The reports are true; Berlin is currently one of the safest countries in the world to make a property investment, but a new report also hints at it being one of the best, writes Liam Bailey.
According to a major study into the Berlin housing market in the first quarter of 2008, rental rates are growing in every district in the city. It is 50/50; in 6 of the 12 districts rental rate growth is accelerating, and in the other 6 it is slowing, but in none are rents bottoming out or falling.
In the same report last year, rental rate growth was accelerating in only three districts: Spandau, Charlottenburg-Wilmersdorf, and Treptow-Köpenick, in all the rest rents were either bottoming out or falling.
In Spandau, which displayed the fastest growing rental rates in last year’s report, rental rate growth has begun to slow according to the recent report, but in the other two districts that saw accelerating rental rate growth last year — Charlottenburg-Wilmersdorf and Treptow-Köpenick — rental rate growth is still accelerating.
Mitte and Neukölln, two districts that saw falling rental rates this time last year, along with Pankow and Steglitz-Zehlendorf, that both saw rental rates bottoming out last year, have joined Charlottenburg-Wilmersdorf and Treptow-Köpenick in the rental rate accelerating bracket in this year’s report.
The fact that 5 of the 6 districts now seeing rental rate growth slowing, were in the rental rates bottoming out, or rental rates falling brackets in the report this time last year, means that they must have seen accelerated growth at some time over the past year. This all shows that Berlin rental rates have been on an upward trend for the past year.
Germany’s government is strict about rental rate rises in Berlin. It has to be, to avoid people being priced onto the streets because of the large portion of Berlin’s population forced to live in rented accommodation, because they haven’t been able to buy their own home. Landlords are only allowed to raise rental rates when the economy and wages are growing, and even then by no more than 20% in three years. Berlin rental growth is so strong now because the economy is extremely strong.
The extremely large proportion of Berlin residents either forced or choosing to live in rented accommodation (82%) gives Berlin one of the strongest residential rental markets in the world, but government control means residential tenancies barely achieve more than a five percent yield.
The current unprecedented level of economic growth, and the fact that it is largely fuelled by growth in the export sector, which should see Germany survive a rocky global economy better than most, has brought reports that the government may soon be able to bring new legislation relaxing the strict laws governing rental rate rises.
For the first time there is hope of achieving higher yields in Berlin, which should really be the case from the solid all year round rental that is so easily achievable. But even without a government relaxation, the growth in Berlin rental rates without government help, the aforementioned stability of Germany’s economy and the high likelihood of it best weathering the global economic storm, is turning Berlin into one of the world’s most popular destinations for a property investment.