Berlin Property

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.

Hi Ritesh,
Welcome to the forum. Sounds like you could have a very lucrative business on your hands. Look forward to more posts on your progress.

Regards
Parin

German property interests me as it seems (along with Japan) to be the only developed country not to have seen a massive increase in property prices.

With the new pro-market Christian Democrat led coalition, is there any chance of the tenancy laws being changed to encourage landlords?

Do you visit Berlin on a regular basis? If you do what kind of vibe do you get out there? I have a pretty streotypical image of the place...ie very grey and haunted by the ghosts of the cold war.
I was looking at an invest op Bulgaria, but from your info Berlin seems a good option. I will need to do some research but would be grateful if you can supply any further info.

That's a very good question James. I got to say that I'm not sure.. What I do know is that a lot of the people I have spoken to out there believe that this will happen in the fairly near term. I think there will be pressure maybe from the big Banking institutions that are now heavily invested in Berlin. These corp's have a history of lobbying parliament and tryng to get their interests pushed through. I personally think this sort of libealisation would be good for the economy as long as it was not pushed through to quickly.. I see Berlin as a med-long term investment. I look at it as an investment where my interest is paid and a fair amount of tennants rent goes to pay off my capital also. I expect the capital uplift, but if it takes a few years, then thats fine. I feel that it is so undervalued that even if it moves 50% of the value, then I'll be more than happy ;-).. Its madness that you could buy something maybe a 10 minute commute from the centre of Berlin for €30k!R.

Hiya IsabellC,

I've been out there about 5 times.. Gotta say I love it.. When I first went there I was expecting to see what u've described.. a grey place full of vandalised buildings, buildings that have been bombed out, etc.. but what I found was a vibrant, multi-cultural city with something for everone.. It has the West (e., Charlottenburg), where you have the Ku-dam - A street with whole varierty of designer shops, etc and an more aged population, and then the East side where you have a young professional crowd with loads of restaurants and bars/clubs.. and the 'artists' part of town - Kreuzberg. Living there is really cheap and you can stil see parts of "the wall".

Please definitely do some research, but the average price per s/m is cheaper than the rest of Europe, and this is the capital of a proven financial european force.

Feel free to give me a shout on 07956 372 663.

Cheers!
R.

Berlin sounds happening! Im going to dig further into it, I will definatly contact you when I come up with some queries.
Thanks for the insight.

No probs IsabellC,.. Give me a shout when ever!
Thanks,
R.