Berlin moves up on Europe's more lauded capitals

The appeal of property in Germany's premier city is outstripping London and Paris

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.

PROMOTED VIDEO
News
REX/Eye Candy
science
News
A photo of Charles Belk being detained by police on Friday 22 August
news
News
i100
Sport
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
Extras
indybest
Life and Style
Google Doodle celebrates the 200th birthday of Irish writer Sheridan Le Fanu
tech
Arts and Entertainment
Vinyl demand: a factory making the old-style discs
musicManufacturers are struggling to keep up with the resurgence in vinyl
News
i100
News
In Eternal Sunshine of the Spotless Mind Jim Carrey and Kate Winslett medically erase each other from their memories
scienceTechnique successfully used to ‘reverse’ bad memories in rodents could be used on trauma victims
Arts and Entertainment
Singer Pixie Lott will take part in Strictly Come Dancing 2014, the BBC has confirmed
tv
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    C# Developer (C#, ASP.NET Developer, SQL, MVC, WPF, Real-Time F

    £40000 - £48000 per annum + benefits+bonus+package: Harrington Starr: C# Devel...

    C# Swift Payment Developer (C#, ASP.NET, .NET, MVC, Authorize.N

    £45000 - £60000 per annum + benefits+bonus+package: Harrington Starr: C# Swift...

    DevOps Engineer - Linux, Shell, Bash, Solaris, UNIX, Salt-Stack

    Negotiable: Harrington Starr: A fast growing Financial Services organisation b...

    Trade Desk FIX Analyst - (FIX, SQL, Equities, Support)

    £50000 - £60000 per annum + excellent benefits: Harrington Starr: An award-win...

    Day In a Page

    Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

    Robert Fisk: No victory for Israel despite weeks of devastation

    Palestinians have won: they are still in Gaza, and Hamas is still there
    Mary Beard writes character reference for Twitter troll who called her a 'slut'

    Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

    The Cambridge University classicist even wrote the student a character reference
    America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

    America’s new apartheid

    Prosperous white districts are choosing to break away from black cities and go it alone
    Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

    What is the appeal of Twitch?

    Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
    Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

    How bosses are making us work harder

    As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
    Manufacturers are struggling to keep up with the resurgence in vinyl records

    Hard pressed: Resurgence in vinyl records

    As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
    Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

    A tale of two writers

    Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
    Could a later start to the school day be the most useful educational reform of all?

    Should pupils get a lie in?

    Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
    Prepare for Jewish jokes – as Jewish comedians get their own festival

    Prepare for Jewish jokes...

    ... as Jewish comedians get their own festival
    SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

    A dream come true for SJ Watson

    Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
    10 best cycling bags for commuters

    10 best cycling bags for commuters

    Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
    Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

    Paul Scholes column

    Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
    Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

    Kate Bush shows a voice untroubled by time

    A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
    Robot sheepdog technology could be used to save people from burning buildings

    The science of herding is cracked

    Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
    Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

    This tyrant doesn’t rule

    It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?