Hi All,

Over the last year and a half I've been looking at the property setup in Berlin.. I've followed a lot of research from a variety of financial institutions.. more or less following their model. Companies such as Goldman Sachs have invested heavily into the berlin residential markets. Some of the reasons why are below..

German Market Overview
• Germany has experienced a strong economic recovery over the past few years.
• Up until last year, property prices have been flat for the previous last 15 years versus 70-200% increases in other markets.
• Low home ownership of 13% in Berlin, compared to 40% in rest of Germany and 70% in the UK.
• Affordability is at a 15 year high encouraging more home ownership.
• OECD sees German as the most undervalued property market in the world (24% below fair value).
Berlin property
• One of the cheapest cities in Europe, where an average price for a 2 bedroom apartment is €60k, or €1000 per square metre. (London €8,500, Rome €7,000, Dublin €5,000, Madrid €4,000, Frankfurt €2,900, Prague €2,300, Budapest €2,200, Warsaw €1,700, Bratislava €1,300 per square metre).
• Capital city of an economic and financial powerhouse with a proven infrastructure.
• Apartments come with long term tenants and attractive yields from around 5-8%.
• Bank finance available in Germany usually between 50-80% loan to value.
• 2006 property transactions up 140% and Berlin prices up 20% in last 15 months.

What’s the Catch?
• Buying costs are on average around 15% on top of purchase price (7% agent fees, 4.5% stamp duty, 1.5% notary fees, 1% due diligence, 1% other costs). However due to the low prices in Berlin, the absolute buying costs are low.
• German law is in favour of the tenant placing a number of restrictions on landlord. For example, rents can only be increased by a maximum of 20% every 3 years subject to government guidelines. However, as rental prices are generally below market rates, rental increases are almost guaranteed for the foreseeable future. This implies the yield will also increase over the same period. Once the expected law changes occur on rental regulations, then local home ownership will become strong and property prices are likely to increase very quickly.


As a result I (along with my partners) have bought some apartments and a block in Berlin. More importantly, we've made some valuable contacts out there (after sifting through a number of dubious estate agents, financial agents and legal practitioners!!!) so if you are interested in finding out more then feel free to contact me.

Cheers!!
Ritesh.