Where next to invest? We profile the world’s top property hotspots, detailing everything an investor needs to know.
Property prices rose 9.6 per Cent in 2016 (Berlinhyp).
Berlin rents rose 5.6 per cent in 2016 (Berlinhyp).
Germany was the 8th most popular country on TheMoveChannel.com in January 2017.
Where is it?
Located in the North East of Germany, the capital city of Berlin is one of the most famous destinations in the world. That is partly a result of its history and partly due to its excellent travel connections as a gateway to eastern and central Europe. For Investors, it is equally famous for its rental-dominated housing market, generating returns for buy-to-let investors, both domestic and foreign.
Who lives there?
Home to more than 3.5 million people, Berlin is the largest city in Germany. While you might expect it to be an older city of business veterans, though, it is also one of the youngest, most international capitals in Europe: more than 40 per cent of its population is aged under 35. This fuels Berlin’s vibrant, thriving cultural and educational scene, which, in turn, helps to attract more and more international residents to the area, creating a cosmopolitan hub for western Europeans, non-EU migrants and Germans that is lively and welcoming. Being a Berliner has rarely been so hip.
Berlin is booming. Like the rest of the country, Germany’s capital has grown steadily since 2012, and that growth shows no sign of stopping. As of 2016, there were 82.8 million people living in Germany overall, up 300,000 on the previous year. In Berlin, there were 132,000 additional households in 2016. With net migration of 750,000 people to the country, the number of people needing housing is only going in one direction.
Supply, meanwhile, is failing to meet demand. Construction is climbing, with housing completions up 35 per cent in the last five years, and building permits up 37 per cent. Even with this recent acceleration in activity, though, housing levels are insufficient. Berlin added just 28,000 new residential units last year, over 100,000 short of the number of new households created.
As a result, the city’s buy-to-let market remains a favourite for investors, with rents on first-time lettings up 4.2 per cent and rents on re-lets up 5.1 per cent. The city has introduced a rental cap in the last year to attempt to limit rising rents, although this is yet to have any notable impact upon prices. Market conditions may change in 2017, as the country’s elections loom, which will likely see housing measures form a major part of the political debate. For now, though, Germany’s fundamentals are rock solid, and, with new builds exempt from the rental cap, new homes and the acquisition of developments are increasingly popular target assets for investors.
Away from residential property, commercial real estate is also highly sought-after. Office take-up in 2016 hit a nine-year high across the country, with rents following suit. In Berlin, a vacancy rate as low as 2.7 per cent promises strong returns for investors. Retail property is equally attractive, although investment totalled €4.9 billion in 2016, down 40 per cent from 2015. 2015, however, was a record year for the sector. Indeed, a lack of high-value supply was the main reason for the lower levels of investment in 2016, rather than weakened demand: foreign investment accounted for 55 per cent of the transaction volume in 2016, driven by the city’s above-average rental growth. The hotel sector is also heating up, with investment levels soaring 47 per cent in the first three quarters of 2016, according to Savills, bucking the slowdown recorded in office and retail.
The result is a thriving property market for investors, despite political headwinds and the rise of online retail sparking some caution. The city’s market is underpinned by a strong national economy. Indeed, Germany’s GDP grew 1.9 per cent over 2016 as a whole, its best performance in five years. The country also has no plans to hike interest rates notably in the near future, unlike other developed economies, such as the USA and, potentially, the UK. With political uncertainty in both countries, plus economic uncertainty in other parts of the world, Germany’s reliable stability makes it a safe haven for commercial and residential investors alike.
German investors make up a large portion of transactions in Berlin, but they are decreasing in number, as demand from other European countries rises. Investors from North America are also increasingly active, fuelled by the strength of the US dollar.
“With a booming population and thriving hotel sector, Berlin is a safe bet for residential and commercial property investors alike.”
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