Jitters over terrorist attacks, immigration strife, and economic instability due to Brexit seem to have put some European real estate investment property on shaky ground lately, but there are bright spots, too.
Kate Everett-Allen, head of international research at Knight Frank names Berlin and Munich on a short list of standout European performers with price growth rates of 9 percent and 12 percent, respectively, in 2015. You can find those figures and a lot more in the real estate investment advisory firm’s 2016 Wealth Report.
Germany’s capital, Berlin, where real estate values have doubled since 2007, is a case in point: The growing city is an important center for high-tech, creative, and media industries. Rubina Real Estate experts note that Berlin is a gateway to Central and Eastern Europe, has a well-developed telecommunications infrastructure, and a well-educated population of 3.5 million that skews young. The city continues to draw new businesses eager to appeal to young professional talent attracted to its progressive vibe and amenities. The demographic between the age of 25 and 30 is growing at the fastest rate.
“Berlin was a very prosperous city with lots of cultural happenings and great architecture until the downfall of Hitler,” said German-born Bernadette Schaeffler, owner of the Bernadette Schaeffler Collection luxury home furnishings showroom in the Dallas Design District. “During the Cold War, it somehow slept like Sleeping Beauty. Since the reunification, people built on top of it. Parts of Berlin are historical, other parts extremely modern. Berlin is cosmopolitan, multicultural, and American friendly. There’s a big expat population — they all feel at home. In general, the cost of living is lower, and rents affordable; that said, real estate prices are going up.”
Along with growth, reasons that analysts say Berlin and other major German cities stand out as investment opportunities are undervalued property values relative to cities such as London and Paris, the strength of the German economy, a housing shortage, and the trajectory of rising prices tipping a purchasing trend, especially in light of low interest returns as an alternative investment.
For those looking to seek properties to generate rental income, it’s interesting to note that Germany has a high percentage of renters vs. homeowners, which goes back to the destruction of housing and subsequent public policies encouraging rental since World War II. In Berlin, 46 percent of residents rent. Rapidly rising rates led to legislation enacted in June 2015, literally called a rent “brake,” to limit yearly rent increases to 10 percent.
It’s hard to say what’s best long term. With the world becoming more and more mobile, investment in hub cities that draw businesses seems solid. On the flip side, slowing German exports have raised concerns that the German economy may not be as strong as some think. Some believe Germany’s market is a real estate bubble that will burst, especially when a dearth of baby boomers who are current homeowners flood the market with homes to sell upon their retirement.
Those inclined to follow the market may find a new tool helpful: EichenGlobal Advisor. It’s a free application available in the U.S, that is based on data of sales prices and rents for every residential property advertised publicly in Germany over the last 10 years. The application provides a tailored report as to the market price and current rent of any residential address in Germany and trend info for any German neighborhood, district, or village — all in the currency of your choice.
And, here’s a glimpse of a Berlin property to illustrate what your money can buy there: a rendering of a two-room, 818-square-foot apartment in the planned building project, Carré Voltaire, which is planned to open summer of 2018. Listed by Zabel Properties AG at $424,935, the unit will be finished out with high-end materials in warm colors, with fine oak parquet floors and high doors.
Picture yourself hanging out here before heading to an avant-garde gallery opening or concert:
The project is centrally located at Else-Lasker-Schüler-Strasse 2-6, near the “Park am Gleisdreieck” and Landwehr Canal. Restaurants, galleries, and shops are just steps away in one of the world’s most vibrant cities.