and the auditing firm PwC have polled 500 market experts in Europe. London, which used to be the star performer, slipped five spots down this year and currently ranks tenth. Inversely, Berlin ascended three ranks to take the lead.
- A recent survey by the world‘s largest estate agency CBRE concluded that rents in Berlin grew by 6.6 percent last year. Compared to the year before (+6.9 percent), the growth rate slowed but slightly. Condominium prices are going through the roof. In Neukölln, they rose by 17.4 percent last year! Sales in the segment of multi-family residential buildings increased by 15 percent year on year, while the transaction volume soared by a sensational 41 percent. Berlin also took the top spot in the residential portfolio segment: Here, the investment volume equalled 7.5 billion euros or a 31.5 percent share in Germany‘s total investment volume.
- The market fundamentals appear to vindicate the keen interest among investors. The number of new residents registered in Berlin last year exceeded the number of people unregistering by 44,742, according to the State Office for Statistics. In the years before 2009, the balance never crossed into the five-digit range.
So the euphoria is understandable. My feeling, however, is that some negative developments have yet to be factored into the prices, most notably the rent freeze. Many market players continue to ignore this latest piece of rent control legislation.
If you own a block of flats whose rents will have little upside left once the rent freeze becomes effective because the passing rent is already close to the local reference rent, you should now consider selling your property. This is all the more advisable if you could sell at a price-to-rent multiplier of 24 (times the annual net rent) or more. To be sure, word that the rent freeze is coming has spread among the market players. But not everyone is taking it as serious as they should, and not everyone has done their math to find out how the new law will impact the rent upside of their properties.
The tendency to screen out detractors during boom times is a phenomenon common to all markets. And just like with the equity market, it is virtually impossible to get in at rock bottom and to get out exactly at peak cycle. But if you feel mentally fit to cope with the possibility that prices could keep going up for a while after you sold, you should now look into your options to sell.