Alex Ahlstrom
I am in love with travel, culture and finance around the world. After working in international real estate finance around Asia and America, I want to share some of my experiences.

Flat-Hunting in the World’s Hottest Real Estate Market

After I received my acceptance to the Berlin School of Economics and Law, I needed to move to Berlin. At the time I had no idea that it was the hottest real estate market in the world. In 2017, the year I was looking for a flat, Berlin housing prices rose 20% from the previous year. Also, I was arriving at the hottest time of year for the rental market, September, when all of the new students are moving to Berlin. And, to get my study visa required by my degree, I needed to find housing within 90 days of arrival. 

Previously, I had worked in real estate across Asia and California. I had managed properties, designed office interiors, marketed hotels and hospitals. I had heard that it was difficult to find a flat in Berlin, but I felt prepared to find a flat. 

Alex working a real estate booth.

The Berlin Real Estate Market was HOT

A little background on the real estate market in Berlin. The European Central Bank, in an effort to keep the economy moving, had lowered the interest rates after the financial crisis to negative 0.25%. What this means is that if you could deposit your money in the Central Bank, you would actually lose money. It also means that giving away extremely cheap loans, because banks would rather loan money to homeowners than place it in the Central Bank for a negative return. So, home mortgages were, and still are extremely low, around 1.85%.https://tradingeconomics.com/european-union/inflation-rate In Contrast, today, in the United States, home mortgage rates around currently around 4.5%. Using these interest rates, a homebuyer in Berlin could afford about a 20% more expensive home in Germany than in America. At the same time, Berlin had a population of about 3.5 million, about 50,000 people a year were moving to Berlin, and there was not enough construction to fit all of the new occupants. The market was red-hot. 

Warren Buffett even entered into the Berlin real estate market by purchasing the Rubina Real Estate Agency in early 2018.

Chicken before the Egg Problem with Credit

I scheduled a few appointments to see houses. I quickly found out that I didn’t have a German credit score, a Schufa. Ironically, to obtain a Schufa score, you must first register a residence. So, unless I knew a homeowner that wanted to look past the many other applicants with credit scores, I was not going to be able to rent an apartment for myself. Also, I found out that student housing required booking a year in advance. 

The Schufa is the German equivalent of the United States FICO credit score system.

More than 20 People Viewing Each Shared Flat

So, I went to https://www.wg-gesucht.de/ , the website recommenced to me by my university to find a shared flat. I started sending out generic copied messages to every posting on the website. After about 300 plus messages, I got a few flat viewings. Most viewings were with about 20+ other people. I tried all the tricks that I knew, outbidding tenants, paying up front, making a larger deposit, nothing seemed to work. At the same time, a hotel in Berlin is about 5-6x as expensive as renting a flat. So, I wanted to find a solution soon.

Germany has Strong Consumer Protections

In the United States, if someone has money, there typically is a way to work a deal for housing. But, in Germany, the laws give much more support to renters, and it is very difficult to move out someone that isn’t paying. In fact, moving a renter out of his flat in Germany could take years, if it is even possible. So, finding a good quality renter is even more important in Germany. Also, there are controls on the increase of rents. For example, even though the property values were rising 20% per year in Berlin, rents could only rise a maximum of 10% a year. 

A protest in Berlin over rising prices of rental properties.

Found a Temporary Solution 

I was able to find a flat that took me. I exchanged a slightly larger rent for the ability to leave the flat with one month of notice. So, I could take a better place when the opportunity came. This first flat was useful so that I could register my residency to obtain my student visa, get a local bank account for a gym membership and settle down to focus on my studies. 

Found my Berlin Home  

After making friends in the city, housing offers started to become available to me. I was lucky enough that one of my best friends was moving into an apartment with an empty room. My friend is Turkish, and he had a connection through the Turkish community to a flat. We moved in together, and finally my journey for a flat had ended. 

My Berlin roommate and I taking time to keep it fresh.

My Takeaways

#1 – Real estate comes down to trust and reliability. And, even more so in a country like Germany, where it could potentially be impossible to move a tenant out of a flat. So, if it is not possible to have credit, because you just moved to the country, your ability to find a flat will be determined by the strength of your relationships. 
#2 – Stay flexible for a better housing opportunity. Landlords and flat shares know that they are in hot demand, so it is easy to negotiate a one-month notice of leaving in your contract. Then, when your friends offer you a better housing opportunity, you are in a position to take it. 
#3 – Be open-minded to local rental laws and culture. Outbidding, raising the price of rent and paying the rent up-front would work well in many markets, but not in the case of Berlin. Understand that although German rental protections make it more difficult to find a flat, they also protect you later if there are problems with the flat. 

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1 Response

  1. Russell says:

    Great info !

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