Why Berlin might be the best property investment you can make right now
February 20, 2024
“We have reached the bottom of the affordability correction and are already back on an upward trajectory,” posted a Berlin-based real estate agent in early January. Germany, like parts of the UK, experienced a correction in 2023 with prices dropping by on average 10%. And, like the UK, price corrections weren’t uniform. Berlin tells a different story – with pockets of the capital registering price rises, bucking the national trend completely and certainly the performance of other German cities like Munich and Frankfurt.
What is happening in the Berlin market at the moment?
Berlin has the inimitable buzz of being a rare capital city in which people can still afford to live and work in. Its vast industry and thriving start up scene also add to its allure of opportunity, its widely documented cultural dominance being the cherry on top. Also, the city’s colossal investment in infrastructure and development have paid off. Its transport systems work well, spanning the city with efficiency making it an easy place to get around in. Which naturally, boosts its job market, inward migration and ultimately its economy.
The recent surge in population and the end of rental controls have seen rents spiral in the city and an unprecedented competition for rental apartments amongst tenants; people waiting for months to find an apartment. Vacancy rates are well below 2% - one of the lowest rental vacancies in the world.
And, if you’re worried about higher lending rates, you’ll be pleased to know that “Interest rates have dropped almost 36% in the last 6 months and it’s now possible to secure a 3.16% interest on a 10-year fixed.” Although, for overseas buyers those deals are probably closer to 4%. Still – lending rates are moving swiftly in the right direction.
Where should you buy investment property in Germany?
Berlin, is the short answer. It’s the market most inured to price fluctuations. It also has the lowest home ownership rates in Germany at 16%, which contributes to its red-hot rental market. Whilst nationally prices declined by around 10% in 2023 in Charlottenburg average sale prices rose in comparison to 2022 and the median asking rent for new properties rose 8.4% on the year previous. So, if you’re wondering where to buy in Berlin – Charlottenburg is a good place to start. Currently we’re selling a development in the popular and historical residential borough of Charlottenburg with prices starting at €187,500.
What about Berlin’s future growth?
As Savills expertly said, “Residential buildings are likely to make up the largest position in the German economy’s fixed assets. An investment in residential property therefore represents a stake in the most important tangible asset of one of the world’s largest economies.” This confidence is huge, the German economy regarded as one of the most secure in the world and investors should be buoyed by this.
Berlin’s shortage of residential homes, particularly apartments, was exacerbated by the pandemic construction slowdown, the energy crisis, an influx of Ukrainians fleeing the war and rising build costs. This meant that more households were joining the housing market than apartments and houses were available. Thus, we see an even hotter rental market developing in 2024-25 as the number of residential permits between Jan-August 2023 was almost a third (28%) lower than the previous year. More and more people + less and less properties = higher rental prices. Savills Germany were particularly bullish: “Long term investors are acquiring a product with virtually no downside risk in terms of income and even the prospect of rising rental income in the long term.”
“The fact that housing is and will remain a non-substitutable basic need also contributes to the defensive character of residential real estate investments.”
We couldn’t agree with this more!
Browse our Berlin developments here or speak to a member of our team about how it works buying investment property in Germany.
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SPREETAL LIVING CHARLOTTENBURG BERLIN
Price from €187,500
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RICHARD BRADSTOCK
MANAGING DIRECTOR
about the AUTHOR
RPA’s founder, Richard has worked in residential development investment for 20 years and oversees the general running of the business ensuring the RPA Group retains true to its founding principles. Over his career Richard has built an incredible network of international property investors and like-minded industry professionals. The RPA Group was born out of a duty of care to provide property investors with an industry-leading and integral service, one that connects investors with quality and desirable investment opportunities, whilst providing reliable and trustworthy market commentary and analysis alongside, enabling investors to make the best, most-educated decisions for them.