Invest in Berlin

“The German property boom fuelled by the Berlin Wall: Wealthy clients desperate to buy homes built on site of Cold War symbol due to its prime central location and huge historical value.” Daily Mail, 4 August 2014

Real Estate Business made in Germany

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Why Berlin?

Invest in Berlin

>> German and foreign investors have steadily begun to realize just how undervalued Berlin real estate actually is relative to most of its European competitors.

Berlin is widely recognized as probably the most influential city in Europe and has long been considered as one of the world’s most important cities. When it comes to relocation, Germany’s vibrant and characterful capital has consistently attracted entrepreneurs from across the globe due to its warm welcome, a highly educated work force and its geographic location in the heart of the European Union, not to mention its historic connections to both eastern and western Europe.

In HSBC’s annual Expat Explorer survey for 2013, Germany took second place, coming just behind China, and is seen as a nation offering both stability and opportunity. Berlin is the city of choice for the majority of newcomers, being the most cosmopolitan in its outlook, with excellent connections to the rest of the world. According to the Amt für Statistik Berlin-Brandenburg, in 2012, Berlin was home to 424,245 non-Germans, and grew by nearly 50,000 people. Demand for property is likely to be here to stay for the foreseeable futute as a result of this expansion.

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BerlinMadridCopenhagenAmsterdamMoscowViennaStockholmParisRomeZurichLondon

Comparison of average housing prices of European Capitals

$ 3,819

$ 7,791

$ 14,582

Source: Numbeo database 2015

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Prices are moving at such a pace that many local residents have become concerned that the German tradition of long-term home rental could soon be brought to an abrupt end. Many are starting to consider home ownership for the first time, encouraged by the low cost of borrowing. Some are even making purchases for their children, whilst they still have the chance; such is the level of expected growth.

Berlin by Comparison

Rental Opportunities First-Time Buyers

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Surprisingly, rental values in Berlin are currently around half of those in Munich, but it is expected that the capital will soon catch-up at current rates of increase. This could provide arms length investors with a ready source of income that is likely to grow steadily over the coming years. Ultimately, it is widely anticipated that renting in Berlin will be more expensive than in Munich within a few years.

When making comparisons with similar properties in London, for example, on a like-for-like basis, investors there could pay as much as four times more. One Hyde Park, in Knightsbridge, hit the headlines in 2014, when a new record was set. “Penthouse D” (comprising of 1,500 metres or 16,140 square feet) was sold for £140 million (GBP) and officially became the world’s most expensive apartment. Prices can vary in London’s more desirable neighbourhoods, typically between €26,000 and €32,000 per square metre [approximately €2,416 to €2,974 per square foot]. According to our research, comparable rates in Berlin are around €14,000.

The scope for upward price movement in London is now extremely limited except for a few select locations like One Hyde Park, where the buyers are almost exclusively foreign nationals and seem to make their investment decisions without regard to the prevailing market price. Savvy investors seeking early-stage growth opportunities in a stable environment are now giving Berlin a very close second look. The prospect of significant growth in the medium term is plain for all to see, as Berlin catches up with its peer group.

According to our research, currently, office properties are the most popular asset class. In the first half of 2014, office space accounted for around 77% of all property transactions. The rental bands in Berlin currently range from €5.50 to €22.50 per square metre per month [€0.50 to €2.10 per square foot].

One of the big growth areas in recent years though has been the development of new, purpose built hotel units. Although Berlin ranks

Commercial Property

Invest in Berlin

third in Europe for visitor numbers, it has been largely under catered for in terms of suitably high quality hotel accommodation. Several international hotel chains have spotted this gap in the market and are developing new projects accordingly. Marriott, Starwood and Accor are amongst the established groups, with new arrivals expected soon. In 2013, there were an estimated 48,818 hotel rooms available in the city. According to the Amt für Statistik Berlin-Brandenburg, the number of visitors to Berlin

has increased every year for the past 10 years. In 2012 the visitor total was 10.8 million, an increase of 10 percent from the previous year. With visitor numbers expected to exceed 30 million overnight stays annually by 2015, there would seem to be ample scope for further development in this sector. The planned new airport will certainly play an important part in this growth story when it finally opens.

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Q 1–2 2014 (Indicative - Commercial)Transaction volume.............€1.24 BillionAsset class in %Office........................................... 77.3Retail............................................ 10.3Hotel............................................ 6.8Premium yield in %Office........................................... 4.75Retail............................................ 4.50

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Invest in Berlin

Who’s Investing?

€German banks are offering some very attractive deals at the moment for the right investor. Interest rates are typically in the low single figures. This is another area in which we could offer assistance, potentially enabling an investor to leverage their financial muscle still further.

There are a variety of investor types actively involved in the Berlin property market. Investors in this sector include open-end funds, property developers, closed funds, owner-occupiers and private investors. REITs, insurance companies, asset managers, family offices and pension funds also feature strongly.

Although typically owner-occupiers may have a slightly different outlook, the common motivator for the other catagories is profit. Professional investors have access to a range of different opportunities and need to limit their exposure to risk whilst maximising their returns within a set timeframe. The financial commitment being made in Berlin at this time would suggest that there is reason to believe this market is about to take-off.

Germany is both trusted and admired in equal measure all over the world, considered by many investors to be a safe haven, making Berlin property the perfect investment vehicle. Whether you are looking for an above average return on your capital or a location for a new business development, we are well placed to assist you in your search. Together with our partners, our extensive network allows us access to off-market properties that would be impossible to locate without local knowledge. Our associated law firm is one of the foremost specialists in the field of commercial property and has been closely involved with many of the largest transactions in Berlin over recent years.

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There are still many development sites to be found in Berlin but there is a sense that remaining gaps are being closed quickly. Once all the empty plots have been developed, the forces of supply and demand will take over and it is entirely possible that Berlin prices will be more reflective of Paris and London within a few years. There is still a good opportunity for those who have access to capital and the ability to recognize undervalued assets. In the event of a British exit from the European Union in 2017, Berlin’s position as the de facto capital city of Europe would effectively be unchallenged and could in all likelihood see a further increase in inward investment, adding to this already interesting mix.

Time to Act

Attitudes to property ownership are changing in Germany, especially in the three biggest cities – Berlin, Munich and Hamburg. For many years, Berlin in particular has been something of a paradise for those who prefer to rent. Tenants paid little and were very well protected by the law. As a result, in 2011, just 16% of Berlin residents owned their own homes, compared with around 50% in London.

With interest rates remaining at historic lows across the Eurozone, investing in property in the centre of Berlin would seem like the perfect opportunity for would-be homeowners and investors alike. The returns on a shrewd investment in a Berlin property will inevitably far outpace anything that a cash savings account could offer at this time, and much more secure than playing the stock markets. According to recent property purchases, Berlin’s top end pricing is currently around €14,000 per square metre [€1,300 per square foot] for prime locations in the city centre but there are significant opportunities within the €2,500 to €5,000 range, both in the residential and commercial sectors, for those who know where to look.

In Summary

Real Estate Business made in Germany

>>If you would like to receive materials on a specific sector or discuss your requirements with us informally, please email your contact details so that a time can be arranged accordingly, specifying the scope of your interest. We look forward to hearing from you.

Contact Us: PONS Real Estate a division of PONS Atlantic Partners GmbH Registration Number: HR B 145 065 Teltower Damm 194, 14167 Berlin, GermanyE-Mail: info@ponsrealestate.com

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