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Berlin property market capital growth

There are a number of reasons why the Berlin property market is expected may begin to show medium to long term capital growth, despite the global economic downturn.

The financial slump has made investors are more cautious than before. Any investment carries a potential risk factor and property investment is no different, but with every recession comes opportunity.

Property markets all over the world have taken a hit in the recent economic crisis, but some have been hit harder than others.

Despite this, the outlook for the Berlin property market capital growth remains healthy. Although there are few places that can escape, the impact of local factors needs to be understood when choosing an investment destination.

Supply and demand.

Berlin’s population is growing faster than the supply of housing.

Population demographics

One third of Berlin’s residents are under 30 years of age, and a further half of the population is under 60. There is a culture of renting accommodation, which means that many of the older generation have rented their accommodation all of their lives and this habit is not expected to change. However, as the younger generation grows up, they aspire to become homeowners.

Minority of homeowners

Because of the city’s previous isolation and political past, only 13% of local residents own homes, well below the national average of 44% home ownership. This situation is expected to change.

Commercial growth

Although the traditional manufacturing base is not as strong as it once was, the service sector and information technology sector is growing. It is reported that some 40 ICT companies have set up their headquarters in Berlin.

Increase in rents

Rents have continued to increase year on year. Early 2009 there was an average rental increase of 6%.

Low base

Berlin arguably has some of the cheapest property of any capital city in the developed world. Once divided politically, the economy of the city has taken a while to recover and the property market stagnated for many years. Recovery has begun but there is still a certain amount of slack in the market.

Gateway to the East

For investors, Berlin is in a favourable geographical position in relation to the former Eastern bloc countries. Their economies are beginning to flourish and Berlin is well situated for investors looking for a foothold in these markets.

New airport

A new airport is currently under construction and by 2011 is expected to handle approximately 30 million passengers a year.

Although the economy may be on a downswing at the moment, growth will always follow and it seems that the Berlin property market has the right fundamentals to experience optimum capital growth in the future.

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