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Berlin spends €1 billion to buy back public flats

Berlin authorities came under fire Friday for spending almost €1 billion to buy back 6,000 former public housing apartments that had been privatized, to bring down soaring rental prices.

Published: 27 September 2019 16:08 CEST

Berlin spends €1 billion to buy back public flats

New flats from Gewobag in Berlin's Pankow district. Photo: DPA

Under the deal announced late Thursday, state-owned housing company Gewobag will repurchase the flats originally built as social housing from the 1960s to the 1990s.

The price tag of €920 million is more than double the €405 million the city-state had made when it privatized the properties in 2004, according to German media.

The mayor of the German capital, Michael Müller, said the deal aimed at “keeping the rents in Berlin stable”.

The purchase marks the biggest such renationalization undertaken by the city, where rents have doubled in the past decade.

Gewobag's board member Markus Terboven said the deal with the private real
estate firm Ado Properties would bring its housing stock to “around 68,000
apartments and secure living space for more than 10,000 more Berlin tenants”.

The far-right AfD party attacked the move as “a waste of money” and the
business-friendly FDP accused Gewobag along with Berlin's government of “participating in property speculation”.

“Gewobag now owes millions without having created a square metre of new living space,” the FDP charged on Twitter.

The latest purchase came months after the German capital's authorities bought up 670 apartments along downtown Karl Marx Allee from a private owner,
also in a bid to hold down rents.

READ ALSO: Berliners see red over Karl Marx Allee sale

Soaring housing costs have become a hot button issue in Berlin, leading
some residents to ponder radical solutions, including campaigning for the
seizure of housing stock from powerful landlords.

Alarmed by the trend, the Berlin city government in June agreed on the outlines of a draft law that would include freezing rents for five years from 2020.

The draft law, which is still being drawn up, would be aimed at preventing rent hikes for 1.5 million apartments, Berlin authorities said.

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EXPLAINED: What fees do you have to pay when buying a home in Germany?

One of the big reasons as to why property ownership is so low in Germany? The fees.

Depending on where you buy your own piece of paradise – you could be on the hook for taxes and fees that add up to over 10 percent of the purchase price! It’s a figure that’s high enough to make some wonder if the investment is worth it – and often used to explain why figures on German home ownership, at around 50 percent – are some of the lowest in Europe.

READ ALSO: Why is home ownership in Germany so low?

Land transfer tax

When you sign a contract to buy property in Germany, you’ll get a letter soon after from your local tax office – telling you how much land transfer tax you have to pay. Such a tax triggers whenever property ownership changes hands in Germany and needs to be paid by the new owner.

It’s calculated based on property value – most often the agreed purchase price – and varies depending on the federal state where the property is located.

The lowest transfer taxes are found in Bavaria – whose 3.5 percent rate is significantly lower than any other Bundesland. Five percent rates apply in Saxony-Anhalt, Mecklenburg-West Pomerania, Rhineland-Palatinate, Bremen, Lower Saxony, and Baden-Württemberg.

Hamburg and Saxony follow with 5.5 percent rates, whereas Berlin and Hesse start going to the high end of tax rates at six percent.

At the highest end with 6.5 percent rates – lie North Rhine-Westphalia, Brandenburg, Saarland, Schleswig-Holstein, and Thuringia.

You won’t be able to add your name to the land registry – or Grundbuch – until you pay your tax.

READ ALSO: Why property prices in Germany are likely to rise this year

Real estate agent fee

In most German states, you’ll also have to pay your estate agent a commission amounting to about 3.57 percent of the property purchase price.

There are four federal states where this fee is lower though – and even a slightly lower percentage could make a big difference given the amounts involved. Hamburg and Mecklenburg-West Pomerania have commission fees of 3.18 and 3.08 percent, respectively.

At 2.98 percent, the lowest real estate commission fees are found in Bremen and Hesse.

These commission fees are also a reason why it may be an attractive option to buy a newer build property directly from a real estate developer – as you won’t pay any commission if you purchase from the developer directly. Private selling or buying foreclosed properties at a court auction also allows you to avoid this fee entirely.

If buying from a developer though, you may have to wait months or years to be able to actually move in though, as the places are often sold while still under construction.

EXPLAINED: What you need to know about buying property in Germany

Notary fee

No matter where you buy property in Germany, a notary must read out the contract in front of both parties.

This can be tedious and take hours – but the idea is to allow both parties the chance to ask questions on the terms of a neutral party.

Unfortunately, you’ll pay for the privilege and there’s no avoiding it. Notary fees are about 1.5-2 percent of the purchase price around Germany in most cases. Some shopping around might help you find a notary who charges the lower end at 1.5 percent.

If you’re not comfortable with legal German, you’re allowed to bring an accredited translator with you to the reading. This is, of course, at your own cost as well.

READ ALSO: Is it a good time to buy a home in Germany?

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