When you think of Berlin, your mind may spring to its vibrant culture, vivid history and top German universities before it lands on the housing market. This unconventional city is a surprising newcomer in the property investment scene, with prospects for the future looking sunny.
The German real estate market is traditionally stable, but in the last few years it has experienced surprising growth. Home prices in the European state rose by 4,5% in the fourth quarter of 2017 compared to 2016 prices – indeed, the market has been experiencing increases of the same or more since mid-2016.
Kai Enders states that the housing market was only responding to demand – and we can expect this to continue. "Despite the high level of new construction, the demand for housing still cannot be met." He also credits Germany's impressive economic stability as a key reason that the country's property market continues to grow.
Although it's the capital city, the Berlin property market isn't always an international investor’s first port of call. It’s traditionally a very creative and vibrant city but, according to Engel & Völkers market report, "the last 12 months [...] have really put the city on the map." More technology companies are beginning to invest here, from start-ups to – most notably – tech giant Google. The low cost of renting office space compared to nearly every other leading city makes Berlin a prudential move for businesses. Costs are around $28,400 per employee per year, compared to $111,900 in New York and $88,800 in London.
The Berlin property market is a hotspot for renting thanks to its very stable economy, which continues to drive high population growth. With the lowest property ownership rate in Germany, at just 14%, Berlin’s rental market is booming. This winning combination of economic growth, dynamic real estate trends and political stability has fuelled the Berlin property market's reputation as a safe haven, making it the "'go-to' investment destination".
The traditional prime-yield area is the central district, Mitte. While the expected return in this district might not be high, it convinces with its high investment security. Investing in up-and-coming areas within the S-Bahn ring is prudent; they’re well connected by the city's good public transport and are already trendy. The districts of Friedrichshain, Kreuzberg, Neukölln and Wedding are seeing the highest rent increases. Choosing a location may seem a little overwhelming, but our Berlin property experts are knowledgeable about all the key districts.
Europe’s biggest economy retains an exceedingly positive forecast for the future. The IMF raised its growth outlook by 0.5 of a percentage point for 2018, leaving an expected growth of 2.3%. According to Ifo economic institute, Germany’s current account surplus was the world’s largest in 2017 and on top of this, unemployment remains low. Germany’s annual inflation rate was 1.8% in March 2018 and is expected to accelerate according to the European Commission.
All these factors point to Berlin property investment being a solid choice. With the population in Berlin set to grow and building rates remaining somewhat low, property demand, and price, can only increase. Take a look at more global property insights and regional market trends to decide if the Berlin property market is right for you.