The new attraction of the city centre
FRANKFURTER ALLGEMEINE SONNTAGSZEITUNG (Sunday newspaper), 10th NOVEMBER 2013,
The new attraction of the city centre
Uwe Schmitz builds luxury apartments. His customers are often over 50 and tired of the suburbs. Here he talks about why his business is booming.
Mr Schmitz, you have just built the most expensive apartment in Hamburg at €6 million. Luxury properties are selling like hot cakes!
That’s the usual noise you hear from the business: Everything is sold before it is built. But that’s not true. We have planned a selling period of three to four years for Sophienterrassen in Hamburg. Of course a penthouse apartment with a view of the Alster sells quickly. But we also have a lot of apartments for €500,000 or a million.
But you’re managing to get them to the people!
It’s not like baking bread, but the market has improved considerably in the last three years. The demand has risen due to foreign interest. Today we have buyers from countries we would hardly have imagined five years ago.
Who is buying here then?
We have buyers from Russia and China. In Berlin the buyers are from Ireland, Greece, Spain and from India.
Is Germany getting more popular or is our property too cheap?
Germany is getting more popular, especially Berlin. And there is good value for money in comparison to London, Paris or Madrid. But in the next 10 to 15 years we will reach the same price level.
So that means the prices are too low, even for luxury property?
I don’t like the word luxury property. Luxury always sounds like waste. For properties in the highest price segment we are way below the prices in Paris or London. France and England are very centralised markets, here a lot of cities are competing with each other: Hamburg, Berlin, Munich, as well as Düsseldorf or Frankfurt.
And you don’t think that apartments for €1 - €6m are a luxury?
The customers who have bought from us have not wasted any money. Some buyers in Lenbachgärten in Munich have sold their apartments after three years at a profit of 50 to 60 percent. When I buy a luxury car I open the door, drive five kilometres and I have lost 20 percent of the value.
Experts say we are paying crazy prices at the moment and the most expensive properties are falling again in value. I don’t think so. If we concentrate on particular locations, in Munich, Hamburg and Central Berlin and built at a certain quality level then the prices will not fall.
What attracts the wealthy to the city?
Different fears and reasons motivate many investors: Fear of inflation, fear of the Euro crisis. They transform liquid wealth into real estate. 50 to 60 percent of my clients are over 50, they don’t want a big house any more, they want an apartment in the city centre. When they are away for three months they give the keys to the concierge and say: You look after it! The German cities were all destroyed after the war and they were rebuilt by brute force. Everyone who could afford it moved out to the suburbs. Today the cities are getting more and more beautiful and the people are coming back.
And your clients are buying to live in them themselves, and not as an investment? In the past almost all of our clients bought for their own use, today the percentage of investment buyers is about 25 percent.
Don’t all luxury houses look the same? Are they not long since mass-produced? Should I now speak badly of the competition?
Do they not build well? There is a lot of copying. What do buyers want from luxury real estate? Now I could start talking about natural stone bathrooms, the finest woods, but these are platitudes. Our underlying principle is: Wherever I look I want to be happy. Even the electricity distribution board should look like an S class Mercedes under the bonnet. You won’t find any technical services in the attic in our buildings, this all happens under ground. That’s what the people expect from us. We invest millions in landscaping, we have fountains from natural stone, one stone costs €400,000 and comes from China.
Critics say you build tower blocks for the rich. A lot of people are hostile because they say we build “gated communities”. This is rubbish. Come with me to Cape Town and I will show what that looks like: There you will find three metre high walls and barbed wire. All we do is to see that the traffic through the area is regulated, that’s why there are barriers, to stop everyone racing through.
A Hamburg politician said recently: “We cannot allow normal neighbourhoods to be turned into luxury districts.” Harvestehude is not a normal neighbourhood. It is an area where wealthy people live. We bought a piece of land from the German Government, at auction and we made the highest bid. Of course, that was very expensive. That’s why we had to match that with very high spec buildings. It’s the way the property business works. Am I as a developer supposed to build 30 apartments there for people in the lower income bracket out of the goodness of my heart? It doesn’t make economic sense. Frankonia is not the reason why rich people live in Harvestehude. We go where rich people already live.
Now Hamburg wants to put accommodation for asylum seekers right beside your development. I have no problem with that. They are just normal people. Just because families come from Africa it doesn’t mean that they will reduce the value of my house.
Do your buyers see it that way too?
Look at Lenbachgärten: Directly across the road there is a Benedictine monastery with a soup kitchen. Some of our buyers even invite the homeless to a piece of cake. There you have the most expensive apartments in Munich with the most exclusive clientele and I’ve never heard a single complaint. Anyone who moves into the city must get used to the fact they are in the middle of a social melting pot, otherwise they should move to the Elbchaussee.
How much are your buyers prepared to pay?
Our apartments in Sophienterrassen start at € 5,500 per m2 and go up to over €15,000.
And what sells best?
Well laid out apartments sell best, 120 square metres, for €600,000 to €700,000. In Düsseldorf we could sell apartments like that like hot cakes. In Munich you would get nothing for that price, there the prices start at €10,000 per square metre.
Why does nobody build affordable apartments in cities?
It just wouldn’t make sense: Land alone costs €2,000 per m2 in Düsseldorf and €4,000 to €5,000 per m2 in Munich. When the cities have development land, they would have to sell it at lower price, so that cheaper homes could be built there. But nobody does that.
Would price restrictions help?
I’ve been in this business for 30 years and whenever the state gets involved in housing policy they have been wrong. At the moment a lot of developers and investors are coming back into the cities. If you start talking about putting a cap on rents then they would soon be gone again.
Uwe Schmitz was talking to Nadine Oberhuber.
10 November 2013