Buying in Germany: Why Invest?
Germany’s property market for the last ten years has shown very little sign of increase and prices have stagnated due to the fact that only 40% of the German population own their own home in comparison to 80% in the UK.
In Berlin alone, approximately 86% of the population rent properties, since it was always cheaper and not seen as socially inferior for Berliners to rent than buy their own home. Despite low interest rates and attractively priced properties, Germans could obtain rented properties cheaply leaving little need to buy their own home.
With the German market awakening to the opportunity of property investment and with attractive interest rates BerlinBuy2Let expects significant price rises as the Germans opt to buy their own property.
Germany’s legal system is very sound, the economy is stable and unemployment in Berlin is continuing to fall, giving rise to an increasing number of investors choosing to buy property.
Property markets in Germany have already seen much investment over the last 18 months with little signs of interest abating and although it is expected that the market will prove to be a medium to long-term investment with a minimum of 5-7 year forecasted growth, the incredibly cheap prices within the property market such as Berlin are clearly not sustainable and we believe will surely increase. Germany is at the beginning of its property growth and for the keen investor it is a gold mine.
The Berlin Property Market
Following the reunification of East and West Germany in 1990 property prices and the economic stability in Berlin rose gradually and then plummeted due to its debts and high interest rates which suppressed its growth until recent years. Despite its economic predicament, investment in the city is booming and Berlin’s development makes the city an exciting contender within the European property market.
Being strategically placed within Eastern Europe and as the capital city of Germany, Berlin has been earmarked for growth and expansion by major investment companies, the property opportunities are endless and have given rise to Berlin and indeed Germany being publicised as one of the emerging markets for 2007/2008.
Comparatively speaking, Berlin’s property prices, continue to surprise with prices from as low as €500 per SQM.
Whilst property prices in London, Paris and Dublin continue to rise with prices reaching over €10,000 per SQM, Berlin is proving to be a property HOTSPOT for small to large investors. Large corporations and building companies looking for the next emerging market have poured millions into the city with organisations buying up huge quantities of housing stock including Morgan Stanley, Fortress and Nomura.
Economically, Berlin’s development is very attractive and its property market increasingly interesting and more exciting to investors. Economic predictions represent significant growth rates in the population of Berlin and its surrounding areas of Brandenburg with an increasing demand for single homes.
Not only has the German government relocated their offices to Berlin but also many associations, organisations and corporations have now established offices in the city with over 40 worldwide companies firmly established.
Berlin is a hub for hi-tech modern media companies and many are now relocating and establishing their offices in the capital. Berlin is also home to many universities, and scientific research institutes attracting many organisations to set up business within the city.
Although, Berlin has also been the receiver of many, heavy Government subsidises prior and following the fall of the Berlin wall, which controlled rent increases and allowed the city to continue to operate as a working city the subsidies are now coming to an end and the effect of these is clearly evident following the boom in development and investment into the city.
Unemployment is falling and the world cup has bought about a renewed interest in Berlin. Berlin has begun its rebirth in its growth and economy and yet its property prices still remain at bargain prices, making Berlin, by far, one of the cheapest capital cities in Europe.
What to Buy?
Residential property in Berlin of all descriptions, not only appears undervalued but beautiful "Altbau" (art deco) style buildings renovated and well maintained can be purchased in prime locations for as little as €1200 - €1400 per square metre. Yields are extremely competitive and offer the investor from 5.5% to 8% return.
Significant growth opportunities in Berlin are not only apparent within its economy but also in its migrant work population. Due to its very location Berlin’s immigrant population is growing and has by far exceeded its 30,000 Polish immigrant estimation in 2005 with many more immigrants settling in the city and requiring good rental properties.
Berlin has without doubt an abundance of good quality property set in well established and attractive residential areas. Parks, rivers and lakes are plentiful in this city and so is the desire for Berliners to rent good quality property in good locations.
Tenanted properties, offer a sound investment with open-ended tenant agreements, often proven cheaper than an empty property.
Location is the strongest factor when considering purchasing any property in Berlin. A property may be cheaper in the less desirable locations but the opportunity of higher rent increases may be reduced and the tenancy turnover rate may be increased reducing the attractiveness of your property not only to a tenant but also to the resale market.
Factors such as these cannot be ignored and risks such as these can be avoided by purchasing property in good locations, which we believe reduces the likelihood of your property remaining empty, increases the opportunity for a stronger rental yield and ensures good resale potential.
So What Property is Available?
Apartment Buildings
Apartment buildings or multi family houses containing single unit apartments can be purchased throughout Berlin from as little as €600 per SQM offering yields of 6 – 8%.
Investment companies and smaller investors have purchased properties such as these in large quantities with the intention of separating or splitting the property into individual apartments and re-selling the units on the market to Germans and investors.
Indeed most sought after are the “Altbau” art deco type properties being built around the turn of the century with high ceilings and original features these properties are unique and highly sought after.
In good locations and modernised, individual apartment prices for these type of properties can flourish ranging from €1500-€3000 per SQM and with yields of between 3 – 6%.
Single Apartments
Single apartments in Berlin are extremely good value. Although varying in price and depending on the location single apartments can prove an excellent investment for the smaller investor. Many UK and European private investors are heading for the capital to invest and increase their property portfolio and capitalise on this exciting opportunity.
Berlin’s cost effective property prices and capital appreciation opportunities present a sound investment within an established rental market for the small to medium sized investor, making the purchase of single apartments an easy and cheap option to investing in Berlin.
Single apartments in Berlin can be purchased from as little as €500 per SQM but for the more exclusive locations in central Berlin and for newly converted loft apartments prices can be quoted up to €6000 per SQM.
Prices such as these, can offer an exclusive and unsurpassed location in central Berlin something not easily obtained at this price in London or Paris.
New Off Plan Apartment Buildings
A rarity in Berlin, properties of this type are particularly difficult to obtain but large building companies working with the German city bureaucracies are now starting projects offering superb off plan loft apartments in great locations.
Properties such as loft apartments can present an excellent investment opportunity as many are built in existing historic properties offering the investor the opportunity to depreciate up to 100% of the monument and renovation related costs for 12 years. An investment opportunity too good to miss.
Off plan properties whilst not readily available, will soon be taking the market by storm, creating a niche market not currently or readily available in Berlin, whilst also presenting good rental opportunities. With Berliners already having a keen interest and desire to rent loft apartments as is the case in larger European cities such as London & Paris where prices for loft apartments have rocketed, properties such as these can present an excellent investment opportunity with returns predicted at around 5 - 6% per year.
Single Houses/Family Homes
Demand for these types of properties is extremely high in Berlin as Berliners seek to find their first family home or single house. From an investment perspective, homes such as these do not offer a particularly attractive opportunity since the yields are low offering between 1% - 3%. Consequently, homes of this type have not proven attractive to investors.
In more affluent and desire able areas such as Zehlendorf where there is open green space, wooded areas and lakes prices are rising with Berliners desiring to live in the “Chelsea of Berlin”.
Combination/Mixed Use Properties – Commercial & Residential
Central location properties that offer the benefit of mixed use being commercial and residential properties offer an excellent investment opportunity. Location depending, these properties are highly sought after.
Investors can expect a superb capital appreciation opportunity in these types of properties in the forthcoming years as the economic situation of the city grows.
Yields on these properties can offer a sound investment return of between 4 – 8%.
Whatever, kind of investment property that you consider investing into, Berlin’s property market is a gold mine and with a constant stream of property investors, investment funds and companies pouring large sums of money into the cities property, this diverse, cosmopolitan, historic city is predicted to continue rise to become THE property hotspot in Europe.