Find out what’s happening in the property investment arena both in the UK and internationally
Why Berlin is Europe’s best bet
August 6, 2015Article by Charlotte Ashton
The largest national economy in Europe, Germany ranks 16th in the world in the 2015 Index of Economic Freedom, which considers matters such as fiscal freedom, government spending and investment freedom. Germany’s highest scores in the ranking were for property rights and investment freedom. Combined with a booming property market, swift growth in cities such as Berlin and intense demand for rental accommodation, this is serving to make buy-to-let investments in Germany some of the most exciting in Europe.
According to the Knight Frank Prime International Residential Index (PIRI), city markets are performing so well of late that they have even outperformed second home sun and ski destinations. The PIRI tracks annual price changes in 100 city and second home locations and found that Germany’s leading cities were enjoying significant prime residential real estate price rises, with Berlin at 9%, Munich at 8% and Frankfurt at 7.5%.
Ray Withers, Chief Executive of leading property investment specialists Property Frontiers, explains,
“Germany has long been a nation of renters, with low rents creating some fantastic city communities. Berlin, in particular, is known for its vibrant neighbourhoods packed with artists, students and hip, young professionals. Of late though, low interest rates across Europe have encouraged Germans to turn to property as a more profitable alternative to savings accounts. With interest from international investors picking up as well, rents are on the rise and the buy-to-let market has become increasingly appealing.”
Against a background of rising property prices (the Economist reported an increase of 20.3% in Germany in the five years to Q4 2014), Berlin has experienced rapid population growth. Its population grew by 1.5% between 2011 and 2013, to 3.422 million. In 2013, a further 50,000 new residents arrived in the city.
New arrivals are flocking to districts within the S-Bahn urban railway catchment area, avoiding the centre in order to balance rent levels with better availability of residential space. Steglitz-Zehlendorf is a prime example. Home to one of Berlin’s most attractive commercial districts, Schlossstrase, which is packed with shops and restaurants, the green and leafy neighbourhood is drawing in wealthy professionals and well-to-do families looking to rent high quality homes.
It is also home to Stadtpark Steglitz, a contemporary development of stylish apartments named after the 17 hectare city park of the same name, which is one of the area’s most attractive features. The development is spread across three buildings (one refurbished and two newly built) and includes apartments ranging from studios to three bedrooms. Prices start from €109,600, with gross yields up to 5.6%.
A bright future
According to the CBRE/Berlin Hyp Housing Market Report Berlin 2015, the employment market and incomes in Berlin are growing in tandem with the city’s economy. Berlin Hyp AG management board member Gero Bergmann succinctly sums up the city’s current position,
“All in all, Berlin is one of the most exciting and, in many respects, most promising locations in Europe.”
Woven through the city’s economic success are strong industrial and entrepreneurial strands. Industrialists accounted for 105,000 of Berlin’s jobs while 40,000 new companies are founded there per year, according to the CBRE.
Over the past decade, Berlin has transformed from one of Germany’s worst-performing regions to its most exciting success story. Economic growth is continuing to draw in new residents with a hunger for a bright future from across the country, and indeed from other countries too. Berlin’s time is now and savvy property investors are queuing up to be a part of its future.
As the Telegraph recently concluded,
“Berlin is a ‘no-brainer’ for British property buyers.”