Bright young things: is Berlin a good investment?
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 (engelvoelkers.com) 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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