According to PWC real estate investors survey for year 2018, Berlin residential real estate market is ranked as the top property market for investment in Europe among large German and European cities. In the same survey view, we find Copenhagen in 6th position, Barcelona 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 negative economic impact and risk on currency value.
Investing in Berlin allows to benefit from a unique combination of attractive residential property prices, investment safety, high return on capital and long term growth prospects.
Berlin is the most international amongst German cities. The German capital is registering double-digit growth in several sectors. The city is also worldwide recognized for its unique lifestyle, business-friendly climate, quality infrastructure, digital business, cultural events sector and as a touristic major destination.
In order to make a good property investment in Berlin, our team will offer you a high-quality advisory service and will fully ensure for you the follow-up of the purchase management in Germany.
The numerous development sites are good indicators of the city business dynamism and the tremendous growth of the real estate market
In addition to its political and historical importance, Berlin began in few years Europe’s start-up capital and has impressive business growth rates in many sectors such as infrastructure, services, digital economy, tourism. 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 safest country for business and investment in all Europe.
Buyinga home in Germany could benefit from the unique advantage of a total tax relief on the sale 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 the property purchase cost (including broker fees, notary and registry costs) allows to have futher tax deductions from taxable income and pay at the end a quite low tax rate on the rental income. If you buy 1-2 properties to rent, you would generally have a tax rate of just 5 to10%.
Prices are 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 enthusiasm for properties in Berlin which made the investment volume tripling within 2-3 years to reach a current rythm of ca. 10 billion euros per year.
Berlin residential real estate market offers great investment opportunities and also attractive mortgage financing conditions at low rates, including for foreign buyers. The German mortgages generally offer flexibility in the rythm of repayment and the interests of the loan are deductible from rental income. The property mortgage in Berlin for a non-resident buyer would be generally around 50% of the purchase price.
Berlin residential property prices are the lowest amongst all major European capitals. The apartments in central Berlin districts are 2-3 times less expensive than Paris and 4 times less expensive than London for a comparable property and location quality. With such good value for money, Berlin is now 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 2%.
Berlin was ranked the 3rd best city in the world in terms of quality of life by Monocles’ Quality of life survey. The most international German city 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 worldwide appreciated for its dynamic cultural life and represent a major destination for artists and business starters.
The German capital represents today the new ‘El Dorado’ for global property investors market, particularly those who want to combine safety and profitability.
Indeed, property investment in Berlin 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 property price increase that is already around 10% per year!
Whatever you are a private investor or whether you buy properties as part of your business, our full-service agency will guide you throughout the search and selection process in order to secure a profitable property investment with a strong potential for price growth.
In Berlin, you have the choice between 3 main apartment categories of investment properties:
A Buy to let Berlin property in a period building
Prices for vacant apartments in Berlin in 2018 range between 4000 € and 6000 € for a central location. The most dynamic and sought-after areas are Prenzlauer Berg, Kreuzberg, Mitte, Neukölln, Friedrichshain and Charlottenburg.
For reasons of profitability, you could opt for a buy-to-let investment in an upcoming location or neighborhood like Wedding or Neukölln where the rental demand is as high as in a top location but the purchase prices are slightly lower. Here, one could secure a property investment with a higher yield compared to a prime top location.
Our advice is whatever the location, if you are buying a vacant apartment is to make a furnished rental which will allow you to have a good tenant turnover and follow the market in terms of rent price growth.
A real-estate investment in a new property development in Berlin
Buying an apartment in new-build development offers the important advantage of not having to follow the rental regulation and therefore to be able to rent the property without any rent pric restriction. Unlike other large European cities, it is still possible to find investment opportunities at affordable prices in a central top location like Mitte and Prenzlauer Berg districts. New-built properties have the advantage of having more functional plans than for the period buildings (Altbau in German) and benefiting from good energy performances standards like KFW-50. New-development apartments also benefit from a strong demand both for rental and resale, especially from international buyers. Also, if you buy an apartment off-plan purchase, you might to benefit from a reduced price of up to 25-30% compared to the price of similar location apartment that is already built.
Finally if you buy an apartment off-plan, the price payment will be split over several settlements over the duration of the property development.
This is the best option for an investor looking for a very stable investment and a strong capital appreciation on the long term. Typically, an apartment in a central location that is sold at an price of ca.5000 € / m2 as vacant property, would be offered at 3500 € / m2 if you buy it already tenanted.
Actually, a tenanted apartment in Berlin could have a deep price discount of up to 40% compared to the average price of the same apartment if it was sold as vacant. This price differene is explained by the rents increase in the last 3-4 years and the difference between historical and new rents.
This investment strategy is even more profitable on the long-term, giving the fact that after 10 years of ownership, one can benefit from a total tax exemption on the capital gain. Thus, tenanted apartments represent actually a great source to buy bargains with far below-market prices.
For long term investors, purchasing a property that is already tenanted would allow to benefit from 3 combined effects:
- Capital gain from the initial discounted price.
- General market price increase, currently around 10% per year.
- Tax exemption when selling a property in Berlin after 10 years of ownership.
Combining these factors would lead to 2-3 times return on investment compared to initial invested capital.
If you are interested in buying a tenanted apartment, it will be good to seek advice about the legal aspects and in particular the local apartment rent regulation law.
At the end, your property investment objective in terms of short and long-term profitability will be the main factor to determine the type of property that is most suitable for you as an investor.
Our company team is at your service for any information related to the search of your property investment in Berlin. We inform you about home prices in the city by location, the profitability, the rental management and ensure for you the management of the bank mortgage financing.
In addition to our listings of over 300 apartments for sale, our team will offer you a full-service on the search and the selection of the right property, as well as for the purchase process management.
In this way, please, do not hesitate to ask us for a free of charge investor consultation!
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