Ever since the marriage of the East to the West in Europe, Berlin has quietly become the bargain of the century. When compared to cities like London or New York, you get two to three times more per square metre, yet the projected growth in value is still higher.
Here are the 4 key reasons Berlin is on the investor radar in H2, 2020:
1. Favourable Demand and Supply
The pull to Berlin has many facets that contribute to its growing popularity. From great institutions like Google and Tesla attracting first-class universal talent to the trendy lifestyle and liberal arts scene making it a millennial favourite. In 2019, Berlin was recorded as the most populated city in the EU, totalling 3.76 million residents.
Berlin is not only Germany's capital for government but also for education and art, making it an increasingly desired location for a favourable rental demographic. Almost 70% of the population is below 35 years of age and there’s been a steady movement towards smaller, centrally-located dwellings in line with shrinking household sizes.
It is expected that with the current steady growth in workforce - which is greater than both London and Paris - 20,000 additional housing units will be needed each year until 2030. Only 16,956 apartments were completed in 2018 resulting in an under-supply of at least 87,000 units.
In essence, demand continues to gain quick momentum while supply shows rather slow growth.
2. Investment Security
Germany is a founding member of the European Union and G7, making it one of the most important global economies with a GDP of EUR4 trillion as of 2019. With continued economic performance and political stability, Germany maintains its position as a safe haven for international capital. Sentiment remains positive for 2020 despite uncertainty internationally thanks to the robust labour market and increasing domestic consumption.
Germany is the third largest exporter in the world with a GDP totalling EUR4 trillion, the economy is characterised by a highly skilled workforce and high levels of innovation –ranking fourth in the world for research and development. The country's efficiency is at its peak, proven by its ability to mitigate COVID-19's effects to the point that the unemployment rate remains a low 6.3% as of July 2020.
As a result of the brief yet effective lockdown, and the enormous fiscal program worth 50% of the total European response, the German economy is on track to rebound far quicker than the majority of other advanced economies globally.
While the German economy proved itself highly resilient to external shocks, Berlin’s economy with average GDP growth of 5.6% p.a. since 2016 has far outpaced the national average. The city’s diverse economic base including the large public, business, and knowledge intensive digital services sectors meant it was far less susceptible to external shocks than economies heavily reliant on banking or the manufacturing and export of automobiles, ships and airliners.
3. Infrastructure and Development
With the new Berlin Brandenburg International Airport shortly opening its doors, Berlin will become a leading city in connectivity.
The airport intends to have a capacity of 35 million passengers per annum with plans to make it 50 million in the near future, providing direct links to the financial capitals of the world. Once in the city, foreigners and Berliners alike can make use of the largest central station in Europe, housing the metropolitan system comprised of 19,000km of rail lines that connect to all major hubs nearby.
The transport system is so efficient that Berlin has the lowest ratio of automobiles per head of any tier 1 German city. This is a fact Berliners wear with pride considering the cultural focus on sustainability. Unsurprisingly, this has attracted and been endorsed by the leader of the sustainability technology industry, Elon Musk.
In November of 2019, the announcement was made of plans to open Europe’s first Telsa Gigafactory just outside of the city. This will undoubtedly attract more highly skilled talent to the area, which already holds the highest number of foreign talent in well-established tech start-ups second only to Silicon Valley.
Another interesting development is the regeneration scheme Europacity. Attracting prestigious employers such as PwC, KPMG, TOTAL and 50Hertz, the 61-hectre development of office space and housing is situated in the geographic centre of Berlin. It promises to become a primary employment node and significantly increase the area of Mitte’s real estate value.
4. Spirit of Innovation and Transculturality
Berlin has become a hub for digital media, medical research and most importantly, technology. In fact, 70% of all of Germany's well established digital and technology start-ups are based in Berlin. The city received €4.1 billion euros last year in venture capital for the industry.
Berlin is renowned for being strongly diverse, youth-centric and contemporary. It wore the crown of World’s Best City for Millennials out of 110 cities up for nomination in the Nestpick 2018 study. This is no surprise as its use of English as a common medium and its strong lead in Europe’s art scene made it popular for millennial expats.
With promising job prospects in booming industries it is no surprise that the youth is narrowing in on Berlin. The combination of historical charm and green spaces with all the modern conveniences of an advanced city make it an easy-choice for young renters.
Click this link to see the investment opportunities IP Global has in Berlin.
