Berlin: The Face of a New Germany for Investors - Emerging Real Estate

Berlin: The Face of a New Germany for Investors

3/8/2008

One key factor for potential buy to let investors is that only 12% of Berlin residents actually own their own property, so the city is still very much a renters market. In Germany, renting property, as opposed to buying, is not deemed socially inferior. Most people who could easily afford to buy property choose not to because renting is such good value.

Before the Berlin wall came down in 1989, Berlin enjoyed a privileged status in terms of subsidies. This affected rent and house prices as both West and East Berliners were encouraged to stay in the city with subsidised housing being one of the key incentives. This legacy from the past is one of the reasons that the property market has not developed as quickly as other cities in Germany and the rest of Europe.

Overall, both rent and average house prices are still relatively affordable in Berlin, when compared to cities such as Munich and Frankfurt where property can be up to 50% more expensive.
The Global Property Guides put rental yields in the city at 4.4%. They report that the best yields, of between 6-7%, can be achieved by apartments in a city centre location that are less than 90sqm. However, investors should note that German law is very pro-tenant. Landlords can be fined if they try to increase the rent to in excess of 20% above the rent charged for comparable premises. Tax on rental income is also high and can be up to 25% for non-residents owning rental properties in the city.

Unemployment in Berlin fell to 7% in November 2006, its lowest level in four years and this trend looks set to continue. Prices are currently low but as unemployment decreases and the economy recovers, buying power will increase which will in turn drive prices and rental returns up.

One key investor opportunity is Schlosspark-Carrée – an exclusive 1927 built development located in the cultural heart of Berlin which is only 400 metres from the over and underground stations and 10 minutes by car from the airport. It offers a rare opportunity where the right location, the right time and the right price are all coinciding, plus it is used by reliable tenants who supply a steady income. A series of 10 year guarantees are also on offer including; rental, maintenance, and modernisation and rent management. Prices from €107,000.

Deborah Fox, director of Emerging Real Estate – the company selling Schlosspark-Carrée, said; ‘Germany is a new market for most overseas investors and it will take time to develop so, people should take a 10 year view, rather than expecting instant returns. As a city, Berlin is on the cusp of great change and offers significant capital appreciation for investors at all levels.’

City AM