Whatever the shape and substance of your overseas property 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 an overseas property investment that is right for you.
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 property investment 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.
At IP Global our approach to overseas property investment 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 overseas property investment opportunity.
There are plenty of considerations to take into account before making an overseas property 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 柏林 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 property investment, 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 overseas property 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 who 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 that 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.
Once investors have made overseas property investments, 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 have overseas property investments are working on a contract basis so it is worth planning ahead, particularly when it comes to reselling.
However, purchasing property overseas often provides more freedom in this respect. Generally, IP Global recommends a 5 to 10-year minimum hold on an investment property.
For many investors, the legal, mental and financial implications of overseas property investments 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 making overseas property investments is that they provide continuous reliable returns through capital growth and rental yields, with minimal active management.
For individuals wanting to drive their net worth, having an overseas property is a reliable asset. And for those living and working in locations with an opportunity to monopolise on a strengthened US Dollar, the time to buy is now.
Berlin, the vibrant capital of Germany, has not only withstood the test of time but has emerged as a symbol of economic resilience. Over the years, the city has faced numerous challenges, from the devastation of World War II to the division during the Cold War. However, Berlin's ability to adapt, innovate, and embrace change has played a pivotal role in its economic resilience, making it a powerhouse in the global economy.
Berlin's history is marked by significant transformations. The city rose from the ashes of World War II, rebuilding its infrastructure and economy with determination. The fall of the Berlin Wall in 1989 symbolized the end of the Cold War, leading to the reunification of East and West Berlin. This reunification brought about immense economic challenges, yet Berlin turned adversity into opportunity by embracing a new era of growth and development.
In recent decades, Berlin has evolved into a thriving hub for innovation and technology. The city's open-mindedness, coupled with a supportive environment for startups, has attracted entrepreneurs and investors from around the world. The rise of tech hubs, co-working spaces, and a burgeoning startup scene has contributed significantly to Berlin's economic resilience.
Berlin's economy is characterised by its diversification across various sectors. While the city has a strong industrial base, it has also invested heavily in the creative and cultural industries. The presence of world-class museums, galleries, and a thriving arts scene not only adds to Berlin's cultural richness but also provides a resilient economic foundation.
The city boasts top-tier educational institutions, contributing to a highly skilled and educated workforce. Berlin's focus on education and research has led to breakthroughs in various fields, fostering innovation and attracting talent. A well-educated workforce is a key factor in sustaining economic growth and resilience.
Berlin places a strong emphasis on sustainable urban development. The city is a pioneer in green initiatives, with an extensive public transportation system, green spaces, and a commitment to renewable energy. This forward-thinking approach not only enhances the quality of life for residents but also positions Berlin as a sustainable and resilient economic centre.
As the capital of Germany, Berlin benefits from its strategic location in the heart of Europe. The city's connectivity through transportation networks, international airports, and a central location within the European Union has made it an attractive destination for businesses looking to establish a global presence.
Berlin's journey from a war-torn city to an economic powerhouse showcases the resilience embedded in its DNA. The city's ability to adapt to change, embrace innovation, and prioritize sustainability has been instrumental in shaping its economic success. As Berlin continues to evolve, it stands as a testament to the notion that resilience is not merely a response to adversity but a proactive approach to building a robust and sustainable future.
Take a look at our latest investment opportunity in Berlin, Yves Quarter.
In an inflationary market, where your purchasing power lessens due to rising prices, the importance of making prudent property investments is heightened. People focus more on low-risk markets and stability, with the best chance of sustainable rents and capital growth possible.
For the past two decades, PwC and the Urban Land Institute (ULI) have been unravelling the complexities of Europe's real estate landscape through their esteemed publication, Emerging Trends in Real Estate Europe. This publication has gained a reputation as a trusted source for investors to draw insight from when making the decision on where to invest next.
As each city across Europe offers unique advantages and disadvantages, below we explore the results of the industry’s most respected annual reports. The graph depicts European cities ranked on their overall prospects in each given year.
The strength of the Emerging Trends report lies in its comprehensive methodology. A collaborative effort between PwC and ULI, the report canvasses the insights of over a thousand property professionals.
These industry experts, that range from investors and fund managers to developers and consultants, contribute to a rich tapestry of perspectives.
These perspectives form the basis of the report's outlook on real estate investment and development trends, where 31 different European cities are studied and compared without bias.
With the possibility of a recession being prevalent across Europe, Berlin has managed to remain one of the top cities to invest in
Berlin's enduring status as a premier real estate market stems from a convergence of factors. Beyond its shared economic strengths with other German cities, Berlin possesses a distinct international allure, while still growing from where it was thirty years ago (prior to the wall coming down).
This underscores Berlin's continuous growth, technological prowess, and unique appeal, making it a standout investment destination.
A key contributor to Berlin's appeal is its adaptability to innovative projects. Notably, repurposing redundant (retail) spaces for e-commerce logistics reflects the city's forward-thinking approach.
Even amid challenges like the pandemic, Berlin's resilience shines through, attracting businesses and solidifying its reputation as a reliable investment hub.
Investors are enticed by the city's upward potential in rents, supported by Germany's effective crisis management during the pandemic. Berlin did not see a wave of people leaving the city, such as seen in other major cities like London, which has kept the housing market more stable.
The nation's robust economy, coupled with low vacancies in crucial sectors, instils confidence in Berlin's ability to weather economic uncertainties.
Moreover, Berlin's commitment to sustainability and eco-conscious initiatives adds to its appeal.
The city has been at the forefront of green urban planning, with an extensive network of bicycle lanes, green spaces, and a strong focus on renewable energy sources.
The city's consistent high rankings not only highlight its present appeal but also signify a trajectory of growth that transcends two decades, making it a consistent and promising option for discerning real estate investors in Europe.
If you are interested in knowing more about investment opportunities in Berlin, IP Global is happy to help investors through the process. Simply contact us here, or for further reading download the Berlin investment case in 2023 here.
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.
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.
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.
With over half the world’s population living in cities, space is rapidly diminishing, costs are rising, and for many, finding a suitable place to live has become a challenge.
One solution that is commonly used in expanding cities is to go small, without sacrificing comfort. Micro-apartments, typically measuring under 30 square meters, are now being developed around the world. Once assumed to be a fad due to their minimal floorplans, Berlin’s market shows that micro-apartments are a sensible and desired option amongst the younger population.
Berlin is attracting new types of residents, and this is understandably impacting the city’s housing requirements. In 1961, single-occupant flats accounted for 21% of all German households; by 2012, that figure had nearly doubled, reaching 41%. Berlin rises above this average, with a 2017 report stating that more than 57% of the city’s households were single-person residences.
In the last ten years, Berlin’s population has grown by hundreds of thousands. Government statistics put the city’s current population at over 3.7 million people, compared with just under 3.4 million in late 2008, and many of these new residents are under the age of 35. Enticed by the city’s exciting lifestyle options, universities, and growing career prospects, we are seeing impressive numbers of students, young professionals, start-up entrepreneurs, and weekday residents looking for new accommodation types that suit their lifestyle and budget.
While older generations may have dreamed of expansive houses away from the hustle and bustle of central areas, many young urbanites prefer smaller units that offer lower monthly rent rates and easier access to their desired employment, education, and weekend hubs. These groups appreciate the unique design of the micro-apartments and often do not carry with them enough possessions to warrant needing a larger space.
According to a recent study from the housing portal Immowelt, rents in Berlin have more than doubled in the last decade, and many renters are being priced out. Due to their reduced size, micro-apartments in large German cities rent for an average of EUR 600 per month. In comparison, 2017 statistics show that a one-bedroom apartment in the center of Berlin can average upwards of EUR 1,000 a month. Beyond the student and young employees who traditionally have been the target demographic for micro-apartments, increasingly the units are appealing to singles of all age groups who wish to reduce their monthly rental costs.
The small square footage of micro-apartments is liked by renters but also offers strong potential for investors. While the average rent of these smaller units is cheaper than one-bedroom apartments in comparable locations, they offer very attractive rental yields as they allow owners to rent them out at costs that, compared to the average property or full-sized home, are relatively high per square meter.
As Berlin continues to grow as a leading hub for technology companies, university students, and real estate investors, prices will only increase and the number of individuals looking for small residences with rents to match will likely grow as well.
A micro-apartment could be the perfect purchase for investors wanting a slice of one of the most energetic and attractive capitals in the world.
Einbecker 47 is a modern residence located in the growing Berlin neighbourhood of Lichtenberg. Positioned close to a number of educational institutions and one of the city’s largest technology hubs, Einbecker 47 sits in the centre of one of Berlin’s most exciting areas.
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