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| Why
Berlin? |
In the past, Germany has not been a market that has attracted much
attention from overseas investors. Whilst property prices in every
other European capital have gone through the roof over the last
ten years, prices in Berlin have remained constant or have actually
decreased in real terms. This has been due to a number of factors,
not least the struggling German economy post unification and high
levels of unemployment. Levels of home ownership in Germany have
also been low historically, with some of the lowest levels in the
capital itself at just 14%. |
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However,
changes are afoot. Over the past one to two years, substantial numbers
of foreign buyers have begun to realise that Germany, and Berlin
in particular, offers some of the best value property in Europe.
A few years ago large international investment groups such as Goldman
Sachs, Morgan Stanley, Terra Firma, Blackstone, Oaktree and Fortress
began to bulk buy hundreds of thousands of apartment units from
German municipalities, and this triggered an interest from smaller
private investors. Many see this as the start of a fundamental transition
from a state-owned and subsidised housing market to an owner-occupier
market, following the same pattern observed over the last decade
in other European countries such as France and Spain. |
What
has attracted these new investors to Berlin is the low sales price
of apartments, excellent and reliable rental returns and the potential
for strong capital appreciation in the medium term (5 -10 years).
The German economy is also beginning to show signs of recovery and
is now considered by the World Economic Forum to be the ‘fifth
most competitive economy’ in the world, ahead of the UK, Canada
and Japan. Many commentators report that the German economy is now
turning a corner, and this is reflected in improvements in consumer
and business confidence. Buyers now are entering at the very bottom
of the market, but prices are beginning to rise as demand increases.
Purchase conditions for overseas investors and Germans alike are
also improving. Foreign buyers can, subject to the usual credit
checks, secure a mortgage for up to 70% of the value of their property
at a low interest rate, typically around 5% fixed for 10-15 years.
Germans are also being encouraged by the government to buy property
as part of their retirement provision, with substantial tax breaks
on offer. These factors should lead to increased rates of home ownership
in the future and provide a firm platform for capital appreciation.
Analysts are in agreement that demand for property in Berlin will
remain strong, with realistic prices and plenty of room for growth.
This is a low risk and stable market in which to invest, and buyers
are protected by the secure legal infrastructure of Europe’s
largest economy.
Berlin also offers many extremely high quality properties compared
with other European cities. The most popular are newly renovated
‘Altbau’ apartments in the beautiful early twentieth
century buildings to be found in abundance in many areas of the
city. These offer spacious accommodation and high ceilings. Prices
per square metre are at rock bottom at between €1,500 and €3,000
in some of the most desirable areas compared to prices of €10,000+
per square metre in London, Paris and other capital cities. |
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