Discover the three best things about the Berlin property market for property investors (part 3-3)
October 11, 2023
Imagine this… you’ve bought a new build apartment in Berlin. You hold onto it for the next 10 years throughout which you profit from being a landlord in one of the most competitive rental markets in Europe. You then decide to sell it by which stage it has gone up in value by 130% (as predicted by Berlin agency Guthmann) and then, as you’ve owned the property for 10+ years YOU PAY NO CAPITAL GAINS TAX on the profit from its sale.
Yep, you read that right! No capital gains tax on properties in Germany owned for a minimum of 10 years. So, as an investor, not only do you benefit from the capital appreciation of your asset you then pay NO CGT on that profit.
THIS, AMONGST MANY OTHER REASONS, IS WHY INVESTORS ARE LOOKING TO BERLIN FOR THE ULTIMATE IN LONG-TERM GAINS.
Why else are property investors eying up Berlin?
Berlin is a city of renters.
80% of the population rent. In 2023 the city enjoyed a vacancy rate of only 0.9%, whilst CBRE reported finding an apartment to rent in Berlin as easy as trying to find a needle in a haystack.
Red hot rents are here to stay.
So ran a Reuters headline in August, citing how new build construction had slowed (blaming rising costs, building permits were down 27% in the first half of 2023) and the end to cheap borrowing (although rates are lower than the UK’s) were forcing potential homeowners to rent, thereby applying increased pressure to an already undersupplied market. Germany is said to be facing its worst housing shortage in 20 years and nowhere is feeling it more than Berlin.
Crazy price and rental growth predictions for newbuild apartments.
130% increase forecast in value of Berlin newbuilds over next 10 years (Guthmann) with a 63% rise in Berlin rents over the next five years (Immowelt).
All that to say, right now Berlin offers investors excellent potential for capital appreciation.
Here are our top three reasons to invest in Berlin.
ONE: Good supply and demand fundamentals weighted towards landlords; long-term capital appreciation in the price of new build property but also soaring rental yields such as 5.5% in our newly launched Berlin development Spreetal Living, compared with a city average of 3.55% in Q3 2023.
TWO: No Capital Gains Tax after 10 years, enough said.
THREE: Ideal tenant pool; Berlin is a city of high earners. The number of tech jobs has boomed by 35% (2015-21) and the city has overtaken London as the fintech capital of Europe. Tesla have established their first European manufacturing hub for cars, the Giga Factory, in Berlin which will now also produce batteries as well as the cars. Little wonder that Berlin’s average salary is nearly 20% more than the average London salary.
We have an extraordinary opportunity investment in Berlin, Europe's Thriving Market! Stay tuned!
Register here for pre launch information.
The RPA Group are property and investment specialists rather than tax advisors and individual circumstances do change the position on everything mentioned above. If you are looking at German property we would strongly recommend you do not rely on the above and speak to a German qualified tax advisor to fully understand your position.
Read Part 1 and Part 2 on our blogs post on why Berlin makes so much sense from a property investor's perspective.
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.