Investment Property in Berlin?

hiya I know this is a very old thread but I was interested to read it, anyone any thoughts or hindsight on this?

My advice on anyone thinking of onvesting in Berlin is as follows:

Firtsly - Germany is one of the few westen european countries to have missed out on the property boom.

I would advise anyone thinking of investing to understand fully why this is so.
And also have very good reasons why they believe this is going to change in teh near future while the rest of western europe faces into a property slump.

Reasons such as " the prices seem very cheap compared to other european cities" is not a good one in my book.
someone could have used that as a reason at any time in teh last 15 years and they still would have lost money.

If that is your logic then at least know why now is any different to any time in the past ?

If you don't understand why prices behaved as they did in teh past, then what hope have you in predicting how they will behave in teh future?

The reality os that berlin has very low home ownership (around 18% i believe)
That mentality is not going to change overnight.

My understanding of why prices behved like they did in teh past is because in teh early 90's the governemnt introduced some HGUGE tax break that benifitted people that did up old flats and renovated them.

Apparently everyman and his dog was at it which resulted in a boom in teh early 90s.

However - when this was taken away in 1997 there was a huge oversupply of property on teh market.
This, coupled with teh economic difficulties with teh reunifaction of germany led to the property decline that followed.

I could be completely wrong with that synopsis of course although i have read it more than once.

Aggree with what most of the prevoius poster says. Berlin property market is not for those expecting to make a quick buck (then again where is at the moment). It is however a safe market. Prices would appear to have bottomed out at a very low level. Rents however or also quite low but give a decent enough yield (and far greater than most places) when you take the low cost of the property. There isn't to many places around where you can buy a property for say €1,000,000 that gives you a rent roll of €80,000 a year. Finanace can be hard to get though but LTV of around 75% are achievable at rates of around 5%. Entry cost are high (up to 13%) when you take stamp duty, estate agents fee etc into account. There was a bit of hype about this market 2/3 years ago when prices we pushed up by foreign investors incl Irish, UK and danish coming in snapping up property but this seens to have abated now and yields and prices are steady now again. Vacancy's are low (I can speak from experience) < 3% and there are relatively no new builds (only renovations) so over supply shouldn't be a problem. Rent for a typical two bed 60 m2 apartment per month would be about €300 (plus heating and running costs etc) so as you can see it not dear. But to sum up, its a safe but long term play > 10 years and if you have money that you can tie up for that long then you could find worse places to but it. Hope this helps and I'm open to contridiction on any of my points.

qwertyuiop said:

...The reality os that berlin has very low home ownership (around 18% i believe)
That mentality is not going to change overnight.

My understanding of why prices behved like they did in teh past is because in teh early 90's the governemnt introduced some HGUGE tax break that benifitted people that did up old flats and renovated them.

Apparently everyman and his dog was at it which resulted in a boom in teh early 90s.

However - when this was taken away in 1997 there was a huge oversupply of property on teh market.
This, coupled with teh economic difficulties with teh reunifaction of germany led to the property decline that followed.

I could be completely wrong with that synopsis of course although i have read it more than once.

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That synopsis applies more to mid size cities in the old East Germany AFAIR - places like Chemnitz or Zweckau, and probably also Dresden and Leipzig to a lesser extent. But not really to Berlin.

However it is true that home ownership is very low, so you have to think about who you're going to sell to down the line. Also transaction costs are quite high. So you need about a 10% increase in price just to break even. You got to ask yourself where do you see this rise coming from. And just like the prices, the achievable rents are also low.

From my experience it's not that the rents are low, it's that house management costs are high.
I have an 52m2 apt in a beautiful classical building in Wilmersdorf, Berlin. This is a fairly upmarket area . Apt cost €75k plus expenses. Rent is €473 pm. So far so good ! The house management charge is €138pm. Now they do keep the building in excellent condition but it sure takes a big bite out of the rent.
Plus side is that no furnishing is required, tenants tend to be long term & he pays by s/o every month on the dot. It's hassle free really & just about paying its' way so I plan to hold for a while & see what happens.

I think location (same the world over ) is the most important factor in Berlin. You've got to buy where the locals want to live.

What about commercial property in Berlin. The return on rented shops is close to 10%. There are also entire building of 8 to 12 rented flats yielding more than 8%!

Why are the yields so high? why are the sellers getting out and missing the opportunity to see the property paying its way with such return? why don't they take a loan against the property if they need cash. In some cases, it does indeed seem so hassle free and with such great returns that one can't avoid to think that he/she is missing something!

In some secondary cities there are even better deals (on paper and return wise I mean), but at the same time you find (in those same secondary cities) many many entire buildings, most big, listed and nice buildings: entirely VACANT and for sale for 50k eur or so, less that 10k per flat! not even the building & material cost.
I think that part of the answer is there.

Forgot to ask, does anyone know the Charlottenbrg area in Berlin? or the towns Zeitz and Hoya in Germany? Would the Germans want to live there? Thanks

ttrigui said:

Forgot to ask, does anyone know the Charlottenbrg area in Berlin? or the towns Zeitz and Hoya in Germany? Would the Germans want to live there? Thanks

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Charlottenburg is the central business district of what was 'West Berlin'. The famous Kurfuerstendamm runs through C'burg with its high end retail. Charlottenburg is also full of old renovated apartment blocks which are a delight. It is still held in high regard by Berliners as a 'good place to live' but is seen as a bit dull by some of the younger crowd who prefer Mitte/Prenzlauer Berg/Friedrichshain (all former boroughs of East Berlin). It's a solid and desirable area in general but I imagine a dump of an apartment in Charlottenburg would be quite hard to rent out as anyone working there in a low paid job would just use Berlin's excellent transport system and live somewhere nice but cheap. Don't know those other places at all, sorry.

Charlottenburg & Wilmersdorf have merged to become one big region.

It is an area like Murphaph says in the old western part which contains the Ku'damm. This section with the Mercedes symbol on top of one building you might recognize from lots of spy films including the recent Bourne Ultimatum. Not too fond of this area myself as I think it's so 70's.

Residential wise it's quite genteel with lots of old buildings perfectly renovated. They are very fond of keeping the old stairwells & doors as well as lovely foyers which give the buildings such character. Schloss Charlottenburg is beautiful. Wonderful grounds & gardens freely open to the public & they seem to make full use of it for jogging, cycling walking dogs etc.

Mietspiegel (monthly rent) is fairly high here. You don't get squatters like in the old east. Areas in Berlin are given ratings & this area is certainly one of the higher ones.

You really need to go for yourself & check out the areas. In reality you get what you pay for. If you want class you won't get it by paying €10k for an apt ! There must be an underlying reason if you see something going so cheap.

The other towns/cities I've never heard of. I believe there are a lot of places in old east Germany that are now like ghost towns. Most residents have left as there isn't enough work. Hard to find tenants then I'd imagine.

No the ones I've seen at such prices, less than 10k per flat and even closer to 5k, are completely vacant and need renovation. Those entire buildings, sold as a whole, are not in recognisable big cities, probably one of those ghost cities mentioned above. They just look so impressive (on the photos).

Thanks for info about the Charlottenbrg area.