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.
Investing in Berlin means investing in the capital of Germany; the world’s third largest exporting country and Europe's leading economy achieving the highest trade surplus worldwide.
Berlin is a stable property market there no risk of currency devaluation like in countries outside the Euro zone, neither a risk of chronic economic downturns affecting house prices as seen in Portugal or Spain.
For an overseas property investment, Germany’s capital property market represents triple AAA investment-class from safety and investment security point of view.
With strong profitability and lowest risk profile, it is no coincidence that Berlin ranks the 1st amongst as the best cities in Europe for investing in real estate.
In this sense, Berlin real estate investments have particularly solid fundamentals:
1/ Attractive property prices with prices 4-5 times lower than London and lower than most of mid-size cities in United Kingdom like Manchester, Newcastle or Birmingham.
2/ The tax incentives of property rental income in Berlin as the deduction of interest on the borrowing of rental income, the deduction of an amortization of the purchase price of the property income and tax exemption on sale capital gains over 10 years.
3 / The economic dynamics of the city in several areas i.e. tourism that has doubled in the past ten years. Also, Berlin’s employment rate has boomed especially in digital industry, where more than 40% are expatriates and foreign nationals. For example, Berlin’s ‘Zalando’ has provided ca. 10.000 jobs and is the flagship of this economic trend.
4 / The result of a population increase of half a million over 10 years creates a lack of housing offers either for rental or for sale.
5 / The grouping of federal administrations in Berlin as well as numerous German groups relocations such as Bayer, Charité and Siemens. The arrival of civil servants, managers, start-uppers and entrepreneurs from Germany and Europe has significantly impacted average income level and purchasing power, especially property prices in Berlin.
Beyond economic figures and analysis, Berlin's development is largely due to its growing popularity in the world (25% of the inhabitants of Berlin are expatriates) and its quality of life (ranked 3rd city most pleasant to live in the world).
In a few figures, Berlin has 175 museums, 140 theatres, 300 cinemas. 4650 restaurants, 1100 bistro bars and nightclubs and is growing daily.
In Berlin, you have the choice between 3 categories of properties and apartments that are suitable for investment:
1) Buy a vacant apartment in a Berlin 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 neighbourhoods 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.
2) Buy a new apartment in a new property development as a buy-to-let investment:
These apartments have several advantages:
- Very good locations like in Mitte
- No regulation of rentals.
- Functional plans, guarantees on construction and energy performance
- Strong demand for rental especially for international
- Strong demand for the purchase of international investors (for resale).
- Sensible increase in price between the start of the project (purchase on plan) and the delivery of the keys.
3) Buy an apartment already rented out:
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 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 recommand that you to seek advice about the legal aspect and in particular the law of rent management, to properly target your rental investment.
In summary, it is your investment choices and objectives that will determine the profile of the property you are looking for, 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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