Mr. Marquardt, Engel & Völkers is one of the larger brokerage companies in the German and therefore also in the Berlin market. As the owner of the E&V Academy as well as through your insights into the operative business, you are close to the action. How do you currently see the Berlin real estate market?
At the beginning of a change process. The market is still at a very high level, but first changes are visible. Investors are sure to look longer and more accurate before buying real estate than in the past. Some of the market participants have already left Berlin and are entering more attractive markets with higher development opportunities and higher returns.
Nevertheless, the location remains attractive. The developments in the city reflect the economic and social change processes. The share of traditional industry continues to decline, and the growth of companies in the field of digitization and information services continues to grow. The changes in forms of work are evident in the highly sought-after co-work spaces market. Start-ups and New Work can no longer be imagined from Berlin. And precisely for these new demands on self-determined, creative work, Berlin with its infrastructure and its cultural offer is an excellent platform. What in my view will keep the real estate market in Berlin on the move.
Specifically to Mietenteckel: has the impact on investment decisions of your customers? If yes, which?
The policy design proposals for the real estate market have a significant impact on investment decisions. The investors are very insecure. Some of the customers have decided to cease their activities in Berlin for the time being. In talks with market participants, the unclear legal situation becomes very clear and the assumed risks are priced in. Which means that prices are adjusted downwards. The presumption that prices will fall allows investors to wait and in part speculate on a weakened market with more attractive prices.
Nevertheless, the market is on the move and transactions are continuing. Some of the market participants start a stronger orientation to purely or predominantly commercially used real estate.
Rentals after the introduction of the rental price brake are considered more critical than before.
The effects are now also evident in other areas of the economy. Contracts with craftsmen, as far as possible, are held back or terminated. Many investors are deciding against planned refurbishment and modernization measures, as they are currently in danger of profitability. Naturally, notaries and brokers have also been influenced by the changed behavior of investors in the market.
Do you also see a change in the behavior of the banks? If yes, which?
There is a much stronger assessment of political activity. From customer discussions I have learned that the banks adjust their mortgage lending values to the changed situation. Reductions in the mortgage lending value of 20-30% were mentioned. The banks themselves are holding back strongly with official statements. Again, from my point of view, a strong uncertainty in the assessment of the future market situation occurred.
The rental price brake 2015 was already a clear regulatory intervention. Why are the current plans perceived so differently?
The rental price brake for many investors has a room for maneuver, which they now consider threatened. And raises the question: what's next? In addition, there are certainly the many-faceted interpretations of the bill and the uncertainty of what will really be effective. Looking at the original claims, some investors are threatened by their economic foundation.
Do you think that is justified? How do you deal with your customers personally?
I can understand the uncertainty of customers very well. The lack of clarity leads to “not acting” - the basis of action is therefore currently on an uncertain foundation for many market participants. Ultimately, the decision always rests with the customer. What I and Engel & Vökers can and still do is to create the greatest possible transparency for a decision.
How does your company react to the current situation?
On the one hand, the developments are made known and discussed internally in order to achieve the highest possible and up-to-date information density for employees. What prepares the employees well for discussions with customers. As the owner of the EuV Akademie, I offer my employees an additional platform for this. On the other hand, Engel & Völkers enables its customers to gain more transparency in events. Talks are held together with other market participants and politicians.
What is your perspective on the continuing expansion of the environmental protection areas in Berlin?
I assume that this expansion will continue. Which, as in the recent past, leads to a change in the buyer group. The classic divider, which buys a house to convert it as quickly as possible into condominiums, buys in these areas no longer or only very limited. The portfolio holders are now even more calculating the possible restrictions. Transaction speed and uncertainty are significantly reduced by the increased exercise of preemptive rights. This will further displace market participants from the real estate market in Berlin.
A further expansion of the Milueschutzgebiete and changes in the statutes towards a stronger regulation of investments, I think personally for the development of the city as not effective.
How do you expect the Berlin real estate market to develop over the next 5 years?
In my view, the development speed will fall significantly. The attractiveness of the real estate market in Berlin, under the current conditions, will lose more and more for many investors. Due to the socio-demographic development and the demands of a more and more changing economy there will have to be further investments. The real estate market will adapt to the new requirements and challenges. From my point of view, investments in existing and new buildings will depend very much on how the political interventions in the market develop and set.
What would you say would be different?
In the current situation I really wish for a better, cooperative exchange between all those involved, a renunciation of the so-called silo thinking and more transparency. It is in my view to a common development of the city. It is important to increase the attractiveness of Berlin even further and to continue the development of the city. What that means for me is that there must be new opportunities for new construction - investment incentives for rental housing construction, greater flexibility in urban planning and building permits, and expansion of the digital infrastructure for the economy. Related to this is the structural consolidation of the city, the use of potential and the creation of new forms of living and working, such as co-living, places for creativity, etc. to use and exploit Berlin's potential in all facets develop.
Mr Marquardt, thank you very much for taking the time to talk.