The German capital of Berlin is a truly historical city, and one that has seen a significant evolution in recent times. While it has not lost any of its unique cultural identity, it has gradually become more international in its nature and developed a decidedly more cosmopolitan feel.
It also played a prominent role in the recent property boom that has gripped Germany, which delivered total sales of more than 210 billion Euros last year. Rents also rose by a record 8% on average during 2016, as the market began to thrive on the back of wider economic growth.
The Growth of the Berlin Market, and its Key Drivers
The growth of the Berlin market far outperforms the national average, having recorded expansion of 115% since 2004. Some economists have unfairly referred to this as a bubble, suggesting that it may be the prelude to a sustained decline in the near future.
German agents have dismissed such talk, citing one important factor to support their argument. More specifically, they claim that the market’s growth has not been characterised by a spike in lending to mirror the rising price points, which is a common indicator of the type of property bubble which triggered the Great Recession.
Instead it is argued that the localised market in Berlin (and the national sector as a whole) went through a period of sustained devaluation that disguised its immense growth. Now that this has been corrected, Berlin is being considered in its true light and has unsurprisingly emerged as a much-needed safe-haven for Eurozone investors during austere times.
The Role of Low Interest Rates and the Spectre of Brexit
There are other factors that have triggered this boom, of course, including the ECB’s minimal interest rates. These are continuing to create a shift in emphasis in Berlin and across Germany, encouraging renters to consider investing in real estate and gradually increasing the home-ownership rate in the city (currently fixed at an incredibly low 14%).
We must also consider the spectre of Brexit, which may have an indirect impact on the property market’s growth both at home and abroad. More specifically, it has been mooted that Berlin could well emerge as the fintech capital of Europe once Britain has left the EU, taking London’s place and potentially creating thousands of new jobs in the city.
A consequence of this is that we’ll start to see an influx of UK expats looking to sell their homes to take advantage of the expanding bubble. In this sense, quick sale companies like Flying Homes will begin to benefit by allowing owners to free up capital for investment in other, more prosperous areas.
Our Final Thoughts: Why Berlin’s growth could be sustained for a prolonged period of time
These factors considered, it would appear likely that Berlin’s property market growth is built on solid foundations and has the potential to expand further in the future.
Even if Berlin does not become the fintech capital of Europe post-Brexit, minimal interest rates and organic growth mean that its property market is sure to enjoy a sustained and prolonged boom. This is something that many European markets can only dream of, as uncertainty and high levels of borrowing take a hefty toll within the region.
