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| Why
Berlin? |
In years gone by Germany has not been a market that has attracted
much attention from overseas investors. Whilst property prices in
every other European capital surged in value over the last 10-15
years, prices in Berlin have remained constant or have actually
decreased in real terms. This was 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,
prices are now on the up as Germany emerges from the financial crisis
as the strongest, safest and least indebted economy in the eurozone.
. Over the past few 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 if not the world. Five
to six 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. This has started a transition from a state-owned
and subsidised housing market to an owner-occupier market, following
the same pattern observed over the last fifteen years 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 has
bounced back very strongly since the financial crisis of 2008/09,
driven largely by strong exports to China and the far east. Unemployment
is at historically low levels and growth of 1.5% was reported in
the first quarter of 2011. This is starting to drive up property
prices as an increasingly large number of Germans are now buying
their own homes, breaking the strong rental tradition, particularly
in Berlin and the former East.
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 relatively 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 many parts of London, Paris and other capital
cities.
Berlin is the government, educational and cultural centre of Germany,
and the third largest tourist city in Europe. Berlin is rapidly
emerging as a new service and technology centre. In particular the
media, arts and design industries are already flourishing. |
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