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Wednesday, August 26th, 2015

Berlin – leader of the European real estate market

Panoramic view of Berlin

The most recent surveys regarding the real estate market in Berlin show that this sector is experiencing a notable boom; the city sitting on the Spree river does not only bring in German investors, but has also won over international investors, currently being one of the most attractive real estate, investment focuses in Europe, as demonstrated in the report entitled “Emerging Trends in Real Estate® Europe 2015”, carried out by the auditing and consultancy firm PwC and Urban Land Institute (ULI). Berlin is considered by a multitude of investors (a total of almost 500 European investors have been surveyed), to be an entrepreneurial, creative and innovate city that has been growing, thanks to the boom in the technology and media industries within the German capital.

Berlin sits in the spotlight for foreign investors

In recent years, the Berlin real estate market has been dominated by national investors. Yet, thanks to the advantages that the capital offers in comparison to other German cities, Berlin is also attracting more and more foreign investors. It is expected that this trend will continue and that the number of real estate transactions will increase throughout the remainder of 2015. Furthermore, 83% of those polled by PwC and ULI opined that Chinese investments into the Berlin real estate market will be greater and greater. However, despite Berlin being the leader of the European real estate market, the investors surveyed put the German metropolis in fourth place, behind Amsterdam, Athens and Barcelona, when determining the city with the best prospects in terms of real estate investment.

Berlin, a city with excellent economic fundamentals

According to the survey, Berlin takes advantage of the great amount of pressure of those looking to invest: despite the fact that there is much capital available, the investment alternatives with higher returns are scarce, therefore the investments in residential properties is currently very popular. According to the PwC and ULI’s report, two thirds of those polled confirmed that they had already invested in the residential real estate sector. Another factor that favours the real estate market in Berlin is the scarcity of properties in other European cities and the huge competition in the market when it comes to exclusive properties. However, one of the main problems of 2015 has been without a doubt, the lack of offers; for 82% of those surveyed, it is the current difficulty in finding a suitable property – a factor that, to a greater or lesser extent, will have an influence on their business model. The survey also reveals that two thirds of the investors polled think that properties in the city centre have very high prices, which translates into a smaller volume of investment, seen for example with Munich, a city that last year was ranked first and has now dropped to eleventh. European investors consider Berlin to have “excellent economic fundamentals” and a very good price index. According to the survey, Hamburg reached fourth place in the list of most interesting real estate markets, for being a city of grand investment opportunities.

Taking risks – a growing trend

The study carried out by PwC and ULI reveals other interesting data such as the increasing willingness of European investors to take risks. At present, due to the intense competitiveness, the markets that were affected by the crisis in recent years and who, little by little are recuperating, have become the centre of attention to investors. Thanks to this new trend, the number of investments has increased in countries such as Ireland and Spain, whose capital cities lead the survey regarding the most attractive cities to invest in, in second and third place respectively. Ireland for instance, has re-established its financial situation with the investment climate having been unaffected, although the price of rentals has notably increased due to the shortage of offers. As previously mentioned, Madrid also gathers the interest of foreign investors; however, many question whether the Spanish market is completely stable and if it can be a good investment with future profitability. However one must take into account the fact that the Spanish capital is a new arrival. Foreign investors are also showing interest in other cities such as Amsterdam, Athens, Birmingham and Lisbon, whilst Vienna, Rome and Moscow are found lower down on the list. In the case of the latter, the geopolitical crisis has had a negative effect in regards to real estate investment.

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