Aug 28, 2015
Berlin seems to be at the top of the investors agenda as the city rental demand increases, the city has very low residential ownership but is this now set to change?
Germany - and in particular Berlin - has been a nation of renters for decades. According to Buy Berlin, just 18% of the city's residents are owner-occupiers due to the housing subsidy legacy of the old East German government. Across the country, ownership remains low, with only around half of Germans owning a home. The only country with a lower home ownership rate in Europe is Switzerland.
However, a national shift in perspective has created an interesting change in the makeup of Berlin's residential population. Now, increasing numbers of renters are becoming buyers, giving the property market a new lease of life. Michael Schlatterer of CBRE Germany comments,
"There is a shift towards owner-occupation, that's for sure. You can see that the trajectory for condominium purchases is going up."
Rent rises are one of the factors behind the new German interest in buying property. According to Jones Lang LaSalle, rents in Berlin have risen from €5.50 per square metre in 2005 to €9 per square metre in 2014. From 2013 to 2014 alone, rents rose by more than 9%. While Berlin has responded by introducing a rent cap, many tenants have already had their heads turned by the prospect of property ownership.
Continuing low interest rates across Europe and Eurozone-related uncertainties have also caused many Germans to look at buying property, as they seek out the best ways to make their savings work for them in this post-Great Recession world. Andrew Groom of Jones Lang LaSalle comments,
"We're at the start of a re-pricing period of anywhere between two to five years. Prices in Germany have tended to be stable for long periods of time, and have then been driven by bigger macro-economic political events. We're going through a macro-economic situation now, which is driving Germans back into bricks and mortar."
- Just 18% of Berlin's residents own their property (Buy Berlin)
- Berlin rents up 9% from 2013 to 2014 (JLL)
- Low entry point of €109,600 attracting global interest in buy-to-let
This shift in national attitudes across Germany has served to create an interesting opportunity for overseas investors in cities like Berlin. As the housing market takes on a new dynamic, buy-to-let properties like Stadtpark Steglitz have become increasingly appealing, with the more active market offering a realistic exit strategy. Apartments there are available from €109,600, with gross yields up to 5.6%. Property Frontiers' Ray Withers comments,
"We're experiencing a real upturn in demand from investors for property in Germany and in particular in the capital. As the Berlin market shifts its focus, international investors are seeing a new and realistic exit strategy open up before them. Combined with the stability of Germany as an investment prospect, Berlin has quickly become one of the most exciting residential property investment destinations in Europe."
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