Berlin real estate market is ranked for the third consecutive year as the best property market in Europe for investment. In the same ranking, we find Copenhagen in 6th position, Barcelone in 16th position, Paris in 17th position while London is only at the 27th position (out of 30 major cities) due to Brexit process and its potential impact on economy and currency. By investing in Berlin, one benefits from a unique combination of investment safety, strong housing demand and attractive property prices. Berlin is world known for its urban dynamism, quality infrastructure, growing digital economy and booming tourism sector.
The several construction sites are good indicators of the economic dynamism and the booming of Berlin real estate market
Berlin real estate investment combines security, strong return on capital gain and long term positive prospects.
In addition to its political and historical importance, Berlin began in few years Europe’s start-up capital and has impressive growth rates in many sectors such as infrastructure, services, digital economy, tourism and also real estate. Investing in real estate in Berlin is first of all investing in Germany, the second exporting economy in the world and the leading economy in Eurozone. It represents today simply the most safe placement of the Europe.
Investing in Berlin real estate allows to benefit from the unique advantage of a total tax relief on resale after 10 years of property holding period. Interest payments on mortgages as well as all management costs are fully relieved from rental income. A property amortization scheme of up to 2,5% of property purchase cost (including agency fees, notary and registry costs) allows to have tax deductions pay quite low tax on the rental income.
Pricesare strongly increasing in Berlin with 8-10 % increase per year with up to 15% in some areas of the city. This trend is expected to continue due to the high demand of rental and purchase and the economic dynamism of the city. Also foreign investors, both individuals and institutional investors are showing a tremendous enthousiasm for real estate in Berlin which made the investment volume tripling witin 2-3 years to reach a current rythym of ca. 10 billion euros per year.
Berlin real estate market offers attractive investment opportunities and also optimal financing conditions at low rates, including for foreign buyers. The mortgages generally offer flexibility in the rythm of repayment and the interests are deductible from rental income. The property mortgages in Germany for non-resident buyers are generally around 50% of the purchase price.
Property prices in Berlin are the lowest amongst all major European capitals. The proprety prices in central Berlin is 2-3 times less than Paris and 4 times less than London for a comparable property and location quality. Berlin is also ranked as the second most active real estate market in Europe (in terms of total transactions volume).
Berlin has the lowest ownership rate in Germany with less than 20% of home-owners compared to 52% average in Germany, which sustains the long term high housing demand. Berlin's population is growing with around 50 000 each year while the new housing offer is limited with only around 10 000 of new apartments per year. That also explains the extremely low vacancy rate in the city of less than 3%.
Berlin was ranked the 3rd best city in the world in terms of quality of life by Monocles’ Quality of life survey. Berlin is known for its safety, developed infrastructure, natural spaces and parks (35% of Berlin city is composed of parks, lakes, rivers and gardens). Berlin is also worlwide appreciated for its dynamic cultural life and represent a major destination for artists.
The German capital represents the new ‘El Dorado’ for global property investment market, particularly for investors who want to combine safety and profitability.
Indeed, property investment in Berlin’s residential market represents a great value for money with double-digit return rates. The total rate of return is the sum of the rental yield plus the rate of increase in current prices, currently it is around 10% per annum.
In Berlin, you have the choice between 3 main categories of properties that are suitable for a profitable property investment.
Buy-to-let Berlin investment property in a period building
Prices for vacant apartments in berlin in 2017 range between 4000 € and 6000 € for the most dynamic and sought-after areas such as Prenzlauer Berg, Kreuzberg, Mitte or Charlottenburg.
For reasons of profitability, you could opt for a buy-to-let investment in developing neighborhoods like Wedding or Neukölln where the rental demand is as high as top areas but with lower purchase prices. Here, one could secure a property investment with a higher yield than top areas.
Our advice if you are buying a vacant apartment is to make a furnished rental which will allow you to control the "pace" of the market in terms of set rental prices.
New-build property as buy-to-let Berlin investment
Investing in new-built in Berlin has the important advantage of not having to follow the rental regulation and therefore to be able to rent the property without any pricing restriction. Unlike other large European cities, it is still possible to find investment opportunities at affordable prices in very central locations like Mitte district. New-built properties have the advantage of having more functional plans than for the Altbau ones and benefiting from highest energy performances standards like KFW-50. The apartments in new projects also benefit from a strong demand both for rental and resale, especially from international buyers. Also, an off-plan purchase makes it possible to benefit from a reduced price of up to 25-30% compared to the prices of similar already buit properties.
This is the best option for an investor looking for capital appreciation and long-term profit. Knowledge of Berlin’s 10 years of detention means you can obtain a total tax exemption of the price increase.
A rented-out apartment in Berlin can present a discount of up to 35% of the sale price of the same apartment if sold vacant. This is explained by the difference in rent and hence yield between the previous and the current rentals
For example, a 2-room apartment that would sell at 5000 € / m2 would be offered at 3500 € / m2 but with a lower rent.
This is actually good source of good bargains at below-market prices for medium and long term investors. Also, we recommend that you to seek advice about the legal aspect and in particular the law of rent management, to properly target your rental investment.
At the end, your property investment objective in terms of short and long-term profitability will be te main factor to determine the type of property that is more suitable for you as an investment property in Berlin.
Our team is at your disposal for any information about real estate prices in Berlin, investment opportunities and options, rental management and financing possibilities.
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