Berlin Property - Is there potential for capital growth?

Investing into property for growth is like most other forms of investment - risky?

Primarily, investors should look at the yield of any prospective property but of course we are all interested in whether capital growth is likely.

There can be no doubt that housing markets - wherever they may be in the world, are currently suffering from the global credit crunch. Simply put there is great difficulty in obtaining credit and this is suppressing lending, and therefore buying. Lenders have in addition tightened up greatly on the lending criteria requiring larger deposits and lessening there income to loan ratios.

All this indicates a fairly bleak picture for house prices in the near future and many experts predict it will get worse before it gets better.

Berlin will not be unaffected by the global crisis and only the most optimistic will make claims of bucking the worldwide trends in the housing market.

Investors, as said, should focus on the yield when making their investment decisions but there does exist some definite reasons why mid to long term capital growth may occur.

1. Supply and demand - Berlins population is growing faster than the supply of housing.
2. The population demographics - one third of all Berliners are under the age of 30 and a further half under 60. The older generation accepted the concept of renting for life and social housing, the younger generation is more in tune with the concept of home ownership.
3. Only 13% of Berliners own property well beneath the national average of 44%. Berlins years of isolation saw it out of step with the rest of the country, a situation that might well change given the passage of time.
4. Whilst not attracting manufacturing jobs, growth is coming in the ICT sectors, some 40 companies have set up Headquarters in Berlin and there has been an influx of some 155,000 foreigners.
5. Rents are on the increase (6%) last year. As a great, many properties are owned for investment purposes their value is tied intrinsically to the rental yield. The lower the property price the greater the yield, the greater the yield the higher selling price can be achieved.
6. The low starting point of property prices. Arguably the cheapest property of any capital city in the developed world.
7. Its unique geographical position as a gateway to the previous Eastern Bock countries that are becoming more important to trade.
8. The building of a new airport and subsequent trade it will bring – an estimated 30 million travelers per year.
9. The falling unemployment rate down from 20% less than 10 years ago to just over 12%.
10. The reinstatement as Germany capital city and now the centre of German politics.

All the above represent good indicators that Berlin property, whilst lagging behind the rest of Germany and Europe, may provide investors with good long term capital growth prospects.

Useful links

• If you are looking to purchase Berlin property as an investment enter here to view our portfolio.
• Read about our Berlin investment property services here
• Discover the top ten reasons for purchasing Berlin property

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