Mittwoch, 9. August 2006

Foreign buyers attracted to Berlin real estate

With some of the lowest real estate prices in Europe, Berlin is an attractive option for foreign investors interested in buying property. We look at the American and British buyers wanting a piece of the German capital.

Berlin is considered the city with the lowest real estate prices in Europe. Even in Moscow or Prague the prices of land and houses are considerably higher than in the German capital. Despite Germany's low economic growth and high unemployment, foreign investors, above all Americans, Britons, and the Irish have discovered Berlin. The returns are considerably higher than anywhere else in Europe, and buyers are speculating that an economic upswing will finally hit Berlin.

"Berlin is in demand like never before," real estate sources say.

Changing hands

According to the latest market report, almost 25,000 purchases were registered in Berlin with more than 9 billion euros (11.5 billion dollars) changing hands in 2005. That's a huge jump from previous years where properties sold amounted to around 18,000 annually. An even greater number is expected in 2007. A square metre of a redeveloped building in a top location costs around 1,500 euros in Berlin, while in London for example the price would be around 15,000 euros. "The situation here is like London about 17 years ago, when for example no one would touch the Docklands with a barge pole," said Philipp Tabert from the real estate agency Winters & Hirsch. Today the Docklands is very popular with office renters, and London the strongest real estate location in Europe.

American interest

In Berlin the boom set in about two years ago when the city's largest residential property firm GSW sold around 65,000 units for 405 million euros to a US investor and its partner. "Thus it was shown that real estate can be had reasonably here," says Tabert. As a result, many Austrian investors came. Today the Americans and the British dominate the market, but investment funds also come from Ireland, Italy, France, Spain and Japan. "Investors from Israel have discovered Germany too," Tabert comments.Classic rental buildings with 30 apartments and one or two shops on the ground floor, commercial buildings as well as residential buildings with as many as 1,000 units are being sold. In addition, supermarkets, shopping centres and shopping malls are in demand.

Sought after

Besides the classic central areas in former West Berlin such as Charlottenburg, Wilmersdorf and Schoeneberg properties are especially sought after in Kreuzberg, a trendy area and site of the yearly May Day riots between leftist activists and police. "The attractive locations in central Mitte district are already taken. There's not much left," says Tabert, but he adds that spots in up and coming trendy eastern Berlin areas of Prenzlauer Berg and increasingly Friedrichshain are becoming especially desirable. After the building of the new Berlin Brandenburg International airport in Schönefeld, the south-east of the city with Treptow, Koepenick and the troubled area of Neukoelln are attracting interest. The airport is having a positive effect on the market as investors can now fly direct to Berlin without connecting with Frankfurt, Munich or Dusseldorf.

Not so well known

The flood of foreign investors after German real estate can also be seen in other cities. "Cities like Salzgitter near Braunschweig or Pforzheim, about 40 kilometres from the French border, are not so well known abroad," says Tabert. Often real estate is packaged with Berlin properties. However highly indebted Berlin will not allow itself to redevelop its central residential districts by selling them off. "Berlin through its city-owned building associations has access to more than 250,000 residences valued at around 10 billion euros, but the city is more than 60 billion in debt," Tabert says. Earlier this year, Dresden sold off 48,000 publicly owned apartments to the US investor group Fortress and with one stroke cleared its debts, though it caused quite a stir. Berlin's left-wing government, however, is strictly against selling off state-owned residences.


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