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Article by: Trevor Hudson t.hudson@berlinrealestatecentre.eu Published: 21/03/2008

Let me explain why Berlin is THE investment hot spot

With the culture to rent properties changing, and only 16% of Berlin’s residents currently owning their property, the time is ripe for prospective buyers to invest in properties in Berlin.

In the last two decades, no city has changed its importance and reputation as positively as Berlin. Reunification in Germany in 1990 resulted in massive tax advantages for those investing in property, especially the reconstruction of East Berlin.

Germany is the largest property market in Europe - and, after a sluggish performance over for the best part of decade, it is finally showing some signs of kicking into life.

But why invest in German property? Reports indicate that large residential property portfolios have risen by 30 per cent in some instances - and traditional mortgage companies are being challenged by innovative new market entrants. Traditionally, lenders wouldn’t consider giving a 25-year-old, with no credit problems and a steady job, a mortgage unless they could manage to raise a 30 per cent deposit - but innovative finance companies, many of who offer 100 per cent funding, are now beginning to enter the market. The recent introduction of tax-efficient real estate investment trusts (REITs) should give the market added impetus. Huge amounts of money are set to be invested in REITs - or G-REITs as they are known in Germany - with some lobbyists forecasting investment to reach as much as €127 billion. This in turn will provide a huge boost to property prices in Germany.

Furthermore, the country’s economy is recovering after years of stagnation. Confidence among business leaders is returning and the economy is growing at a decent rate, thanks to a strong and competitive export industry. Because of its mortgage practices and static economy, property prices have remained low in recent times - especially in eastern cities such as Berlin and Dresden, where costs can be up to 30 per cent lower than the rest of the country and below those found in some eastern European countries.

The German property market is now focussing on realistic prices and long term return on investment. There is a growing appreciation that real market forces need to be introduced to drive investment and development in residential property.

Today, investment that pays for itself is in demand. Purchase decisions are based on the reliability of earning and rates of return as well as the long-term value of the investment. As a result large property portfolios are now being sold to private equity funds. This change is the start of a fundamental shift from state-owned and subsidised housing to a private market.

In the same way Italy, France and Spain have evolved over the last decade from a rental market to a predominantly owner-occupier market, all the dynamics are in place for a similar shift in Germany. The climate is demanding reform.

Interest rates are traditionally kept low in Germany - and because it is such an established economy, investors should feel secure if choosing to plough funds into its property market.

If entered into with expert knowledge and guidance, property investments in Berlin are long-term secure and profitable capital investments.

 

External Article Link: http://www.property-partnership.com/overseas-property-guides/overseas-property-guide.cfm?id=122

Article Link: http://www.property-partnership.com/overseas-property-guides/overseas-property-guide.cfm?id=122

Please contact the author at t.hudson@berlinrealestatecentre.eu for more information.

 

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