For twelve years, from 2000 to 2012, I regularly urged investors to buy residential real estate in Berlin. Now I am urging you to sell!

The number of articles I have published over the last decade arguing in favour of investments in apartments and apartment buildings in Berlin is so large, I have honestly almost lost count. For many years I felt as if I were alone, standing by and watching as many private (and above all institutional) investors avoided Berlin. Every day I had to listen as people listed a catalogue of reasons explaining why it was a pretty stupid idea to invest in Berlin: too many benefit recipients, the economy wasn’t dynamic enough, rents were too low, rents and property prices were too flat. Lots of investors had also had their fingers burned, for example with investments in state-subsidised rental housing.

Leading research institutes were equally pessimistic in their assessments of Berlin’s residential housing market.

The landscape has, however, changed dramatically over the last few years. Berlin has been “in” for a while now: popular among both private and institutional investors, Germans and foreigners.

I am once again taking a position that is guaranteed to generate a lot of opposition, and which will probably leave me standing alone once more, as I argue that it is now the time to sell.

I never really planned on selling my Berlin properties; I had always intended to hold on to them. But now I have sold. Not everything, but a number of objects: Last Friday I sold some apartments (nothing special, built in 1959) in Berlin-Mitte at a rent-to-price ratio of 37.

Why am I selling? Can I rule out that prices in Berlin won’t continue to rise? Of course I can’t. Real estate markets are like stock markets. Almost nobody will manage to pick exactly the lowest point to enter the market, or the absolute peak to make their exit. Anti-cyclical buyers and sellers simply have to accept that it is highly likely that prices will continue to fall, at least for a limited period, after they buy, and will rise further after they sell.

Nevertheless, Berlin’s real estate market (and it is not the only one) is in a condition that stockbrokers would describe as “overbought.” There are almost no properties on the market as there too few sellers. The mood for Berlin is, and remains, bullish. I side with André Kostolany and Warren Buffett, who have always preached: Buy on panic, sell on euphoria.

How likely are future rental increases? Sure, there will be further rental increases in Berlin, but not with the same dynamism as we have seen over the last few years. So far, the Mietpreisbremse rental price brake hasn’t really bitten, but at some point it will dampen prices. In addition, the Mietpreisbremse hasn’t really been priced into real estate prices yet.

I cannot understand brokers and realtors who continue to confidently beat the drum for real estate investments in Berlin. They do so even though there is absolutely no shortage of would-be buyers! I can only explain it as force of habit. Some people are always of the opinion that now is exactly the right moment to buy. I advise nothing more and nothing less than what I do myself. That was the case back when I was buying, and is still true today as I sell.

I have still sold, even though I can’t really see any alternative investment opportunities right now. I previously wrote about the multi-family house in Berlin-Neukölln that I acquired in 2004 at a rent-to-price ratio of 6.8 and sold for 25-times the annual rental income. I subsequently invested the proceeds in a residential property in Oranienburg that I bought at a price-to-rent ratio of 16.6, and am sure I could sell today for at least 20-times its annual rental income, as well as in a Jamestown US institutional real estate fund, which generated a profit of over 20 percent (!) within a single year. So: On the one hand, it can be difficult to find alternatives. But, every now and then, an opportunity presents itself – in any case an opportunity that delivers more than 1.5 percent, which is all that is left after operating expenses on a property that cost 37-times its rental income. Even if you can’t find an alternative right away, it’s still better to “invest” your money in government bonds, at least for a year or two, even at negative interest rates. If you’ve generated strong yields elsewhere, it’s something you can live with. It is definitely a better strategy than buying over-priced assets right now. After all, today’s expensive acquisitions are tomorrow’s write-downs.