Berlin property prices are lower than in any capital city in the industrialised world, according to a new comparative study by Engels & Volkers, although it is not the first time this has been reported, and it will probably not be the last either.
In Mitte, the upmarket district of Berlin, top end apartments currently go for an average price of 3,500 Euros per square meter, which is a fraction of the price of a comparable unit in the financial district of New York.
Engel and Volkers declared Berlin's history of division as responsible for its failure to grow like other capital cities.
"We have only begun to see things changing here in the last ten years. But, compared with other major cities, the impact of this on the property market is rather minimal," said Anne Riney, managing partner of Engels & Volkers in Berlin-Mitte.
"It will take a long time yet before the market reaches anything like the price margins of London, Tokyo, New York or Paris. Until then, Berlin will remain the world capital with the lowest-priced residential property," she added.
It is true; history is a huge part of the reason why Berlin property prices are so low, but not in the way laid out by Engels and Volkers.
Only 40% of Germans own their own homes, much lower than the developed world average of around 70%. The status quo has developed over the years, and the renters culture is now deeply entrenched in Berlin.
Because of the situation, the government imposes controls on rental rates, allowing rents to rise only when wages rise. Because the biggest buyers of property in Berlin are buy to let investors, price rises are governed by rental rates. This vicious cycle has kept the lid on Berlin property prices for years.
Berlin Investment Apartments vs Blocks
ReplyDeleteInteresting stuff re apartments in Berlin, the rent of these apartments does tend to set the price with yields for single apartments running somewhere between 4% and 5% in the better parts of Mitte apartments are marketed for up to €6,000 m2 but that's pretty top end, but does not compare to the €70,000 m2 Candy and Candy market 1 Hyde Park apartments for in Knightsbridge in London.
Buying an apartment in Berlin on the face of it look very arrtactive, but buying the whole building often produces far greater yields and is a much easier purchase than a single apartment, banks see builingd with typical yields of between 6% - 8% with say 20 teants paying rent a much better risk to lend against than an apartment with a signle tenant producing 5% yield, hence they will lend up to 85% on some buildings but with single apartments the loan can be as low as half of that anount.
Singla apratments don't offer the rental potential a whole building does as after time ina builing tenants move on, get married etc and with the average tenancy in Berlin being 7 years there is the oportunity to refresh the apartment and get a better current open market rent compared to what the outgoing tenant was paying.
But like any market there are things to need to know about buying so the rent list or rent contract in berlin is key so we have produced a video on our web site of some of the esential buying questions to ask about buying a property in Berlin have a look at the questions for yourself Nilreb.com and have a look at the Hidden Berlin section of our site for some cool places to visit in Berlin.
John Aitken
www.Nilreb.com