Why invest in Berlin?

We've all been hearing about real estate investments in Berlin for a few years now, and Berlin real estate continues to attract more foreign and local investors than ever as the city shines more brightly than ever. Here we present you with 6 good reasons to invest in Berlin real estate.

 

PWC's #1 city to invest in

Berlin is one of the most attractive cities in Europe, not only for its cultural and artistic life but also for real estate investments. It is not for nothing that for the last 3 years PwC and the Urban Land Institute have ranked Berlin as the number one city to invest in real estate.

This study shows the real estate trends (click here to download the Study) according to many criteria but it is clear that despite the past 2 years of COVID, the German capital has not lost its attractiveness, on the contrary. Berlin, which used to be considered a "poor but sexy" city, is changing all observers, with the construction of the biggest complexes in Europe (Tesla, BER airport...). All the economic indicators are green to make Berlin the political capital of Germany and now a real economic power.

An accessible property market  

Housing prices are among the lowest in Europe

A distinction must be made here between flats rented for investors and empty flats for both residents and investors.

In Berlin's residential areas, it is possible to find flats from €5,000/m² for rented flats, to €6,000/m² on average for empty apartments, whereas in London or Paris prices are two or even three times higher.

The real estate sector in Berlin is booming today. It is the capital of cheap real estate, as it has not experienced a real estate bubble. Berlin's prices per square metre are unbeatable. Prices range from €4,500 to €9,000 for the best locations. The prices are very interesting for all investors or expatriates who wish to diversify or invest part of their portfolio in a city that has not been affected by the price explosion like other cities in Europe.

Low prices that appeal to different investor profiles

These prices and the quality of the buildings play in favour of new buyers who have the possibility of buying a 50 m² flat for the price of a 15/20 m² apartment in Paris. 

The Berlin real estate market is now attracting those investors who know the market well and believe in its potential. This makes Berlin one of the most attractive cities to buy real estate, whether it is a pied-à-terre, rental investment or a permanent move. 

Investors come from all walks of life, as Berlin's real estate prices allow every investor profile to buy a flat according to their desires and needs, which is a privilege in Europe.

Quality housing

Berlin's flats are large (very rarely less than 30 m²). They are often properties with beautiful “Altbau” architecture (building style of the 1880s-1920s). ADEN Immo mainly offers this type of flat in buildings with renovated common areas. There are still many periods features such as old parquet floors, ceiling mouldings and large building lobbies with a period feel. Extensive renovations have taken place over the last 20 years and in almost all of the properties on offer so that separate kitchens and modernised surfaces can be found while retaining a certain charm.

A real quality of life

Berlin is now the 3rd most visited city in Europe, behind Paris and London, but ahead of Rome, Barcelona and Madrid. 

12.3 million visitors in 2015

This is due to its quality of life, the originality of its architecture and the fact that it has become a centre for new trends in art and culture.

170 museums

350 art galleries

130 theatres The International Film Festival (Berlinale)

A healthy and secure market

Berlin, the capital of Europe's richest country, is located at the crossroads of Europe's major roads. Germany is the world's 4th largest economy, the 3rd largest exporter and the largest European power.

Economic take-off 

More and more companies are moving to Berlin to be at the centre of Europe. Large international companies, especially in the innovation, high-tech, IT and media sectors, have relocated their German or European headquarters to Berlin, for example, Sony Music-BMG, Daimler-Benz, Universal, Siemens, and IBM. Numerous innovative companies, especially in the field of online commerce, also have their headquarters in Berlin (Tesla, Zalando, Rocket Internet and a large number of start-ups).

Berlin's economic potential

The Berlin property market is at odds with other European markets. 

Indeed, while the property market is sluggish in Europe, Berlin has regained its international reputation and property prices have begun to rise. It is a dynamic metropolis, the government has moved there, and it is the seat of many embassies, consulates and international organisations.    

> 3 million residents

250,000 expected arrivals in Berlin per year

+ 29,000 births per year

Germany is a safe haven in Europe because of its stable and prosperous economy. 

Favourable tax and legal environment

Legal safeguards so no housing bubble and a fair market for all parties = consensus 

In contrast to some countries where the real estate boom has taken place but where the legal and judicial environment is not very secure for investors, Germany offers strong legal guarantees for a risk-free investment, equivalent to France.

Franco-German Tax Convention 

ADEN Immo is not intended to be a tax consultancy. However, we would like to inform you that the tax treaty with Germany, signed in Paris on 21 July 1959, specifies that income from real estate is only taxable in the state where the property is located. Your rental income earned in Berlin will only be taxed in Germany, allowing you to benefit from a lower tax bracket. Please note: 80% of our clients do not pay tax on their German rental income.

Concerning the CRG CRDS: it is declared in France, but as your property is located in Germany, it is refunded to you.

Tax reductions in Germany

At present, the tax benefits are as follows:

Tax benefits for buying a flat in Berlin*

  1.   Depreciation of the property open to all (2 to 2.5% per year of the value of the property),
  2.   On resale, tax exemption on the capital gain after 10 years of ownership (compared to 22 years in France). Please note that this is only valid for German tax purposes, as France has recently modified the tax treaty between the two countries, and requires people who are taxable in France and sell a property in Germany to also declare it in France according to French tax rules. This rule is not necessarily valid if you are not a French tax resident.

* For information purposes, it is necessary to verify this information with a specialised tax firm

Investment horizon: 10 years

This is because experts predict a doubling of sales prices over the next 10 years, but also because capital gains on sales are tax-free after 10 years of ownership.

A market with great potential - Berlin

The French are investing more and more in real estate in Berlin

While institutional investors began to invest in Berlin real estate as soon as the Wall fell, they are now being joined by many private investors, Scandinavian as well as British and French, who have seen the potential of Berlin real estate. Many French investors who invested in France during the last decade are now arbitraging their portfolio in favour of Berlin to start a new real estate cycle. 

The average budget for a rented investment in Berlin: 

300.000 €, 2 Zimmer, 60 m²

Favourable prospects for real estate in Berlin

The German market is not yet completely homogenous. Disparities between West and East Germany persist. For example, while housing prices in Munich are higher, they are very cheap in Berlin.

Berlin's property prices do not appear to be at their long-term equilibrium level. The main reason for the low prices is the oversupply of housing in Berlin during the 1990s, which was a direct consequence of the post-reunification building boom. Today, the situation has changed: the lack of new construction, combined with the demolition of large housing estates in the former East Berlin, has led to a decrease in supply that is now insufficient to meet demand. Indeed, there is a strong demographic increase to meet growing demand. As a result, the first effects of price increases have started to be felt: +10% per year since 2019

In the long term, this suggests that property prices have interesting growth potential. It is even likely that property prices will increase soon, as Berlin's local prices adjust to those of Germany and other major European cities.

An interesting rental market

Rents may seem exceptionally low for a Parisian as the average rent per m² is 9 to €10 in Berlin compared to more than €30 in Paris, but the profitability is comparable. These rents are also much lower than in the rest of Germany. The rental market is therefore all the more interesting as it is currently undervalued even compared to other major German cities and the prospects are for a rise in rents.

 16% of homeowners in Berlin

2% vacant units  

The increasing demand for rental accommodation, coupled with the decreasing supply of rental accommodation, is leading to a gradual rise in rents. It should be noted that Berlin has less than 2% of vacant units. Districts such as Mitte, Friedrichshain or Prenzlauer Berg are highly sought after for rental investments as rental rates are higher than in other districts.

Various studies, such as that of Jones Lang Lasalle, have shown that the rental market is very attractive and predict a "big potential of the Berlin real estate market" for investors.

 

Sources:

Amt für Statistik Berlin und Brandenburg

Benchmarking Report ECM

Senatsverwaltung für Stadtentwicklung

Berlin und Brandenburg Prognosen

Hauptbahnhof Berlin

GSW Wohnmarktreport

IBB Wohnungsmarktbericht

 

 

Rechtlicher Hinweis: Dieser Beitrag stellt keine Steuer- oder Rechtsberatung im Einzelfall dar. Bitte lassen Sie die Sachverhalte in Ihrem konkreten Einzelfall von einem Rechtsanwalt und/oder Steuerberater klären.

Photo: © Aden Immobilien

 

 

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OUR TEAM

with passion for service

Mathilde Allemand

Office Berlin Wilmersdorf

Junior Project Manager

French, German, English +49 30 88 70 24 08 mathilde.allemand@aden-immo.com

Michael Bautz

Office Berlin Friedrichshain

Real Estate Agent

German, English +49 30 29 77 87 80 michael.bautz@aden-immo.com
Lars Drewes

Lars Drewes

Office Berlin Wilmersdorf

Head of Sales

German, English +49 30 23 633 533 lars.drewes@aden-immo.com
Foto Mitarbeiterin Isabelle Goncalves

Isabelle Goncalves

Office Berlin Wilmersdorf

Real Estate Agent

French, German, English +49 30 887 024 07 isabelle.goncalves@aden-immo.com

Robina Henicke

Office Berlin Friedrichshain

Real Estate Agent

German, English +49 30 29 77 87 80 robina.henicke@aden-immo.com

Annabel Huard

Office Berlin Wilmersdorf

Senior Project Manager

French, German, English +49 30 88 70 24 08 annabel.huard@aden-immo.com

Udo Lewin

Office Berlin Wilmersdorf

Real Estate Agent

German, English +49 30 23 633 533 udo.lewin@aden-immo.com

Olivier Montero

Office Berlin Friedrichshain

Real Estate Agent

French, German, English +49 30 29 77 87 80 olivier.montero@aden-immo.com

David Nguyen

Office Paris

Managing Director

French, English +33 1 56 33 70 70 david.nguyen@aden-immo.com

Hélène Salvanes

Office Berlin Wilmersdorf

Marketing & Business Development

French, English, German +49 30 88 70 24 08 helene.salvanes@aden-immo.com
Porträt Arnaud Schott_quadratisch

Arnaud Schott

Office Berlin Wilmersdorf

Managing Director

French, German, English +49 30 23 633 533 arnaud.schott@aden-immo.com

Cihan Selmo

Office Berlin Charlottenburg

Real Estate Agent

German, English, Turkish +49 30 220 66 11 77 cihan.selmo@aden-immo.com

Ulrike Siebert

Office Berlin Wilmersdorf

Marketing Manager

German, English +49 30 88 70 24 08 ulrike.siebert@aden-immo.com

Julian Strehblow

Office Berlin Charlottenburg

Real Estate Agent

German, English +49 30 220 66 11 77 julian.strehblow@aden-immo.com
Foto Mitarbeiterin Alice Thion

Alice Thion

Office Berlin Wilmersdorf

Rental Manager

French, German, English +49 30 887 024 07 alice.thion@aden-immo.com

Jeannette Zentel-Schertlin

Office Berlin Charlottenburg

Real Estate Agent

German, English, Spanish +49 30 220 66 11 77 jeannette.zentel-schertlin@aden-immo.com