A buy-to-let in Berlin is considered as top property investment option in Germany and all Europe. In fact, the capital of Germany is today one of the best places in Europe to look for property investment, well ahead of other German and European large cities such as Munich, Frankfurt Paris and London.
Indeed, Berlin property market is quite diverse and remains affordable despite the property prices have soared last years. The more time passes, the more attractive real estate investment in Berlin becomes. This is riven by the demographic growth and the economic dynamism in the capital of Germany.
A dynamic market is great news for an investor, but you still have to select the right area and the right apartment to achieve a successful property investment in Berlin. Find out here the right questions to answer and what you need to know to make the right property choice for your new property investment in Berlin:
- Which districts to target for a buy-to-let in Berlin?
- Which property type for your Berlin buy-to-let?
- Why is Berlin quite attractive for lettings?
- What are the tax advantages of buy-to-let properties in Germany?
- The bottom line about buy-to-let investment in Berlin
Which districts to target for a buy-to-let in Berlin?
The capital of Germany is made up of more than a dozen districts and one should target areas where the potential is strong and where it’s easy to rent out your apartment. For your buy-to-let investment in Berlin, you should opt for areas with high potential and long-term visibility. Even if the rental return is limited at the time of purchase, as the rent market is regulated and rent controlled by the city, the long-term development of the capital of Germany will prove you right.
In addition to representing the historic background of Berlin, Mitte is the center of all the activity in the German capital. Even though property prices are relatively higher here than in other districts, buying an apartment to rent in Berlin-Mitte represents an important source of long-term income and a safe investment value in the center of Germany’s capital. Prenzlauer Berg, with property prices like Mitte, would be also a top area for your apartment purchase. It is considered the most sought-after area for living in East-Berlin so the demand for rent. Our adice: If you find an opportunity of a buy-to-let in Berlin-Prenzlauer Berg at a good price, don’t hesitate to seize it as properties sell quickly due to the high demand and limited supply of apartments for sale in Berlin.
Finally, Friedrichshain offers a good compromise with property prices 10-20% lower and proximity to Alexanderplatz.
West Berlin is a great place to invest in real estate in Germany. The districts of Charlottenburg-Wilmersdorf and Schöneberg are rather high-end residential city areas. This is especially true for Charllottenburg, which is known for its mythical castle, which is very popular with tourists, and for its famous avenues such as Kurfürstendamm and Kantstrasse and its large squares such as Savigny Platz and Oliver Platz. Wilmersdorf is a high-end residential area with magnificent period buildings. Schöneberg is geographically the most central district of the city and has easy access to all other districts of the capital of Germany. It is distinguished by its popular locations, including the diplomatic quarter and the lively gay district around Nollendorfplatz and Akazienkiez, which is ideal for going out and about with its countless cafés, restaurants, and art galleries.
The residential area of Steglitz in the southwest of the German capital also offers an excellent investment potential with property prices around 20% lower than other areas of West Berlin.
In the south of Berlin are the two most lively districts in the whole of Berlin: Neukölln and Kreuzberg. These are two young, multicultural districts with many students and entrepreneurs and expatriates. With its bars, restaurants, clubs and numerous parks, the two districts together known as Kreuz-Kölln are a great place to go out and offer an alternative atmosphere. It is therefore a living environment that many people dream of!
Investing in buy-to-let in Berlin Kreuzberg or Neukölln is also a guarantee of a good return and easy renting, as the demand for renting is very high. With property prices 20 to 40% lower than in Mitte, investing in Kreuz-Kölln logically becomes one of the most profitable investments in the German capital.
Which property type for your Berlin buy-to-let?
For the choice of your apartment in Berlin, you should also make the right choice in terms of property size and construction date:
Small and middle-sized properties are the best buy-to-lets
It’s common knowledge that a real estate investment success is based on sustainable strong rent demand. So, one should first ask the question: which apartment will have always suitable rent applications. In this view, generally it’s the studios and 1-bedroom apartments who have the highest number of applicants, especially that most of population is single in the capital of Germany.
Going for a 2-bedroom might also be an interesting option as they have generally lower letting turnover and rent is usually more stable.
Property construction date matters!
Berlin has a regulated rent market, which means that you cannot rent an apartment at any rental price, even if you have rent applications for that rent level. Indeed, period properties have a limit in rent and if you rent at a higher price, you might face compensation claims. . It is also possible to find an apartment already tenanted, which might represent a good turnkey option.
At the opposite side, new build properties can be rented out at any rent level. It means that if you buy a new apartment, you call let it at whatever rent you get on the market.
New apartments have higher potential of rent of compared to period apartments. However, they are also more expensive to buy. So, one should assess the best options and watch out closely details of each apartment.
Luxury is an option to consider for buy-to-let in Berlin
It’s common knowledge that luxury property segment is strongly developing worldwide and that despite several financial crisis luxury apartments kept going up. On the other side, prices of luxury apartments for sale in Berlin are lower than all other large city in Europe. This combined facts means that you might consider an upscale buy-to-let investment in the capital of Germany, giving it’s both safe and promising. Check our luxury apartments for sale
Why is Berlin attractive for property letting?
In Berlin, people preferred historically to rent apartments to buying them. More specifically, only 20% of Berliners are owner-occupiers. The strong rent demand makes explains why rental investments are so profitable.
In addition, with an average of 4600 euros per square meter, Berlin property prices are lower than in most large European cities and capitals. In London, for example, property prices are two to four times more expensive than the capital of Germany. This makes Berlin a much more affordable place to invest in an apartment to rent out, but that’s not all.
The property prices have an upward trend as they are sustained by low interest rate mortgages. The average price increase for apartments is about 10% per year. So, it’s never too late to invest in Berlin buy-to-let property, as the profits generated increase over the years. But the sooner you invest, the more you will benefit from this rapid property price and market growth.
Beyond numbers, Berlin offers high quality of life standards. As the start-up capital of Germany and Europe, it attracts many entrepreneurs. Entrepreneurs make up a large proportion of potential tenants of properties (both for apartments and business premises). The same applies to students whose number is increasing with the university pole expansion in the capital of Germany
This attractiveness will make your buy-to-let in Berlin profitable on the long-term as the rent demand keeps going up in the city.
What are the tax advantages of buy-to-let properties in Germany?
The German real estate tax system is a great advantage if you rent an apartment in Berlin. In fact, as a Berlin buy-to-let landlord, you would benefit from several tax advantages:
- After 10 years of ownership of the apartment in Germany, your capital gain is tax-free.
- You can deduct 2-2.5% of the value of the apartment for 40 years, in addition to current expenses and interest on the buy-to-let mortgage. It does not matter whether you buy-to-let mortgage is in Germany or in your home country.
- Your apartment rental income will only be taxed in Germany. The progressive income rate of tax you will be subject to is very attractive.
The bottom line about your buy-to-let investment in Berlin
A buy-to-let in Berlin can be quite profitable if it is well-planned. This covers the choice of right area and the property and the analysis of long term development perspectives.
First Citiz Team stands by your side form the very beginning. We bring you our property market expertise, advise you on advise you on all aspects (rent, regulation, purchase steps, property management….) and to help you making the right investment decisions!
Once, you’ve chosen the right option, the process for buying a apartment in Berlin (and in Germany) is itself straightforward and much faster than in most of countries. With the support of our English-speaking estate agent in Berlin you will go easily through the paperwork and the process and achieve a successful buy-to-let investment in Berlin!
If you have any questions or require further information about property investment in Berlin, First Citiz team is at your disposal!