This city’s population influx is generating demand for apartments and causing prices to escalate.
A report released by German real estate financing company, Berlin HYP, indicates that despite a growing demand for housing and signs of supply shortages, Berlin still has the most relaxed housing market of the seven major German cities. But this looks set to change.
IP Global’s 2015 Global Real Estate Outlook Q3 points to Berlin becoming a key market for property investors. Compared to other European capitals such as London and Paris, Berlin as a Tier-1 city with Tier-3 pricing is regarded as significantly undervalued.
Thanks to the 250,000 jobs created in the past 10 years, the city has had a huge population influx that has generated demand for apartments. High-profile infrastructure projects such as the €5.3bn Brandenburg Airport, situated to the south of the current Schönefeld facility, is proving a boon for employment.
INFRASTRUCTURE AND JOBS
Another significant project that is helping fuel demand for jobs is Berlin TXL at the site of Tegel Airport. Tegel was the main airport for West Berlin, but will close once Berlin Brandenburg opens in 2018-2019. Berlin TXL — billed as the Urban Tech Republic — will deliver a modern research and industrial park just a short distance from the heart of the city.
To fulfil the accommodation demand — plus that of another 340,000 new residents expected by 2030 — it has been estimated that the city will need an additional 19,655 new apartments every year. However in 2014 only 9,000 units were built and this left an imbalance that is driving residential rental and buying prices upwards. IP Global’s 2015 Global Real Estate Outlook notes that the average price of a Berlin apartment increased by 11.7% in 2014. In prime areas of the city such as Mitte, the equivalent figure was even higher (24.2%).
THE LUXURY MARKET
While high-end apartments may not be in high demand from tenants, there has been a distinct change in the luxury residential buying market. A recent report in the World Property Journal indicated that Berlin’s condominium prices will continue to see substantial growth in years to come. The growth is being driven by strong domestic and foreign demand.
Experts estimate that high-end apartments will achieve prices of €10,000/m2 — a leap from current prices of between €4,500/m2 and €6,000/m2. This segment has already seen massive growth and the number of properties sold in this price bracket grew by 46.5% in 2014.
LIVING IN BERLIN
So what does Germany have to offer those who chose to invest in property and reside in the country?
Says Richard Bradstock, director at IP Global in Abu Dhabi: “Take a close look at Berlin’s economic fundamentals and it is easy to see the city’s appeal for real estate investors. Not only is there a significant shortage in housing stock, but Berlin’s economy continues to strengthen as well.
“Job opportunities are on the increase as big infrastructure projects are carried out. This all means the city’s population will continue to grow and the demand for housing along with it.” Berlin, he notes, always had a reputation as a cool city and was regarded as a thriving European centre for fashion, art and culture.
Living expenses such as food and travel are significantly cheaper than those in London and Paris. A meal at a mid-range Berlin restaurant, for example, costs about €40. An average bottle of wine costs about €5. Petrol is about €1.40/l and a small car such as a Volkswagen Golf (1.4 Trendline) sells for about €18,500. The price of a monthly travel pass is €79 in Berlin, while a similar pass would cost about €175 in the UK capital.
Crime statistics have increased slightly over the past three years but are low, and violent crime is extremely rare.
SOUTHERN AFRICAN INTEREST
IP Global says about 70% of its southern African clients invested in 2015 in the UK, 20% in Australia, and a growing proportion (10%) in Germany and the US respectively. In 2014 about 90% invested in the UK and 10% in Australia. While Southern African investors still gravitate towards familiar markets, they now consider.
Words: Lea Jacobs