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Blog | 12. Oktober 2017

BERLIN DOMINATES GERMANY’S RESIDENTIAL INVESTMENT MARKET

Anyone who owns an apartment building in Berlin is sitting pretty. Thanks to the city’s pronounced shortage of housing, owners of rental apartments are having no problems finding tenants. And when owners do decide to sell, they are greeted by a long line of interested buyers. So, it comes as no surprise that more investment properties were bought and sold in the City on the Spree last year than in any other German city. From Reinickendorf to Treptow-Köpenick and the districts in between, a total of 1,155 residential and commercial buildings changed hands – for a total of EUR 4.2 billion. Berlin thus held on to its leading position in the German residential investment property market. Hamburg ranked second with sales of EUR 1.5 billion, followed by Munich’s EUR 980 million, Dresden’s EUR 950 million and Cologne’s EUR 770 million. Across Germany as a whole, transactions totalled around EUR 15 billion in Germany in 2016. According to the real estate association IVD, the Berlin market accounted for 26 percent of the overall result.

 

TENANT-FRIENDLY CITY WITH A PROMISING FUTURE

Nothing has changed: Berlin is still a city of tenants. Only one-in-ten buildings is a single or two-family house. According to the Berlin-Brandenburg Office of Statistics, there are approximately 1.89 million apartments in Berlin, averaging 70 square meters of living space. These apartments are occupied by an average of 1.8 people, a number that is set to decline further over the next few years. Single-person households are on the rise across Germany, and the same trend is clearly noticeable in Berlin. The market for residential investment property accounts for 47 percent of transactions involving developed land in Berlin. And, despite enormous construction activity in recent years, there is still a persistent lack of housing. The city’s population continues to grow steadily: Within just four years (2011-2016), 254,000 people arrived to make Berlin their new home. In the first half of 2016 alone, the city registered positive net population growth of 35,000 people.

 

HEALTHY YIELD OPPORTUNITIES THANKS TO REGULAR RENTAL INCOME

These developments have created enormous opportunities for investors. Rental income is regular income – and Berlin’s moderate property purchase prices generate attractive returns. The yield potential in the German capital is holding steady at 4.9 percent. In Munich, yields are just 3.2 percent (Deloitte Property Index). While apartment buildings in Berlin cost an average of EUR 3.64 million, equivalent properties in Munich change hands for an average of EUR 6.22 million – an increase of 6.4 percent since 2014. In the same period, prices in Berlin have actually fallen by 1.4 percent. This fall is due to the fact that older properties from the 1960s have also been attracting the attention of numerous investors, a direct result of the substantial demand for apartment buildings in the city. The acquisition of an older apartment building requires significantly lower investment than a new building, thereby enabling even higher returns.

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Blog | 12. Oktober 2017

BERLIN DOMINATES GERMANY’S RESIDENTIAL INVESTMENT MARKET

Anyone who owns an apartment building in Berlin is sitting pretty. Thanks to the city’s pronounced shortage of housing, owners of rental apartments are having no problems finding tenants. And when owners do decide to sell, they are greeted by a long line of interested buyers. So, it comes as no surprise that more investment properties were bought and sold in the City on the Spree last year than in any other German city. From Reinickendorf to Treptow-Köpenick and the districts in between, a total of 1,155 residential and commercial buildings changed hands – for a total of EUR 4.2 billion. Berlin thus held on to its leading position in the German residential investment property market. Hamburg ranked second with sales of EUR 1.5 billion, followed by Munich’s EUR 980 million, Dresden’s EUR 950 million and Cologne’s EUR 770 million. Across Germany as a whole, transactions totalled around EUR 15 billion in Germany in 2016. According to the real estate association IVD, the Berlin market accounted for 26 percent of the overall result.

 

TENANT-FRIENDLY CITY WITH A PROMISING FUTURE

Nothing has changed: Berlin is still a city of tenants. Only one-in-ten buildings is a single or two-family house. According to the Berlin-Brandenburg Office of Statistics, there are approximately 1.89 million apartments in Berlin, averaging 70 square meters of living space. These apartments are occupied by an average of 1.8 people, a number that is set to decline further over the next few years. Single-person households are on the rise across Germany, and the same trend is clearly noticeable in Berlin. The market for residential investment property accounts for 47 percent of transactions involving developed land in Berlin. And, despite enormous construction activity in recent years, there is still a persistent lack of housing. The city’s population continues to grow steadily: Within just four years (2011-2016), 254,000 people arrived to make Berlin their new home. In the first half of 2016 alone, the city registered positive net population growth of 35,000 people.

 

HEALTHY YIELD OPPORTUNITIES THANKS TO REGULAR RENTAL INCOME

These developments have created enormous opportunities for investors. Rental income is regular income – and Berlin’s moderate property purchase prices generate attractive returns. The yield potential in the German capital is holding steady at 4.9 percent. In Munich, yields are just 3.2 percent (Deloitte Property Index). While apartment buildings in Berlin cost an average of EUR 3.64 million, equivalent properties in Munich change hands for an average of EUR 6.22 million – an increase of 6.4 percent since 2014. In the same period, prices in Berlin have actually fallen by 1.4 percent. This fall is due to the fact that older properties from the 1960s have also been attracting the attention of numerous investors, a direct result of the substantial demand for apartment buildings in the city. The acquisition of an older apartment building requires significantly lower investment than a new building, thereby enabling even higher returns.

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