It’s been 25 years since the Berlin Wall came down uniting east and west and Berlin’s property market took off. The eastern side has been gentrified and is now home to various luxury apartments. The average price for property in Germany’s capital city is €2,500/3,500 per square metre, around one third of that in Paris or London, which makes it an attractive investment option for personal enjoyment or a stable rental income.
Why is Berlin more affordable than other capital cities in Europe?
The rental market is strong – Berliners tend to rent rather than buy so 10-year fixed term contracts aren’t uncommon. Over 42% are owner-occupied but only 15% of Berliners are homeowners, according to statistics from the Federal State Office.
Tenant cooperatives are strong, meaning renters are likely to stay in properties for longer as well as undertaking basic property maintenance. Berlin is the first city in Germany to pioneer rental caps to stop rents rising rapidly, which provides tenants with some security. This creates a healthy rental market as they will stay in properties for longer. Unlike London it gives Berlin a diverse cultural mix as people of varying income levels can afford to live in the centre.
Berliners earn seven per cent less per annum than the German average – there are fewer big companies (although more investment means this is changing). Berlin has an entrepreneurial mindset and reinvention has been key since 1989. It is widely regarded as Europe’s tech start-up city as living and workspace costs are affordable. Incomes are slightly lower than in Munich and Frankfurt meaning residents need affordable accommodation.
It is a rich cultural centre with a rising population and has good public transport, a fascinating history, a strong art scene, tech/start up hub mindset, great food, a low cost of living and direct flights to other capital cities in Europe. The German parliament is now based in Berlin and the country has invested a lot in its capital city.
The property market is young and prices are 3-4 times lower than in other cities. Analyists predict an increase of 5-10% per annum and double prices in 10 years’ time. Germany has a safe and secure legal system and the strongest economy in Europe which means buying property here is low risk. Property is still affordable in central areas of Berlin and will bring a high rental yield.
Rental psychology is different – it’s not seen as an inferior option to buying like in the UK. Renters enjoy long-term tenancies and take pride in the properties they live in. If you are overseas there’s less hassle in terms of vetting new tenants every two to three years.
New builds are excluded from the rental cap so there are plenty of buy-to-let opportunities that still yield capital growth.
Black Label Properties is a one-stop shop to buying in Berlin and have a range of properties to suit all budgets, from studio apartments in popular neighbourhoods to luxury period apartments and mobile houseboats.
For more information on the company’s current properties, go on-line at: www.blacklabel-properties.com