For the Property Investment Mogul
Berlin, Germany, is a city brimming with possibility. It was named the top European market for real estate investment by PWC and the Urban Land Institute for 2016, 2017, and most recently 2018, as it was recognised for investment and development prospects as well as rental and capital growth.
Berlin has grown into a magnetic global city and now ranks behind only London and Paris as Europe’s top city for both tourism and education. But have investors looking for an up-and-coming opportunity already missed the boat, considering the city’s growing list of accolades?
Interestingly, Berlin is one of the most youthful cities in the world. A booming population coupled with a transition into digital, technology, and servicebased sectors has resulted in a powerful economy and dropping unemployment rates. With population growth of 400,000 expected by 2030, a rising demand has created a housing supply deficit of 40%. This bodes well for property investors looking for a thriving European market in which to diversify their portfolio.
The city is at the heart of the country’s reputation for innovation – Berlin has outperformed Germany’s GDP growth for years. Also, a solid workforce thanks to the lowest unemployment rate in 25 years contributes to a healthy economy still on its way up.
Berlin is a mecca for Millennials as the city offers free education and its universities and colleges attract more students than anywhere else in the country. The prestigious Humboldt University of Berlin has produced an impressive 29 Nobel laureates. So buyto-let investors should take note.
For those who have completed their studies, the positive outlook in Berlin continues. The relatively low cost of setting up a company, as well as a business-friendly ecosystem means that the city is attracting more businesses and people every year. Crowned the “Best city to launch a startup” by the World Economic Forum in 2017, a culture of dynamic entrepreneurship is helping the city to thrive. And with one new start-up founded every 20 hours, job growth is seeing optimal figures (at 20% from 2009 to 2016).
With all this enticing people to the city, Berlin is experiencing a chronic undersupply of housing – evident in a vacancy rate of just 1.2%. In 2015, a total of 10,722 new homes were built against an annual demand for almost double that, at 20,000.
As highlighted in the Emerging Trends in Real Estate 2017 report, Berlin ranks first place in investment and development prospects, and also first place in the expected increase in amount invested, rents, as well as capital values.
IP Global has capitalised on districts within Berlin that are believed to offer the greatest prospects for investors. The IP Global portfolio consists of 11 projects with developments in Friedrichshain in East Berlin, Neukölln, Charlottenburg, Lichtenberg, Köpenick, and Schöneberg.
Neukölln’s mass transformation has occurred so rapidly that even Google Maps can’t keep up with its lightening-speed progress. Following in the footsteps of other gentrified districts, the previously ignored southeast district has now been recycled into a trendy, distinctive, and sought-after area. It is the city’s most trendy destination, boasting a variety of modern bars, international cosmopolitan restaurants, art galleries, and boutiques in addition to having the city’s most vibrant nightlife. CBRE, the largest commercial real estate services and investment firm in the world, reported that Neukölln saw Berlin’s second-highest top market segment rental growth in 2016 at 9.6%, against Berlin’s average of 4.6%. Meanwhile, for sales, the district saw Berlin’s second-highest top market segment capital growth in 2016 at 20.3% against Berlin’s average of 10.5%.
Friedrichshain was once an industrial, working-class, freestanding borough, badly bombed during World War II. Gentrification is now underway with restoration happening across the district, and arts, culture, fashion, and technology industries are thriving throughout. Not to mention the lush, green oasis that is Volkspark Friedrichshain, the district’s large park, which offers easy access to nature for its residents. With so much going for it, people are taking note of Friedrichshain and it is proving increasingly popular with buyers and renters alike. Rental growth is a key indicator of future capital appreciation, and prices are already on the rise in Friedrichshain, which last year saw the fastest rental growth in Berlin at 11%.
Berlin is Germany’s centre of government, media, science, technology, and culture. The city has also managed to keep its unique history and urban identity, while forging forward as a global capital. Overwhelmingly positive indications mean we foresee this youthful city’s growth continuing into the future, and for investors, now is the time to get involved.