“The city is developing magnificently”

Nikolaus Ziegert about Berlin, risky investments, political mistakes and current trends on buying condominiums

Nikolaus Ziegert, managing director of ZIEGERT Bank- und Immobillienconsulting GmbH

Mr. Ziegert, in 2013, around 13.9 billion euros were earned in Berlin in the sale of houses and apartments – has the Berlin market now finally woken up, like Sleeping Beauty?

I have been active in this market for 25 years, and I think we can say with some confidence that we are now living in an entirely new era. Berlin’s property market works quite differently today from even a few years ago. Berlin has grown up and turned professional. The city now has an established property market – largely the work of international investors who have arrived and shown Berlin’s market participants how the market could look in the future if developed strategically along international lines.

If you take a personal look back – how expensive is the average Ziegert apartment today per square meter, and how expensive would it have been 15 years ago?

I don’t have a computer for a brain, but today’s average price is between 3,500 and 4,000 euros per square meter. 15 years ago, I'm sure it would have been about 1,500 euros cheaper.

You came to Berlin in 1985, and the Wall fell four years later. How did you find the years that followed on the property market?

Right after the Wall fell, Berlin was very euphoric and fully expected, probably inspired by the words of Helmut Kohl, that there would be blooming landscapes and gardens within a few years. Prices reached their high point in 1994. But they dropped again afterwards, because neither economic growth nor the rent levels developed in the way that had been hoped when East and West started to merge. Prices were then at their lowest point in 2005/06. The exciting thing is that we have only now returned to the level of 1994 – we have reached a point where we think that prices are extremely high.

What were the main reasons for the increase 20 years later – were prices catching up? The start of a bubble?

International investors have watched and investigated trends and market developments very precisely. They have established how great the demand in the rental sector is and how clear it is that demand outstrips supply. Unfortunately, German companies were quite slow to notice this potential. The market’s development, unlike immediately after the fall of the Wall, has tracked demand in both the rental sector and the purchasing sector. I don’t see a bubble.

About 80 percent of our customers buy places to move into themselves

What makes you so sure that the trend is more reliable than in 1994?

The development has now continued for so many years that it certainly feels more stable. But there is also hard data to support that claim. In the 1990s, special tax laws on depreciation and other instruments led to an overproduction of residential property in Berlin. Tax incentives were created, and we can only be happy that these misdirections have been removed from the market. We can now again rely on fundamental market data. People moving to Berlin – a very important factor – the number of young families who need plenty of space, the healthy and continuous growth in incomes – it all speaks a clear language.

You say that foreign investors are an important driver of development in Berlin. Isn’t there a risk that these investors who buy in large quantities are also willing to sell in large quantities once another city is deemed to have become “hipper,” leaving small investors with falling prices?

International buyers are not currently buying for speculative reasons, but rather because they really want to invest and provide long-term financing. Of course they want the cheapest available money right now, but I don’t detect a speculative approach.

Which group forms the majority of Ziegert’s customers, people who buy for their own use or investors who purchase property to let it?

Around 80 percent of our buyers buy for their own use. And that’s good news: Berliners have noticed that Berlin is an exciting market in which to purchase an apartment. There are, however, also entirely new groups of purchasers – those between 20 and 29, for example, a group that has grown by 100 percent in the last year. The classic buyer group of those between 40 and 50 is also growing dynamically.

20- to 29-year-olds – a surprising class of buyers. Is it their parents who are doing the buying? Or is it Berlin’s “new economy” that’s visible here?

They are smart and able to communicate in such a way that allows them to touch their parents for money. They’re good at it. They tell us things like: “I’ll need ten days to get this money from my parents.” They explain it to their parents, do the calculation, and are able to sell it 100%. I’ve had some pretty unbelievable experiences, where buyers have told me: “Mr. Ziegert, I haven’t quite reached the 100-percent mark, could you come in just for five minutes, and then my parents will be on board.”

Nikolaus Ziegert (right) interviewed by Steffen Uttich

Berlin is traditionally a city of renters – is that changing right now?

Even if the government acts as though there were no alternative to renting and only protects and supports renters, things are still changing. Added value for the city is the watchword. The city is developing magnificently; why should Berliners not be able to take advantage of this opportunity to make money by buying a piece of Berlin, their own four walls?

A lot of people seem to think it’s too good to be true. Don’t you often hear people telling you: “Mr. Ziegert, that’s too expensive for me.”

Well, too expensive is a relative concept. If you have money and you would like to increase it by 30 percent in five years, I would strongly discourage you from buying an apartment. Maybe you would be better off speculating on the stock exchange, but that’s not my area of expertise. Property is a long-term investment. My financing department tells me that we can offer a fixed interest rate for 30 years, so if you place your purchase under a safe financing umbrella for 30 years, you’re sure to not lose money.

Skeptics say that one of the market drivers in addition to economic development is limited space, which is why Munich and Hamburg are getting pretty full. Berlin has the ability to spread out into the hinterland of Brandenburg. There is no detectable shortage that would force prices upwards. How do you deal with such basic skepticism with regard to owner-occupied apartments?

We welcome it, because it gives us an opportunity to examine the question critically. Owner-occupied property in Germany is subject to an unusually conservative form of financing. Our customers usually start with a high percentage of their own capital, with amortization rates between one and three percent. That leads to long-term growth, whether there is still space here or not.

At one point I realized that residential property was my thing.

Some experts say that owner-occupied property is a form of consumption, and that it’s even more reckless to view an apartment as a pension fund, because the purchase is tied to high ancillary costs that are difficult to recoup later. Renting a property out, however, is attractive from a taxation point of view, and can be used to earn a profit. Investing this profit in an ordinary savings account, even at one percent interest, is still worthwhile. Will Ziegert give more consideration to that in future?

That is a process that we would like to work on. We have noticed, however, that there is great interest in owner-occupied properties in Berlin. An owner-occupied apartment is certainly a consumer product, but it has plenty of advantages over, say, chocolate: an apartment doesn’t melt, can’t be eaten, and will probably undergo an increase in value.

Where in Berlin do you currently see the greatest dynamism in price, and what parts of the city have some catching up to do?

We’re on the lookout ourselves and we find it very exciting to bring a product to market, say in Neukölln, where we sell at an average price of 3,300 euros per square meter. Our feeling is that there’s still a lot of potential. There are some areas on the edge of town like Pankow or Weissensee, or even Lichtenberg, where there are some great spots, some great neighborhoods that I hadn’t seen before I went out there recently. As a team, we’re always excited when we get to know these hidden corners where prices could still develop very strongly.

And what about Zehlendorf – is that already off the scale?

As far as I’m concerned, yes. Berlin pulsates where new things are happening and new things are being discovered. Grunewald, for instance, is a fantastic location, but prices there have barely developed at all. So in the south of the city there are some areas that have stayed quiet, and others such as Neukölln that have seen a lot of action. What could happen next in Wedding? I don’t quite have an answer to that, but something could happen.

Mr. Ziegert, when you came to Berlin in the 80s, your first apartment was under the stairs in Schöneberg – it’s quite a journey from there to being the market leader in selling apartments. How did you manage that?

It’s entirely due to the vision that I had. Back then in West Berlin there were plenty of financial jugglers. I thought to myself: what would be the safest investment? What would be best for the Berliners who want to stay in their neighborhoods? I came up with the idea of property dealing and thought that that would be my focus.

And you turned out to be right.

Back then, I assumed that it would take ten years. I never thought that I would invest my life in it, but I have now been convinced for almost 30 years that Berlin can reach a certain level of owner-occupied property and that living in their own four walls could have a positive effect on people. The feeling of responsibility that the residents have is strengthened when they own their own apartment and feel they owe a debt to their surroundings. That’s our vision, and I expect it to still develop considerably. I, personally, am still investing in property.