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Demand exceeds supply in Berlin

Germany has not always seemed like Europe’s most glamorous investment or holiday home destination; however, this strong and stable economy at the heart of the continent is increasingly a favourite spot for property buyers from the Americas and Asia in particular, with Berlin the number one choice for second homes and investment properties.

High standard of living

Sebastian Fischer, managing director of Engel & Volkers in Berlin, says that Germany remains a top global investment destination. He describes it as, “a safe haven economy in the Eurozone, with a stable currency and general positive outlook.” Berlin itself, he says, was kept afloat in the aftermath of the 2008 global downturn by its strong demographics, growing economy and high standard of living.

Berlin is a cultural as well as an economic centre, with around 600 galleries, dozens of theatres and three opera houses. It is also famed for its generous green spaces and large urban parks and, of course, its vibrant, cutting-edge nightlife, which is the envy of all Europe. Around 3.4 million people live in Berlin and its thriving contemporary art scene is reflected in the architecture and design of its new buildings, which are among the most stylish and contemporary in the world. History is still apparent all around, however, not just in the many museums but also in the older buildings still standing in the centre and in the formerly communist east of the city.

 

Low prices

Residential property prices have increased on average by 25.5% since 2011, with higher increases in the city centre. Berlin remains considerably cheaper than London or Paris and even below other German cities such as Munich and Hamburg.

These low prices, alongside Berlin’s reputation for tourism and culture and the strong German economy, attract investors from across the globe with demand very much exceeding supply as a result. The weak euro is drawing increasing numbers of Americans, Canadians and buyers from China and the Middle East, as well as Russians. Other European nationalities are also well represented.

Easy financing and no restrictions on overseas buyers in Germany also add to the appeal, with mortgage rates for foreigners running at 2 – 2.5%. A 40 – 50% deposit is generally required, but German banks are prepared to loan up to 70% of the property value for owner-occupiers.

 

Crowded rental sector

Most Berliners are tenants rather than owning their own properties, with almost 90% of the population renting according to recent figures. While 226 projects comprising 17,600 apartments are in line to be completed over the next three to four years, 70-80% of the completed units are owner-occupied condominiums and about 50% of those are second homes; therefore, the rental sector is still greatly overcrowded. The opportunities for buy-to-let landlords in Berlin are obvious.

The most popular district to buy and live in is the city centre, Mitte, although apartments in neighbouring Kreuzberg are also highly sought after. Last year 17,668 apartments were sold in the city, a decline from five years ago when the figure was 18,857. Average prices have risen, however, from €161,000 (£118,000) in 2011 to €202,000 in 2014.

 

 

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