The next political intervention in the housing market is on its way. Federal Construction Minister Horst Seehofer is currently preparing what he has called the “Building Land Mobilization Act” and has already submitted a draft bill to a hearing of German industry associations. One key aim of the new law is to make it more difficult to convert rental apartments into condominiums. By doing so, the Federal Construction Minister is hoping to increase the provision of affordable dwellings and protect tenants from being displaced out of the city centers. Berlin already has 63 designated “social protection areas” covered by a range of restrictions on condominium conversions. If the law is enacted, similar restrictions will soon apply in all parts of Germany with tense housing markets and the whole of Berlin would be affected.

Property owners need to respond quickly

But what impact will these changes have on the owners of apartment buildings? As we saw in the wake of the recently introduced rent cap, prices for apartment buildings fell. The proposed ban on condominium conversions is likely to add even more pressure on prices. We therefore strongly advise owners to divide their buildings into condominiums now to make sure they retain the option to sell units individually and avoid the impact of the proposed ban. Even though the law is not yet on the statute books, property owners need to take account of the extensive lead time required to formally divide their properties. Owners will need more than just a certificate of separation; the division needs to be entered in the land register to provide full legal security. And the period required to process property divisions has not been helped by the recent coronavirus pandemic or the spike in division applications, both of which could prevent applications being processed in time.

Profitable option: building sale or condominium conversion

There are only advantages to a timely conversion. After all, not only can the apartments then be sold individually, it is also still possible to sell the building in its entirety – and most likely at a higher price than without a declaration of division. Moreover, the changes to the land register pages can also be reversed at the request of the new owner.

The general consensus is that property ownership will remain worthwhile in the long run. More and more households are choosing to buy an apartment rather than living as renters – be it to provide income in retirement or as a hedge against inflation. But the supply of condominiums remains very limited – and it looks as if the planned law will only exacerbate the situation. Last but by no means least, selling individual units as condominiums also offers a clear route out from under the rent cap. If you have any questions about converting your rental units into condominiums or the rent cap, or if you would like to have your property valued, please feel free to contact our consultants, who will be happy to assist you and answer your questions.

Yours

David Borck Immobiliengesellschaft

Schlüterstraße 45 | 10707 Berlin | service@david-borck.de
Telefon +49 (0)30 887 742 50 | Telefax +49 (0)30 887 742 525