Bright young things: is Ber­lin a good in­vest­ment?

The Daily Telegraph - Property - - Front Page -

With a young pop­u­la­tion, a cul­ture of rent­ing, a buzzing hi-tech econ­omy and a good qual­ity of liv­ing, Ber­lin’s prop­erty mar­ket has re­cently found a new lease of life. With all the in­gre­di­ents for a land­lord’s haven, is prop­erty in Ber­lin re­ally a good in­vest­ment?

Around 50 per cent of Ger­mans own their homes over­all, with the per­cent­age in cities much lower. In Ber­lin, 85 per cent of the pop­u­la­tion rents, a fig­ure that has fallen by just three per cent in the last decade. By com­par­i­son, that fig­ure is about 37 per cent in the UK – al­though it is ris­ing. The cap­i­tal city is also ex­pected to grow by 250,000 peo­ple by 2030.

A short­age of prop­er­ties to buy and a bal­loon­ing pop­u­la­tion mean that house prices in the city are soar­ing, up 36 per cent over the last three years alone, ac­cord­ing to Deutsche Bank. This is com­pared with an av­er­age of 30 per cent in other Ger­man cities. Av­er­age rents have nearly dou­bled in the last 10 years, al­though from a low base.

“There are two big uni­ver­si­ties here, and Ber­lin is still pretty much the only Ger­man city where it is pos­si­ble to get by speak­ing only English, which means it is at­trac­tive to peo­ple from all over Europe,” claims Till McCourt, Ziegert’s chief re­searcher.

The city re­mains very af­ford­able rel­a­tive to oth­ers be­cause of rent con­trols, he adds. Ber­lin has the one of the low­est cost of liv­ing lev­els of all Ger­man cities, and the only ur­ban area that is cheaper is Cologne.

So what has kept Ber­lin so af­ford­able? For­eign in­vestors hop­ing for a This huge four-bed­room apart­ment near to Bran­den­burger Tor has a big sun deck, bal­cony and a car park to charge elec­tric ve­hi­cles. €1.249 mil­lion This two-bed­room flat has an open-plan liv­ing room with huge win­dows and a ter­race. € En­gel & Völk­ers (en­gelvoelk­ need to wait for 10 years af­ter pur­chase be­fore they can sell with­out in­cur­ring a fi­nan­cial penalty, ex­perts note, which drops to two years if you’ve been liv­ing in the prop­erty.

Rents on new-builds are capped at 10 per cent above that of com­pa­ra­ble prop­er­ties in the area. Con­cern that rent con­trols have not re­cently been prop­erly en­forced has led to the es­tab­lish­ment of a fed­eral coun­cil ini­tia­tive ex­pected this year to “abol­ish the many ex­cep­tions” that have slipped through.

So who is buy­ing as an in­vest­ment? “Seventy-five per cent of the buy­ers are Ger­man,” ex­plains McCourt, who adds that Mid­dle East­ern money ac­counts for some of the rest. “They are of­ten longer-term in­vestors at­tracted to hous­ing, be­cause Ger­mans are con­ser­va­tive and pre­fer it to shares.”

Eoin Ryan, 30, an Ir­ish ar­chi­tect, and his French wife Clothilee Hugo, 27, who works in soft­ware, met while they were both liv­ing in Dundee and de­cided to move to Ber­lin to­gether. They have just bought a one-bed­room apart­ment in Pankow, in the north of the city, for €240,000 (£216,000) through es­tate agent First Ci­tiz. “We al­ways in­tended to buy here be­cause rent­ing seemed very ex­pen­sive – but then we were coming from Dundee, so I sup­pose it’s rel­a­tive,” says Ryan.

“The place we were rent­ing when we first ar­rived didn’t have the kind of pro­tec­tions that renters with long-term ten­an­cies have. Since rents were ris­ing so sharply – 20 per cent in a year in some parts of the city – that was an­other rea­son to buy.”

An­other down­side for in­vestors is the back­lash against buy­ers who bring with them what is per­ceived as gen­tri­fi­ca­tion, adds Ryan. “It’s hap­pen­ing be­cause of the way the city is mar­ket­ing it­self,” he says.

“It’s de­lib­er­ately try­ing to bring higher-paid jobs here and from that a lot of other things be­come in­evitable. On the in­vest­ment side of things, the sit­u­a­tion is the same as we hear it is from friends in London: the anger is di­rected at for­eign in­vestors.”

While Ber­lin ap­pears to have all the in­gre­di­ents for would-be land­lords – huge, grow­ing de­mand and a buoy­ant econ­omy – all is not what it seems.

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