Smart Money is back – and it plays by new rules

A market no longer following the old playbook

Over the past decade, residential real estate was a safe haven of the zero-interest era. Berlin was seen as undervalued, rental yields as reliable, and regulatory intervention as manageable. The investment case was straightforward: strong population growth, low vacancy rates, rising demand, and inexpensive debt. Value growth was largely driven by the market itself, not by active asset development. That logic no longer applies. Strategies have shifted, and Berlin is now assessed with greater nuance—much like other mature markets.

Value is created through execution, not pricing

The capital returning to the market is targeting assets where potential lies not in short-term price movements, but in active transformation. Asset management has become the core discipline. Investors are focusing on properties requiring energy upgrades, offering structural rental upside, or providing long-term development potential. These assets are typically acquired at a discount, then repositioned through refurbishment, expansion, and modernisation—ultimately brought into ESG-compliant condition. What was considered “too complex” two years ago is now recognised as a source of value.

The objective is to create a new-quality product that will appeal to institutional end investors in the years ahead—particularly pension funds and insurers, many of which will soon be restricted to acquiring green, sustainable, energy-efficient assets only. With new residential construction in Germany still lagging, an undersupply is emerging that is expected to be addressed primarily through the upgrading of existing stock.

Longer horizons, higher professionalism, and international capital

This approach is not short-term speculation. It reflects a new level of professionalism. Investors are working with longer time horizons, higher equity ratios, and clearly defined operational strategies. Target internal rates of return typically range between ten and fifteen percent. Notably, the share of international buyers continues to rise. At Engel & Völkers Commercial Berlin, the number of purchasers with an international background has doubled year-on-year. Current demand is driven primarily by investors from the United States, France, Israel, Switzerland, and Scandinavia.

For many of these investors, Germany remains a safe haven. Despite price growth since 2015, entry levels are still moderate by international standards, supported by stable demand and a high degree of predictability. From the perspective of Stockholm, Zurich, or Paris, Berlin stands out as a market that has become increasingly rare: resilient, liquid, and transparent over the long term.

Conclusion: a market defined by performance

The cycle has changed—and so has its logic. Value is no longer driven primarily by leverage, but by execution. Investing in Berlin today means committing to fundamentals, active management, and time. Smart capital has absorbed the lessons of recent years.