Apartment prices in Berlin have doubled from their modest 2008 levels of €1,500 per m² up to an average of €3,000 today. Previously Berlin had not been considered particularly appealing for real estate investments.
Population growth was stagnating, as was the economy: “Berlin was poor but sexy,” as Berlin’s former mayor Klaus Wowereit regularly admitted. But those times are over. Since 2005, the Berlin economy has been growing faster than the German average.
Even during the financial crisis in 2009, there was growth of almost 1%. In addition, the population is growing by 1% annually, and the quality of life is very high with a good infrastructure and cultural institutions. Indeed a recent report by PWC and the Urban Land Institute declared that Berlin offers the most attractive investment and development opportunities in Europe.
In Berlin’s current residential market, property priced above €10,000per m² whilst still relatively rare is becoming increasingly common. We have seen an increase in the number of properties in this price bracket of 800% in just five years, with prices continuing to rise. Berlin is the largest major city with the lowest property prices in Germany. Buyers from Munich still smile at our prices, as you will struggle to find a property for less than €5,000 per m² in the Bavarian city. In Berlin, properties with this price are still considered luxurious.
Berlin’s roughness is now becoming chic. Top international designers are shooting their advertising campaigns in scruffy looking German capital in areas including Mitte, Kreuzberg, or Friedrichshain; Gucci’s Creative Director Alessandro Michele, for example, staged his spring and summer collection in the Berlin subway, at the city’s central bus station, and on the high-rise rooftop of the Maritim Hotel. Berlin’s retro flair was the ideal fit for the seventies-inspired collection.
Even star architect Daniel Libeskind was inspired by Berlin’s unique charm. His first residential building in the city, which completes this autumn, is called Sapphire. The crystalline surface resembles the hard and rough façade synonymous with the reputation of Berlin’s. The Libeskind apartments are generating significant international interest, as are many luxury projects in Berlin Mitte. Israelis and Italians as well as Brits, Americans, and Chinese are well represented in the city, where the portion of international buyers in central Berlin in particular continues to grow – by up to 50% in 2015. A strong interest from foreign buyers extends to other properties.
At the same time, Berlin is profiting from uncertainty in other European markets. The LUX project, a 64-unit development just 600 metres away from the iconic Brandenburg Gate, for example, was built by Spanish developer Triple A shortly after the housing bubble burst in Spain. The majority of the apartments were bought by Spaniards but also by Swiss nationals. The latter benefited from the unpegging of the Swiss Franc from the Euro, which in early 2015 reduced the price of Berlin real estate for Swiss buyers by 20%.
A potential Brexit could at first seem to have the opposite effect: the pound falls and apartments in Berlin become more expensive by an estimated 20%. But as an investment location for high-end residential developments, Berlin still remains attractive because there’s no reason the acceleration in prices should slow down in the coming years. Brexit could even have a long-term positive impact on the Berlin housing market, because economic and political focus in Europe would likely shift even further towards the German capital.
Nikolaus Ziegert is managing director of Ziegert Bank und Immobilienconsulting