Germany, and in particular Berlin, is increasingly being considered by investors as a safe haven amongst the current global financial instability.
Article written by Your Place Berlin
Not only are investors switching funds to German property as a result of poor returns from other sources such as deposit account interest and shares, but also ordinary conservative and cautious Germans are now viewing German property as a safe and profitable place for their savings. Many newspapers, including the Financial Times’ James Wilson (12.06.12 ‘Germans put their wealth into property’) have recently reported on this phenomenon.
Renting in Germany is a well structured affair with reliable tenants who regard their rented apartment as their own home and look after it accordingly and so, with rents in the major German cities increasing strongly, owners/landlords are prospering from both improved yields and from the capital appreciation of their property.
Developments in Berlin
Berlin has seen rents increase considerably over the past few years and the trend is set to continue. The city is now thriving as the re-united country’s capital. Average incomes are rising and new properties, although construction is on the increase, are still not plentiful enough to take account of the influx of newcomers to the city and the changing demographics. So, rents and property values are increasing. This is, however, not regarded as any kind of bubble, since there is still a long term price correction taking place to correct the very low prices that Berlin carried out of its cold war history. Both rents and property prices still have some way to go to reach the prices in other major German cities such as Munich, Hamburg or Stuttgart.
Here is a summary of some of the reasons to invest in property in Berlin.
Compared to prices in other major European capitals, such as London and Paris, the price of property in Berlin remains a snip. This has historical reasons and now a long-term correction is under way.
Values are expected to continue to rise due to factors such as the continued internationalisation of Berlin and the relocation of Germany’s government back to Berlin in the early ‘90s. The opening of Berlin’s new international airport in 2013 is expected to accelerate this trend even further.
Germany is back as the powerhouse of Europe and in Berlin the property prices are moving upwards to reflect this. The disposable wealth of Berlin residents are climbing and thus so are the rents.
There is no capital gains tax on German property sales after 10 year of ownership. There is good capital growth potential with only 14% of Berliners owning property, the national German average being around 40%. The trend is now towards more ownership and, together with changing demographics and increasing rents, is pushing demand and prices higher.
Also there are good and safe rental yields of around 4% to 6% and low euro mortgage rates of 3%-5% with lending of up to 60% of value is available to non-German tax payers.
Germany never experienced the property boom as experienced, for example, by the USA and UK and thus was, and is, more insulated against a downturn. Therefore German, and especially Berlin, property is increasingly being looked upon as a safe haven by international investors, especially in the current economic environment. As mentioned by real estate journalist Zoe Dare Hall in The Sunday Times (24th June 2012):
‘For many investors, Germany is a lone land of opportunity in Europe (bar central London) – a relatively safe haven from the euro crisis.’
Your Place are an independent native English speaking property broker based in Berlin. We know the local Berlin market for high quality old apartments and for new builds, including luxury property, and we can offer exclusive opportunities in these areas. We will support and advise you through all procedures and provide information on all aspects of your investment.
The views and comments herein are those of the author and do not necessarily reflect the views or opinions of Rightmove Overseas, Rightmove Group Ltd or Rightmove Plc