US billionaire Warren Buffett is tapping into Berlin’s booming market for residential real estate. His brokerage unit is partnering with a Berlin firm to draw not only residents but investors from around the world. It is the first of many international partnerships envisaged by Mr. Buffett’s holding company.
Berkshire Hathaway Home Services has used a franchising model to become the second-largest residential real estate broker in the US, with some 41,000 independent firms signing up for one of the most illustrious brand names in the world. The firms handled $127 billion worth of property last year. The unit also offers property management services and now wants to bring the whole package to Germany and other countries.
The Berlin partner, Rubina Real Estate, specializes in new homes, touting Berlin’s relatively low prices to global investors who want to cash in on potential appreciation. Residential property in New York costs €17,000 per square meter on average, while in Berlin it costs less than half that even in top neighborhoods. Rubina’s properties cost €4,000 per square meter on average – excluding brokerage fee – leaving substantial room for price appreciation.
They have high expectations. Rosemarie Zanghellini, Berkshire Hathaway Home Services
“Profit depends on the purchase price,” commented the brokers at Rubina, who see potential gain even in new homes. “A used car is cheaper than a new car,” they note by way of comparison. “But you have no warranty and the used car can break down more quickly.” Prices in Berlin rose 70 percent in the period 2009 to 2014 alone, and rents were up 56 percent.
Buy low, sell high has, of course, been the mantra of Mr. Buffett as a value investor who has become the third-richest person in the world through his holding company, Berkshire Hathaway.
Rubina is already specialized in rich clients from China, Russia and the Middle East, and is expected to channel funds from foreign investors into the Berlin market. “Twenty-eight years after the fall of the wall, Berlin’s population is growing fast,” said Gino Blefari, chief executive of Berkshire Hathaway Home Services. “There are people here from 180 countries and numerous residential projects are being developed for them.”
Mr. Blefari says there will be other franchise ventures in the coming months – in Europe, Asia, North America, and beyond. The Warren Buffett moniker on the firm name inspires trust in customers, says Rosemarie Zanghellini, head of Berkshire Hathaway’s New York brokerage. At the same time, she adds, “they have high expectations.”
Reporters Martin Gerth, Tim Rahmann, and Roman Tyborski at Handelsblatt sister publication WirtschaftsWoche contributed to this article. It was adapted into English by Handelsblatt Global editor Darrell Delamaide. To contact the author: [email protected].