04 March 2008

Berlin: A renter's market

Over the last 12 months Berlin has turned to be one of the most desirable places for property investment. But what is the truth behind investing in this cultural dynamic and economically key city?

One of the most crucial factors for potential buy-to-let investors is the fact that only 12% of Berlin residents own their own property, so the city is pretty much a renter's market.

In Germany, buying property, as opposed to renting, has a trivial social stigma in the meaning that renters are not considered as inferior. Most people avoid buying a property even though they could easily afford it.

Before 1989, the year that Berlin wall came down, Berlin was privileged in terms of subsidies. This status had a high influence on rent and house prices as both East and West Berliners were strongly encouraged to stay in the city tempted by subsidized housing. For the time being, this legacy carried from the past is one of the main reasons that the housing market has not developed as fast as other cities in the country and the rest of Europe.

Overall, both rent and average house prices have still remained relatively affordable in Berlin, while in other cities like Frankfurt and Munich property can be up to 50% more.

Nevertheless, investors should note that German law protects tenants. Landlords can be fined if caught to increase the rent of 20% above the one charged for comparable premises.