Berlin – Hot Cake for Foreign Investors

During the announcement of the National Election results in September 2017 threw up a few surprises, one aspect has remained constant. Angela Merkel wants to continue to be the English Chancellor for another term.

What this does is increase the totaled did with the national leadership continuing for another term, Their policies (especially Those pertaining to real estate,: such as the Real Estate Acquisition Tax) so will have to extended run. This means that Germany, already a darling in Europe for real estate investment, wants to have a bull run for the next few years.

Several reasons have been added to the coveted status in the global real estate market.

First , the growth of German economy, which has been outpacing its closest neighbors France and the UK in the last few years. This trend is expected to continue in 2018 as well as the German economy is expected to increase by more than 2%, compared with 1.5% for France and 1% for the UK, respectively. Factors such as increased private consumption, low inflation ( expected to be 1.5% for 2017 and 1.7% for 2018 ), low employment rate ( 4.2% in Aug’16 compared with 10.1% for Euro Zone for the same period ), and high wages are all expected to contribute to this growth. Adding to this, increased domestic demand as a result of refugee inflation, rebound of the country’s construction sector (which accounts for about 4% of Germany’s GDP ), & a stable government, and the country can expect even more -Brexit era.

Second , the historically low-interest rate, which has resulted in real estate in Germany being a safe haven than even the share market for many investors.

This market stability can be traded to the fact that most home buyers opt for fixed-rate loans. In the 2003 to 2015 period, over 60% loans approved to Initial Rate of Fixation (IRF) of 5 years or more. IRF allows the German housing market to circumvent any abrupt changes in interest rate or value of the houses. This, in turn, provides stability to Germany’s banks as well, so who prefers to long-term lending.

All these factors are contributing to the increased demand for homeownership for Germany, a country where home ownership in the least among Western countries ( 52.5% home ownership for Germany vs. 70% average homeownership for EU ). Not just domestic demand, Germany’s stability and potential for growth is international investment as well as in the real estate sector.

As a survey conducted by Wisconsin School of Business, Germany is the second most stable and secure international real estate investment destination, next only to the US.

With all these going for the country, it’s worth noting that the cities are seeing the rapid appreciation in real estate. This positive effect is felt by Berlin, the country’s capital and the seventh most populous urban area in the EU.

Berlin is one of the most sought-after metropolitan in Germany, with 60,000 new residents in 2016 alone. In case of the influx of people, US, Italy, and the UK are the three top origins countries (barring the refugee influx). Several factors are contributing to Berlin’s ‘sought-after status’ as well as its perception of a global city. sought after status’ as well as its perception of a Global City.

First , Berlin’s burgeoning technology sector, which is generating demand for residential housing projects. Low property rent prices ( $ 28,400 per employee per year in Berlin vs $ 111,900 in New York, $ 105,400 in Hong Kong and $ 88,800 in London ), supportive business environment, and access to talent in technology companies, venture capitalists, and even start -up to set-up shop in the city. Deutsche Bank moving its Risk Management operations from London to Berlin branch, as well as Google, through its funded Factory Berlin as well as its own planned operations center in Kreuzberg area, are some of the examples of increased corporate interest in the city. center in Kreuzberg area, are some of the examples of increased corporate interest in the city.

Second, the city is one of largest metropolis’ with the lowest property ownership price in the country. While cities search for $ 5,000 per sq.m, these prices are still considered ‘luxury’ in Berlin.

The average price per sq.m in Berlin is about EUR 3,940. This makes it highly profitable for international investors, who are looking for a good return on investment. This is reflected in ownership status in Central Berlin, where in 2015 over 50% ownership of international buyers, constituting major American, Chinese, Israeli, and Italian buyers.where in 2015 over 50% ownership was of international buyers, constituting majorly of American, Chinese, Israeli, and Italian buyers.

Third, young & high-income households are migrating to the city, while the existing households in the city are witnessing a gradual growth in the income. This trend in opening up new segments of buyers, who prefer homeownership to property rental.

Add to this the international diaspora, which is moving to the city for its many job opportunities, thus giving the city a multicultural outlook. London and Paris as European cities with global appeal and a highly liquid real estate market.

If the current trends hold, the German real estate market wants to continue to be a hot cake for both foreign and domestic investors.

For more details on the hottest properties, furnished as well as unfurnished apartment, as well as property management of existing apartments in Berlin, read more on Eichen Global .

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