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Grant Reynolds has been with IP Global for over 15 years. He's seen us enter 28 new cities and how the markets have evolved since our first few properties. Today, we interviewed him about his recent trip to Berlin and Leipzig, markets that continue to provide a compelling case for investment.
I shared with my colleague David that actually I first went to Berlin in 1978, way before he was born! Back then it was a divided city, poor and on its knees, an inner beauty but mixed with much pain and despair – when I returned in 2015 the Berlin Wall had been down for over 20 years and the city was in the midst of an economic revival.
Berlin, Germany - June 10, 2013
From the minute I landed at the new Berlin Brandenberg Airport I was blown away by the transformation. The shiny, bright new airport absolutely personifies the new Berlin – within 30 minutes I was in the centre of the city and new infrastructure littered the skyline from fancy new apartments along the River Spree to the glistening buildings of Europa City and Berlin Hauptbahnhof Central Station.
Great question! It's fair to say that in both cities the west sides very much still reflect "old money", classic architecture intertwined with modern landmarks. In Leipzig, the glistening Red Bull Arena is home of the successful RB Leipzig FC and in Berlin the modern architecture along the Ku Damm mixed amongst period buildings.
On the east side of Berlin, a city once divided is now re-united with tons of regeneration and an environment brewing for creatives. Leipzig’s east side is also up-and-coming, young professionals are moving east given great transport links and better value real estate.
Indeed, I did! For me this was one of the best parts of my trip, engaging with the locals - from those in our hotel to those eating out by the Brandenberg gate, Ku Damm, and central Leipzig. Certainly, Leipzig and Berlin are very much international cities, and I was pleased that the Germans I spoke to could comfortably speak English as my German is a bit rusty since I lived there many years ago. Those who I spoke to were proud of their city – young Berliners confident of the future after a challenging past – those in Leipzig embracing unified Germany and seizing the economic opportunities presented to them since high-level long-term planning was set in motion over 20 years ago now.
I also got the sense that locals feel that Leipzig is very much a hidden gem, given its beautiful architecture (see below Leipzig train station for example) to the large corporates based here, you can truly see why this city is the fastest growing in Germany.
The rents -rents are moving upward fast! Germany has a very open-door policy for immigration – lots of skilled jobs are being created in Berlin and Leipzig and there simply isn’t enough property. The incredible modernisation of both cities and the amazing transport infrastructure provides a strong platform for future growth. I was also surprised that Leipzig is only 1 hour and 15 minutes from Berlin by train. It’s also very cheap to get around, EUR8 will provide you a day ticket all-round the city of Leipzig.
Getting enough property for the growing population has to be the biggest issue. Both cities are in danger of becoming a victim to their own success. There is an accute undersupply of housing and, like the UK, with so planning rules and regulations, it is a difficult obstacle to overcome. It is a big positive for potential investors though, and the number one reason IP Global is so active in this market. The tax advantages (no capital gains after a 10-year hold) also go hand in hand with attracting property investors.
I came away from Berlin and Leipzig extremely excited about the next decade of growth opportunity – a lot has changed since my last visit in 2015 and I won't leave so long before I am back again.
As COVID-19 spreads fear and uncertainty around the world, finding the right market for investment is crucial.
The volatility of stocks in the first half of 2020 has left flight-to-safety investors wondering which economy and asset class will be the most resilient, providing security for their investment. Property has historically been this go-to asset for a number of factors. But with trepidation across the globe, how do you find the right market?
This guide outlines the 5 key elements to look for, using IP Global’s investment case for Berlin as an example.
When we look at Berlin, it is an ideal example of an international hub for business and innovation, not to mention the capital of Europe’s largest economy.
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 cities and regions heavily reliant on banking or the manufacturing and export of capital goods such as automobiles, ships, and airliners.
It is estimated that Berlin’s decrease in GDP will amount to a mere 2.7% this year followed by a rebound of 4.9% in 2021, once again outperforming other major German cities.
More than 420,000 new jobs were created in Berlin since 2009, an increase of 40%, resulting in the unemployment rate falling from 20% in 2003 to 7.5% at the end of 2019. The city is forecast to have 635,000 people in office- based employment by 2021, an increase of 12% from 2019, while Frankfurt is forecast to have 268,270 people, an increase of just 2% over the same period.
Due to the high caliber new job creation, Berlin incomes grew by 34% between 2009 and 2017. This was a higher growth rate than in most other German cities and the national average, revealing the scale and underpinning the city’s transformation.
Going forward, we expect to see more reliance on technology than ever before and regions with strong innovation and technological capabilities will perform the best.
Berlin is a start-up capital, and one of the most prolific start- up hubs in Europe with 40% of all German start- up jobs created in the city. Over 200,000 new jobs have been created in the technology-based knowledge intensive business service sector since 2009, resulting in the number of jobs in information and communications technology doubling over the period.
German startups raised a record EUR6.2bn in venture capital investment in 2019, an increase of 36% on the previous year. E-commerce is becoming less significant than previous years with software, FinTech and mobility start-ups receiving significantly more financial backing. The lion’s share of finance went to Berlin-based startups receiving over EUR3.7bn – an increase of 41% compared to the previous year.
Another important factor to consider is how a market is primed for attracting young talent, often the largest demographic in the rental sector.
Berlin boasts a top-class academic environment with world-renowned institutions such as Humboldt University, Charité, and Frei University Berlin amongst the top ten in Germany. There are a total of more than 250,000 people currently working, researching, or studying in Berlin’s tertiary level educational institutions. And over the next ten years, Berlin is expected to develop into an outstanding European hub for cutting-edge research and technological innovation, attracting more and more talent to the city.
Property investment is for long-term growth and so it's crucial to invest in a market with a high level of government stability and an economy that can weather any downturns or global crises.
Germany has proved to be one of the safest countries in the world to live during the global pandemic. It recorded by far the lowest number of fatalities per 1 million inhabitants of any industrialised nation, thanks to a swift and effective response. Germany’s first-rate healthcare system has approximately 48 ICU beds per 100,000 population compared to the OECD average of 12 beds and has the capacity to process over 1 million COVID-19 tests per week.
Over 98% of Germans are covered by public or private health insurance, greatly reducing the number of unknown pre-existing conditions which contributed to the subdued mortality rate. 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.
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Not only this, but you need to find a market where there is a growing population opting to rent. This is usually the case for young professionals, new migrants, and actually 83% of Berlin’s local residents
Berlin is the most populous city in the EU with 3.7 million residents as of 2020, and on track to surpass 4 million residents by 2030. The city has experienced sustained positive net migration, bolstered by positive natural population growth since 2009. Together with the surrounding area of Berlin-Brandenburg, there are over 6 million people living and working in the region.
Berlin is a young and truly international city, home to expats from over 190 different countries representing 21% of the total population, with the average age of newcomers to the city under 35. Continued population growth and a trend towards one-person households will continue to put pressure on the city’s already strained housing stock.
Berlin’s housing market remains structurally undersupplied with a deficit of at least 86,000 units as of 2019, while economic and population growth are expected to outstrip supply until at least 2030. An additional 0.5% of apartments were completed per annum over the last decade, while population growth was double that at 1%. As a result, the vacancy rate has continued to tumble from 3.5% in 2011 to 0.8% as of 2019.
An undersupplied housing market combined with a booming economy puts sustained upward pressure on house prices and rents, which has been the case for Berlin over the last decade. Prices for newly built and existing apartments increased by over 120% between 2009 and 2019, with rents following a similar trajectory.
Berlin’s top market segment which accounts for new-builds and refurbished units experienced 8.1% capital appreciation in 2019, while rents increased by 7.3% over the same period. Yet Berlin still remains affordable by both national and global standards for investors and residents alike, and thus the trend is expected to continue for as long as the structural factors persist.
To learn why Berlin's prime housing market experienced the highest level of capital growth in Europe during the pandemic, click here
Small is beautiful -and the news is out.
Europe is abuzz with change, and new lifestyles are being embraced. In Germany, for example, the Federal Statistical Office predicts that by 2040 one in four people will live alone -a vastly different outlook from the turn of the century. Millennials are getting married later, putting careers first in a fierce focus on independence. And with time a rare commodity, people don’t want to waste it on a long commute.
Enter the growing lifestyle trend of micro-living. Otherwise known as the future of making limited space work in flourishing European cities. Expansive, cluttered apartments are a thing of the past. Minimalism is the future of city-centre living.
A classic characteristic of micro-living is that it is suitable for singles and, occasionally, couples. One might find this a disconcerting factor when looking at the rapid global population growth. A more accurate benchmark, however, is to measure your investment against the trend of household sizes. For example, the outlook for micro-apartments in Germany, Sweden or Austria is dramatically different to that of Ireland or Poland.
Germany is one country particularly primed for micro-living. As you will see by the below graphic representation of its household structure, single households will rise to an alarming 19.3 million by 2040.
According to Cushman & Wakefield, 2018 saw an increase of 85% on the previous year in transactions for micro-apartments, bringing the total to EUR1.5 billion. Berlin, Hamburg and Frankfurt in particular saw a large growth in the market. In fact, Germany as a whole has the highest investment in micro-living in the European Union.
Due to the large number of young working professionals and students embracing convenient living, micro-flats are usually located near key employment nodes and the best universities.
Europe is a mecca to highly-skilled immigrants and offers some of best education in the world. Key cities are seeing a growing demographic of young working professionals and international students, drawn to fruitful job prospects and outstanding universities.
Paralleling this trend is a direct growth in demand for micro-apartments.
Considered a very lucrative market, in 2018 alone, the European student accommodation investment landscape saw a transaction volume just short of EUR10 billion.
According to UNESCO, the UK, France, Germany, Italy, The Netherlands, and Spain are among the top 20 destinations for global students studying abroad. This correlates with Corestate’s ideal markets for micro-apartments as seen in the below graph.
In addition to this, Cushman & Wakefield found that there is a clear correlation between micro-apartment buildings under construction and urban areas in which demand for residential property is highest. Locations like Berlin, London and Vienna are the leading cities of education and have buoyant job markets, it is no surprise that these are the places fervently jumping on this new lifestyle trend.
There are 3 main sub-sectors of micro-apartments. These are namely: serviced apartments, student accommodation and furnished micro-apartments. The commonality among them all is the convenient location, furnished-nature and shorter-term leasing.
One mistake to make is to assume that the only target demographic is the youth, although currently it is the largest market. With the world becoming so globally accessible, commuting and frequent business trips are a way of life for a large share of working professionals.
Many of which do not wish to live in hotels as they prefer the privacy and a space to make their own. This demographic further elevates the rental prospects as luxury living becomes compact.
Micro-apartments are becoming relevant in several phases of life due to changes in society and demographics. This makes property investment in micro-living a multifaceted opportunity for all generations. There are young adults requiring student housing, new working professionals branching out from families and expats and commuters of all ages who prioritise convenience. In future, there could even be a market for the elderly with mobility constraints to benefit from assisted micro-living. As the housing supply pipeline narrows across European cities, the future of this trend has countless possibilities but the one certain forecast is growth.
Property has one of the more secure income generators of all the asset classes as it is not as heavily benchmarked to the economy. If trouble looms for the stock market, people still need places to live and with populations growing exponentially, the security is further cemented each year.
It’s important to diversify your portfolio with a real estate investment, but often the biggest concern is the substantial lump sum of capital needed to finance the purchase. This is particularly an issue in sought-after areas.
Given the smaller property size of micro-apartments, the entry point for investors is much lower than that of a 1- to 2-bedroom apartment. It is a great opportunity to get a foot on the property ladder. Moreover, the lower price presents the opportunity for property investors further up the ladder to purchase more than one apartment, so the risk is spread across multiple sources.
There are many income benefits to micro-apartments but two particularly stand out. The first is that, when done well, their appealing modern amenities combined with a central location make the return on square metre comparably high while still being in the price range of a far larger demographic. Furthermore, they generally have lower running costs and are more eco-friendly due to their size and new-build nature.
The second income benefit is in the short-term nature of the lease. It is the custom in many European countries like Germany to rent on a rolling lease, which means to begin the process as a tenant, there is usually vigorous credit history scrutiny and a 3-month security deposit. Micro-apartments take all this hassle away. Moreover, the buy-to-let investor benefits as the 12- to 24-month contractual period allows more price elasticity to increase the rent according to demand.
In terms of investment security, one has to look at the facts. A definitive figure cannot be placed on the overall supply of micro-apartments because there are so many different segments to micro-living.
Given that the largest portion with measurable data is student housing, we will base further analysis on those metrics by Cushman & Wakefield. To date, primarily 60% of investment in the student housing segment has been domestic, with a further 28% coming from European countries. Seeing as this is a relatively new concept and demand is rapidly growing, investor confidence remains secure that the market for resale will be particularly fluid.
Furthermore, it bodes well for security that the growing youth are the largest sector using micro-living. It means the investment is not correlated with economic fundamentals but rather the value placed on career prospects and education. Micro-apartments are therefore a defense investment and an ideal risk diversification strategy (Corestate).
● Students, international young professionals and a growing number of singles fuel a fervent demand for micro-living.
● The high quality, flexibility and lower rent in central locations are key features to tenants.
● Micro-apartments are attractive to risk-averse investors as occupancy rates soar.
To learn about IP Global’s latest opportunity in micro-living, click here.
Few places can say with certainty, that they still have stable investor confidence going into 2021.
The stock markets have been exceptionally volatile, there is a global pandemic and political stability is teetering on the edge in many countries.
If you haven't yet, now is the time to diversify your portfolio with an asset class that shows more stability in a reliably-managed economy. Luckily, there is one standing firmly ahead of the rest, historically good at crisis management.
With the largest economy in Europe, Germany is renowned as a safe haven -having mitigated risk significantly during the 2007/2008 Global Financial Crisis. From a macroeconomic perspective, sentiment remained positive for 2020 despite uncertainty internationally thanks to the robust labour market and increasing domestic consumption.
In light of increasing demand particularly for residential property, the number of housing unit completions across the country have been insufficient to close the supply gap totalling over 1 million units as of 2019. This under-supply has translated into upward pressure on both house prices and rental rates, especially in the 8 key cities.
Given the movement towards urbanisation, it is prudent to select a real estate investment in one of the key cities promising growth. The 2019 Housing Market Report suggested Frankfurt, Hamburg and Munich all as favourable markets, but no options were as quintessentially promising as Berlin or Leipzig.
When looking from a micro-economic perspective, Berlin is a prime example of a German city experiencing a favourable shift in both demand and supply. It most recently won the 2nd place accolade of Best European City for Investment in 2020, according to PwC and the Urban Land Institute’s Emerging Trends in European Real Estate. It continues to outperform Germany’s GDP growth rate, with an average annual rate of 4% in recent years.
Berlin is the most populated city in the EU, having become a hub for great talent from around the country and abroad. The German Economic Institute predicts that by 2035 there will be over 4 million people living in this captivating city. The growing workforce is stronger than both London or Paris at 4.4%.
Some may think there is cause for concern of a housing bubble materialising given the last global crisis, but it must be stressed that the COVID-19 pandemic is not an economic crisis, the fundamentals on which it stands are completely different. Historically, housing has been the go-to asset for flight-to-safety investors as it is considered the least volatile asset class.
There is no economy in the world more resilient and effective at crisis mitigation than the German economy, particularly within the capital of Berlin. While most cities experienced minimal or no capital appreciation, Berlin's prime market experienced the third highest capital appreciation of all global cities in H1 2020.
The best kept secret is that although property prices have risen 11.8% in 2018, they are still two to three times less than the price of New York or London real estate.
Berlin operates as Germany’s centre, not only for government but also for technology and culture. The new Berlin Brandenburg Airport, which will be shortly opened, will provide direct links to the key financial centres of the world, with an initial capacity at 35 million passengers per year. Once in the city, foreigners and Berliners alike can make use of the advanced metropolitan transport system with 19000km of rail lines and the largest central station in Europe. This progressive efficiency in transportation leaves Berlin with the lowest ratio of automobiles per head of any tier 1 German city.
Perhaps an even more interesting growth in development is the industry moving to the city. Google, Samsung and Pfizer all have offices in Berlin and Elon Musk has announced his first European Tesla Gigafactory will open nearby. It is forecast to bring 10,000 new jobs and attract talent in technology from all over the world.
Berlin already contains 70% of Germany's well established digital and technology startups and received €4.1 billion last year in venture capital. The only other centre of innovation with as diverse a pool of global talent, is Silicon Valley in San Francisco. An area which also happens to have the second highest rent for residential property in the world.
In terms of culture, the global city has arrived and in many ways also mimics San Francisco. Berlin is renowned for being strongly diverse, eco-friendly and contemporary. Using English as a common medium has made it popular for millennial expats as well as it being the leading city of Europe’s art scene.
With promising job prospects in booming industries it is no surprise that the youth is narrowing in on Berlin. The marriage of historical charm and green spaces with all the modern conveniences of an advanced city make it the perfect choice.
Why wait? If you like what you hear, click here to learn more about our latest Berlin offering or here speak to one of our consultants .
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:
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.
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.
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.
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.
Few places can say with certainty, that they still have stable investor confidence going into 2020.
The stock markets are plummeting, there is a global pandemic and political stability is teetering on the edge in many countries.
If you haven't yet, now is the time to diversify your portfolio with an asset class that shows more stability in a reliably-managed economy. Luckily, there is one standing firmly ahead of the rest, historically good at crisis management.
Garnishing the largest economy in Europe, Germany is renowned as a safe haven -having mitigated risk significantly during the 2007-2008 Global Financial Crisis. From a macroeconomic perspective, sentiment remains positive for 2020 despite uncertainty internationally thanks to the robust labour market and increasing domestic consumption..
In light of increasing demand particularly for residential property, the number of housing unit completions across the country have been insufficient to close the supply gap totaling over 1 million units as of 2019. This under-supply has translated into upward pressure on both house prices and rental rates, especially in the key 8 cities.
Given the movement towards urbanisation, it is prudent to select a real estate investment in one of the key cities promising growth. The 2019 Housing Market Report suggested Frankfurt, Hamburg and Munich all as favourable markets, but no options were as quintessentially optimistic as Berlin or Leipzig.
When looking from a micro-economic perspective, Berlin is a prime example of a German city experiencing a favourable shift in both demand and supply. It most recently won the 2nd place accolade of Best European City for Investment in 2020, according to PwC and the Urban Land Institute’s Emerging Trends in European Real Estate. It continues to outperform Germany’s GDP growth rate, with an average annual rate of 4% in recent years.
Berlin is the most populated city in the EU, having become a hub for great talent from around the country and abroad. The German Economic Institute predicts that by 2035 there will be 4 million people living in this captivating city. The growing workforce is stronger than both London or Paris at 4.4% contributing to an impressively low vacancy rate of 1.1%. These factors, coupled with rental growth of 7.1% and a capital growth rate of 11.8% in 2018 alone are culminating to make residential real estate in Berlin one of the most in-demand commodities in all of Europe.
There is always the concern of a housing bubble materializing when demand for real estate is this high. However, due to a shortage of land and skilled labour as well as strong political intervention, supply is currently hedged. This means there is low risk in the foreseeable future of demand wavering and the supply of housing being overcompensated. Berlin’s housing market is chronically under-supplied, with an expected additional 20,000 units needed per annum until 2030.
The best kept secret is that although property prices have risen 11.8% in 2018, they are still two to three times less than the price of New York or London real estate.
Berlin operates as Germany’s centre, not only for government but also for technology and culture. As it is now firmly on the map, the infrastructure has been upgraded to suit the status. The new Berlin Brandenburg Airport is being opened in 2020 which will provide direct links to the key financial centres of the world, with an initial capacity at 35 million passengers per year. Once in the city, foreigners and Berliners alike can make use of the advanced metropolitan transport system with 19000km of rail lines and the largest central station in Europe. This progressive efficiency in transportation leaves Berlin with the lowest ratio of automobiles per head of any tier 1 German city.
Perhaps an even more interesting growth in development is the industry moving to the city. Google, Samsung and Pfizer all have offices in Berlin and Elon Musk has announced his first European Tesla Gigafactory will open nearby. It forecasts to bring 10,000 new jobs and attract talent in technology from all over the world. Berlin already contains 70% of Germany's well established digital and technology startups and received 4.1 billion euros last year in venture capital. The only other centre of innovation with as diverse a pool of global talent, is Silicon Valley in San Francisco. An area which also happens to have the second highest rent for residential property in the world.
In terms of culture, the global city has arrived and in many ways also mimics San Francisco. Berlin is renowned for being strongly diverse, eco-friendly and contemporary. Using English as a common medium has made it popular for millennial expats as well as it being the leader city of Europe’s art scenes.
With promising job prospects in booming industries it is no surprise that the youth is narrowing in on Berlin. The marriage of historical charm and green spaces with all the modern conveniences of an advanced city make Berlin a diamond in the rough of real estate investment.
Why wait? If you like what you hear, click here to learn more about our latest Berlin offering or here speak to one of our consultants .
Whatever the shape and substance of your investment portfolio, you do not want to be overexposed to uncertain market conditions. Property has long been considered a safe and stable investment option, particularly when compared to more volatile alternatives, such as stocks and shares. Whether you are looking for long-term capital growth or income generation, or a combination of the two, there are several things to consider before making a property investment that is right for you.
Why look at overseas REAL ESTATE investment?
The purchase of property is seen to be a prudent investment as it can provide an individual with a solid income. It also adds diversification to a portfolio that may otherwise be focused on stocks and shares. Overseas real estate investments had the added benefit of providing geographical diversification, spreading risk over various markets.
While property on home turf often holds appeal, once people investigate offshore markets, they can find the benefits to be lucrative. Exchange rates, regulations or tax benefits can favour the overseas investor.
How does IP Global choose offshore investment opportunities?
At IP Global our approach involves extensive research and due diligence that can be best summarised by the ‘PIE’ acronym: understanding each market’s Population, Infrastructure and Economy before making recommendations.
Firstly, as a location’s population grows so does demand for dwellings, driving property prices upward.
Secondly, infrastructure and connectivity are key. A government’s approach to regeneration and improvements to transport infrastructure often correlates with rising population density, further increasing an asset’s value.
Finally, a stable and robust economy with diverse industries and growing employment levels makes for a promising investment opportunity.
What should investors consider before buying an overseas property?
There are plenty of considerations to take into account before making an offshore investment. How easy will it be to extract profit? What are the income, capital gains and inheritance tax implications of investing in foreign markets? For example, properties in Berlin are now extremely popular because, in comparison to British properties, they do not undergo capital gains tax if held for ten years.
Although a market may appear attractive for investment, when considering overseas properties, it is important to understand the entire purchase process. What are the legal and tax implications for foreign investors? Variables such as how and when to apply for a mortgage should be considered; the procedure changes significantly under different jurisdictions and can be challenging in unfamiliar markets. A trusted mortgage adviser to guide you through the process is often an invaluable partner.
As a foreign investor, it is also important to consider the exchange rate and how currency fluctuations might affect the investment in the medium to long term. Currently, the strengthening US Dollar, combined with Brexit concerns, make it cheaper for overseas investors who are residing in countries such as the UAE or Hong Kong, which are pegged to the US Dollar.
Once the purchasing logistics have been confirmed, potential investors also need to conduct due diligence on their partners on the ground, from the developer to lettings agents, to the property management teams. Understanding the local rental market is key to ensuring strong demand and future saleability prospects. Again, choose any partners wisely and work with advisers that have a strong track record of success.
Purchasing a buy-to-let property can enable investors to repay their mortgage via the proceeds of their rental income. In the last decade, customer-buying behaviour has changed with investors becoming more cautious. Instead of buying trophy properties outright, clients are more inclined to use their budget to buy multiple properties in a range of locations, spreading any risk. They also use mortgages as leverage to maximise their returns and enable their money to go further.
Even if you have the available cash to purchase your property outright, there can be strategic advantages to leveraging (borrowing money) to finance an investment. Investors can not only buy more than one property but buy types of property than they could not otherwise afford. For example, an analysis of IP Global’s London property portfolio found the return on property investment was magnified 2.7 times on average using this strategy.
What should investors look at on an ongoing basis?
Once investors have made property purchases, it is important to constantly assess their value and progression and, if necessary, re-evaluate any related strategy whilst simultaneously managing tenants and property upkeep. Many expatriates who purchase overseas properties are working on a contract basis so it is worth planning ahead, particularly when it comes to reselling. However, purchasing overseas often provides more freedom in this respect. Generally, IP Global recommends a 5 to 10-year minimum hold on an investment property.
Why IP Global, and why now?
For many investors, the legal, mental and financial implications of purchasing overseas properties can be daunting. IP Global has local and global expertise in end-to-end servicing, from research and arranging mortgages, to facilitating purchase and conveyancing, handling lettings and managing the property, as well as advising on the optimal time for reselling.
Ultimately, the key advantage of acquiring offshore property is that it provides continuous reliable returns through capital growth and rental yields, with minimal active management. For individuals wanting to drive their net worth, property is a reliable asset. And for those living and/or working in locations with an opportunity to monopolise on a strengthened US Dollar, the time to buy is now.
Berlin is a world-class metropolis city attracting students far and wide.
A property market’s education sector is a key indicator of the market’s investment potential and as such is important to assess. A well-developed and attractive education system like Berlin’s demonstrates the city’s growth, long-term stability, as well as strong rental demand. Attracting 185,000 students annually, Berlin’s education sector continues to excite investors for good reason.
Berlin took 7th place in last year’s QS Best Student Cities rankings, safely ranking in the top ten cities for the third year in a row. Moving up the charts significantly in recent years, the city boasts a strong affordability ranking as well as being highly desirable. Other annual surveys which rank the world’s most liveable cities, including those conducted by Mercer and Monocle, also show Berlin moving up the ranks over the last few years and being increasingly popular with younger demographics.
When asked to pick the top factor that makes Berlin a great place to study, students unanimously highlight the fact that the city is remarkably affordable in comparison to other similarly sized capital cities. While the city’s growing population has driven up rental costs, rent control laws, and the prevalence and popularity of flatshares and micro-apartments mean students can still maintain a great quality of life here.
While the city has become more expensive than it was ten years ago, when the former Berlin mayor Klaus Wowereit famously referred to the city as ‘poor, but sexy’, Berlin’s appeal has remained steadfast. Having flourished into one of the world’s coolest urban hubs, the city has been a major center for design, fashion, and art students for decades. The city’s booming economic growth is now leading to more budding financiers looking to the city’s numerous universities, demonstrating that Berlin is as perfect for history aficionados and budding designers as it is for future bankers and lawyers.
With long-established cultural diversity, international students feel more at home in Berlin than many other European capitals. Enticed by the fact that all undergraduate degrees (and some postgraduate programs) are free at public universities in Germany, even for international students, 19% of all students in Berlin come from abroad. The city’s greater provision of English courses also has proven appealing to international students, particularly at the postgraduate level. The city’s entrepreneurial culture gives rise to a buzzing food and entertainment scene, positioning its nightlife among the top in the world – two perks that surely seal the deal for many prospective Berlin-bound students.
The neighborhoods of Friedrichshain, Kreuzberg, Neukölln, and Lichtenberg are popular among students for their many bars, cafes, independent shops, street festivals, and of course, affordable housing.
Intrigued by Berlin and its investment case? Visit our Berlin hub to learn more and review our step-by-step guide to securing a German mortgage to start your investment journey today.
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