Berlin Residential Market

The German residential sector presents one of the most interesting investment opportunities. This is even during times of global pessimism in the finance and capital markets. Investors, who are looking for a market without price speculations, may find attractive properties after the analysis of German property. The market shows stable prices with very good investment opportunities, based on decreased supply and increasing rents.

In contrast to other Western European and US residential markets, Germany has not been as severely affected by the changes caused by the financial crisis. This has prompted claims that there is no real estate crisis within the German borders. Capital and private investors also have not felt the limited financing restrictions. The major problems with achieving finance have mainly been found in the commercial real estate market.

During these last years, countries such as England, Spain and the US have experienced price increases for their residential units between 100 and 300 %, however, the prices in Germany developed at a stable and moderate level. There are and were no price bubbles unlike other markets.

One of the reasons for this, were the price corrections in 1998 as a consequence of the reunification boom in East Germany.

Another valid point is the German attitude toward real estate financing. Consumers have to bring ca. 50 % equity of the sales price to achieve mortgage financing. That means good liquidity and creditworthiness is desired by the German banks in comparison to the US where banks gave mortgages to many of its 2007 sub-prime clients without securities and guarantees.

Private investors are increasingly recognizing the value of rented properties. The supply is decreasing, as are the vacancy rates and there are a lot of locations benefiting from increased levels of immigration.

All segments of the German residential market show increasing rents. But the levels are higher in the larger cities as opposed to those of small or medium sizes.

In cities with more than 100.000 habitants, the rents increased in 2008 round about 2 - 3%, especially renovated apartments in good locations of the big German cities. There were price increases of 4%. For the coming years, there are strong growth expectations.

For everybody who has invested in residential properties, this is good news, high occupancy and increasing rents.

Above all young professionals want to move to and remain within these locations.

Source: Meridiana Research Department, May 2009