Berlin full of ‘exciting possibilities’

Berlin could be on the verge of becoming a hot property destination, claims Assetz…

By autumn it will be 19 years since one of the most significant events in the history of Berlin, when the physical wall which had divided the city since 1961 was breached and the ideological barrier between the two sides also tumbled. In those heady days, the city lay at the heart of a counter-revolution that united a divided country and saw the winds of change sweep through Europe.

Then came the reality. Berlin was still divided economically and socially. Its industries had been proposed up by subsidies in the west and by a now abandoned state system in the east. While Germany as a whole struggled with recession in the days after reunification, Berlin fared particularly badly, with the inevitable social tensions between people who had grown up living very different lives.

Demand increasing

While much of the latter is an issue for sociological study, the economic aspect is of relevance to property investors, who may have wondered if and when the city, now the capital of a nation once more, would start to see any kind of property boom. Why go there, it might be asked, rather than affluent Munich or finance capital Frankfurt? Indeed, why look at Germany at all, where the kind of property boom that has happened in so many other European countries has not occurred?

Discussing this, the manager of German estate agency Top-Immobilien, Michael Schmidt, said that the next few years will see developments that investors will enjoy. He noted that in Germany as a whole, the proportion of owner occupiers is much lower than in other countries and lower still in Berlin.

He commented: “That means that there is more and more demand. At the moment there is no reason for tenants to buy a flat, for example, because rents are cheap. When they buy the property, they have to pay the interest on repayments – and at the moment, rents are cheaper.”

However, this will change, he stated: “But from last year to this year, we saw increases to rents of ten per cent. Next year it will be ten per cent again, and again – and then they will decide to buy.”

A lot of potential

Therefore landlords may have two exciting possibilities – firstly that of rising rental income and secondly the chance of being able to sell on the property at a profit as buyer demand rises and consequently pushes up house prices.

Mr Schmidt said there was “a lot of potential” for price increases, noting that not only was Berlin property cheaper than places like Munich, but it is also in the middle of a vast wave of investment which has put €80 billion (£61 billion) into the city so far and has more to go.

So could Berlin finally be booming? This week the city joined Munich, Frankfurt and Hamburg in the top ten of European locations for property and investment, according to research by CB Richard Ellis. While this is a reflection of the wider economy and not just the residential sector, the economic improvement of Germany may be another factor in helping Berlin to achieve the growth it has been hoping for.