Berlin, which next year marks its 30th anniversary as a re-unified city, has witnessed strong price growth over the last five years according to Knight Frank.
In its latest report - Berlin Insight 2018 - it found that both prime and mainstream markets have seen strong price growth thanks to a shortage of new supply, a robust labour market, a strong economy and a rapidly growing population.
In the year to March 2018, average prices in Berlin rose by 14.9%, ahead of London but in line with the rate of growth in Edinburgh and Amsterdam over the same time period.
Rents, meanwhile, increased by 11% in 2017, according to research carried out by Deutsche Bank. The rent brake introduced in the city in 2015 prevents property owners from increasing rents by more than 10% above the average for the area, but this only applies to pre-constructed buildings and not to new-build apartments or refurbished units – which might help to explain why rents are still rising at a strong rate.
The city, which is popular among young urbanites, creatives and artists thanks to its relative affordability and bohemian vibe, is also increasingly a go-to destination for tourists. Demand is rising, with Berlin hosting 31 million overnight stays in 2017, making it the third most visited European destination.
As a reaction to the explosion of tourists – and short-term letting sites such as Airbnb catering to this increased demand – holiday rentals are currently limited to 90 nights a year in the city.
Although Berlin is not known for being a haven of home ownership – only 15% of the city’s inhabitants own their own home – it remains a popular place for overseas buyers. Aside from German purchasers, buyers from the UK, US and Switzerland are the most prominent. The majority of these are buying within the €300,000-€700,000 price bracket.
Since 2015 Turkish and Middle Eastern buyers have been more active, seeing Berlin as a safe haven for investment. This is aided by the fact that residents and non-residents are treated the same in terms of tax and purchase costs, while many overseas buyers are attracted to the Berlin market due of its high quality of life and relatively low cost of living.
Demand is likely to remain strong in the near future, despite Brexit uncertainty, tougher regulation, affordability issues and tighter monetary policy. Berlin’s position as the capital of Europe’s strongest and most stable economy, its low house prices (the lowest of any German city with a population of more than 1 million) and its firm foundations (low unemployment, strong wealth creation prospects, low cost of living, good schools, etc) still make it an excellent prospect for investors.
When it comes to the most in-demand areas, Charlottenburg, Berlin’s stylish prime district to the west of the city, is still very popular among young professionals and families, while Lichtenberg and Treptow-Köpenick - to the east of the city centre - are witnessing a host of regeneration projects designed to attract more people to live in these areas. Families, in particular, are lured by the green spaces and good transport links on offer.
Elsewhere, Friedrichshain – also found to the east of the city centre - is enjoying strong levels of demand. This is largely being driven by its proximity to Mediaspree, a media and communications hub now home to Mercedes-Benz, Coca-Cola and Universal Music Studios. Unsurprisingly, it is particularly attractive to young professionals who make up much of Belin’s highly skilled workforce.
With the population of Berlin set to grow 8.2% by 2030, and the demand for new apartments set to be 20,000 per annum, everything suggests this buzzing, thriving city will continue to be one of Europe’s most desirable investment areas.