Berlin moves up on Europe's more lauded capitals
The appeal of property in Germany's premier city is outstripping London and Paris
Sunday 11 December 2011
London or Paris; Paris or London? Which of these two is Europe's greatest city?
The debate has gone on for decades, if not centuries, we never get the definitive answer and probably never will. But I'd like to throw in a leftfield choice, the German capital of Berlin.
Right at the centre of the continent – Berlin is 45 minutes from the Polish border, a few hours from Vienna and eight from Rome. It's the home of the German government, the most important in Europe, and is this year on course to attract more international visitors than Paris. It's a city which, two decades after the Berlin Wall fell and following a tumultuous and troubled century, feels more and more as if its time is finally coming. From the café culture, to the iconic buildings of previous Reichs, the seemingly endless art galleries and museums and the old west and eastern centres of the city, Berlin is abuzz with possibilities.
About 3.4 million people live in greater Berlin – less than half the population of London – but this is set to grow with a continued influx of government departments and business headquarters. All this spells potentially good news for property investors who have a little wider perspective than the classic home in the sun with golf course access.
"This is an entirely different sell for overseas property investors. With the home in the sun, the question is always what do you do on the third week. With a city like Berlin there is such variety for those looking to settle and real opportunities to tap into the burgeoning professional rental market," said Alex Upson, a director of Cluttons Resorts which is marketing several major developments in Berlin (www.cluttonsresorts.com).
And the rental market dominates in Berlin. Only 16 per cent of Berliners are owner-occupiers compared with nearly 45 per cent in Germany as a whole and close to 70 per cent in the UK. According to Germany's biggest estate agent, Engel & Volkers, property owners can expect an average rental yield of between 6 and 7 per cent, which means that within 15 years the original investment is paid for. This compares favourably with most overseas property investment which tends to be very seasonal and fashions in holidaymaking.
"Most hope that overseas property investment will financially wash its face. However, Berlin property tends to offer much more," Mr Upson added. This is attracting buyers, according to Nicolas Jeissing, the managing director of Engel & Volkers. He said: "We have seen a lot of interest from foreign buyers such as the Chinese, British and even of late the Greeks. We are currently building about 5,000 units a year and that is far too few for the numbers of professionals coming into Berlin. This is having an upward pressure on rents."
Prices in Berlin are a fraction of those in London and Paris even in the very best areas. Prices are calculated by the square metre which can make comparisons difficult, but with even a very high-end development in the centre the prices rarely rise above €7,000-8,000 (£6,000-£6,800) per square metre. This means that new-build large one-bed or small two-bed flats can be had in the range of €300,000-450,000. Second-hand flats in good but not prime areas of the capital can range from €2,000-4,000 per square metre. Good luck trying to get those sorts of prices in Kensington and Chelsea or just off the Champs-Elysées. However, prices are rising: Engels & Volkers reckons by 7 per cent this year and the central district of Mitte by an eye-catching 14 per cent.
It's in Mitte – on the banks of the river Spree and next to the famous Berliner Ensemble, once the stomping ground of playwright Bertolt Brecht – that Yoo Berlin is being built by Zurich-based Peach property group (www.peachestates.com). The 10-storey building will contain 87 apartments with one to four bedrooms. With interiors inspired by the French designer Philippe Starck, the development will be ready in spring 2013 and brings luxury at well below prime London prices.
"Flats will start at €388,000 and rise to €2.89m for cityscape views. Gardens will also be available for some flats and it's within a short walk of the buzzing cafés and bars as well as the Reichstag and governmental HQ," said Marcus Spielberger, the relationship manager at Peach Property Group.
Another development is the Charleston, located in the bustling Potsdamer Platz, just five minutes' walk from the Brandenburg Gate.
The Charleston was inspired by the great apartment buildings of New York (www.berlin-capital.com). The apartments have the facilities of a luxury hotel with 24-hour concierge, a swimming pool, whirlpool, sauna, solarium and fitness club. Apartment sizes range from 130sqm to 319sqm and cost from €599,000 to €2.19m.
There are downsides to buying in Berlin and Germany as a whole, of course. Buying fees are far higher than in the UK, so bank on between 10-12 per cent of the purchase price. Capital gains tax may be due on any profit and, what's more, tenants have protected rights in Berlin. This means that they can stay in situ as long as they want with increases capped by the city authorities – no more than 20 per cent over three years is the current cap.
However there are ways around such tight tenancy laws. "If you buy a good property in the centre, then there are real opportunities to rent to companies who then house employees. And because this is an agreement involving a business the tenancy laws don't apply," said Tim Bogen, a property specialist at Berlin Capital Investments.
There is also one elephant in the room, the fate of the euro. A general collapse of the single currency could be a disaster for the eurozone economy and anyone investing their sterling, at least in the short term. However, any moves to a eurozone with fewer members centred on Germany could lead to a rapid appreciation of the currency against sterling, leaving investors quids in.
Longer term, though, the key for investors is going to be whether or not Berlin as a city takes its place among the highest echelon of Europe's cities. The odds look better than ever.
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
Fuel poverty could kill 100,000 vulnerable people over the next 15 years, charity warns
MPs call for Equitable Life policyholders to be paid £2.8bn owed by government
Phoenix Life: Chance of a refund for overcharged policyholders has risen
Donald MacInnes: A church that pays a living wage? Don't make me laugh
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
- 1 The black and blue dress: Makers considering a white and gold version
- 2 Man to be beheaded in Saudi Arabia after ripping up a Koran and hitting it with his shoe
- 3 Husband and wife die holding hands within hours of each other after 67 years of marriage
- 4 PornHub turns masturbation into energy in bid to save the planet
- 5 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
New theory could prove how life began and disprove God
This is what it's like to be dead, according to a guy who died for a bit
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Ukip would cut billions from Scottish budget to fund English tax cuts
Russia's roadmap for annexing eastern Ukraine 'leaked from Vladimir Putin's office'
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...
Day In a Page
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads