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Market Dynamics

Current Residential Market Conditions.

Return to a normal "Supply - Demand" property market.

Berlin's property market is evolving into a normal supply - demand driven marketplace for the first time in nearly 70 years. After the years of partition Berlin initially boomed based upon rapid investment in infrastructure and housing developments with high levels of housing subsidies and assistance. Salary levels, driven by this rapid development, increased initially but eventually once the heat went out of the boom salary levels dropped dramatically. Core economic conditions eventually destroyed the early boom compounded by the removal of many subsidies and allowances. The poor economic climate in Germany (both macro and micro) further exacerbated local issues and the floor dropped out of the property market. Property prices in parts of Berlin are now as low as a third of the m2 price levels seen at the height of the boom which was over 12 years ago.

During this period residential property prices in Germany mostly remained static (most quoted reports show an absolute decline in German Residential Property values over this period of between 2% and 5%). Adjusted for inflation the decline in property prices over this period is obviously much greater.

While there was an initial shortage of habitable properties in Berlin to cater for the initial population growth after re-unification the large number of new build multi-family properties in the early 1990's combined with a sharp reversal in population growth resulted in a large quantity of vacant properties within the city which was over 150,000 at one point. Since the dramatic reduction in "New Build" in the late 1990's vacancy rates have dramatically reduced. The latest projections indicate that this surplus could be eliminated within the near future and without a dramatic recovery in the number of new build "Multi-Family" homes shortages are forecast due to increases in the number of households.

The above graph is based on published figures for household numbers, new build rates for multi-family homes and the reduction in the numbers of existing properties. The mean predictions for population growth and the established trend towards smaller households have been used to indicate the anticipated number of "Multi-Family" households in Berlin up to 2034. Current vacancy rates are estimated between 60,000 and 80,000 multi-family units depending on the methodology used. The values used are based on the mean value for each methodology. The projected vacancy figures include an increase in the level of new builds from current levels of approximately 2500 to 10,000 units a year and the loss of approximately 5000 multi-family properties a year. The "Loss-Rate" is less than a third of the typically expected loss-rate of 1% of properties per year due to the destruction of the poorest/oldest properties or a change into non-residential use. As Berlin has a large proportion of older properties it would be expected that there should be an even greater loss-rate of the existing property stock.

* The data for Marzahn-Hellersdorf has been compiled and aggregated from a number of reports. The borough has one of the largest concentrations of "Plattenbau/Pre-Fabricated" properties in the north of the borough and with high rates of renewal/removal of these properties the quoted rate cannot be reliably verified.

Housing Stock (Supply) Developments.

The Berlin housing stock is dominated by approximately 1.88 million multi-family homes which includes an increase of 180,000 units since unification. In 1990 the population of Berlin was 3.42 million mostly living in the 1.7 million multi-family homes at a density of 1.99 people per dwelling. By the start of 2008 the population had dropped slightly to 3.4 million living in the 1.88 million multi-family developments at a significantly reduced density of 1.8 people per dwelling.

The increase in the property stock primarily occurred in the years to 1997 when up to 30,000 units a year were being built. New build since then has declined dramatically and there are now less than 2500 multi family homes being built in Berlin every year. This is less then the estimated residential unit loss-rate so in effect the total stock of Multi-family housing is reducing while demand increases.

With the low price level currently being paid for multi-family units there is limited scope for development as build costs would typically exceed current price levels for the average property.

As seen in earlier illustrations there is still a significant overhang of vacant properties however this has decreased from 160,000 (9% of properties) in 1998 following the peak of "New Build" construction to less than 80,000 (5% of properties) at the start of 2008. This overhang is serving for now to compensate for the shortfall of new builds. With the steady decline in vacancies it should be expected that there will inevitably be shortages in the availability of vacant properties in the next 5 or 6 years.

With the large gap between new build costs and the price of mainstream properties holding back development only increased prices will help to ease this shortfall and bring developers back into the mainstream residential property market. Normal "Supply-Demand" market conditions should in time drive the market towards re-sale price and new build cost equilibrium.

With rents declining in Berlin from 1996 to 2006 this resulted in a dramatic increase in the number of "Non Performing" properties where "Net Net Rent" would not meet the financing costs (for an explanation on true rental returns and explanation on "Net Net Rent" refer to our "Renting the Facts" web page. This was exacerbated by over-lending based on non realistic valuations and a lose financial environment. Large numbers of private landlords/Investors in Berlin residential property in the 1990's have gone bankrupt as a result with large losses being incurred by the financing institutions to these Landlords/Investors (many of the investors and financing institutions effected were based outside of Berlin).

As there tends to be a long "Time-Lag" (2 to 3 years in many cases) from any initial "Zwangsversteigerungen/Bankruptcy Order" to the eventual "Forced Sale" of a property the rate of "Forced Sales" was still increasing in 2007 when there was an increase of 8.2% from the 2006 figure of 2866 to 3101 court sales. It is predicted that 2007 will be the peak year for "Forced Sales" with a steady decline following as listed properties work there way through the system. For additional information on rates of forced sales in the major cities of Germany and an introduction to how these "Forced Sales" function refer to our "Zwangsversteigerungen/Bankruptcy Order" web page for further information.

Note. Special tax breaks given for investment in property in Berlin during the 1990's drew many professional people from throughout Germany to invest in Berlin. Thus the profile of Landlords/Investors who have had properties taken back by the Banks is quite unusual. The tax breaks given were of such significant benefit that even with the loss of their original equity overall net losses were not quite as high as this might imply.

The aftermath of the "Bust" has led to both a shortage of investors willing to invest in speculative new build and the limited availability of finance for speculative building. (As a result of losses suffered at this time financial institutions in the rest of Germany do not now finance residential purchases/investments in Berlin for private investors). Some planned large scale residential developments on the periphery of the city have been dramatically scaled back and in many cases only a small percentage of the planned new build has been completed with many plots left un-developed.

Rental Income Decline Bottoms Out.

Rents are now showing clear signs that the 10 year decline in rents has bottomed out and many of the districts are seeing increases in rents. The latest projections are that many tenants in Berlin will move into larger or better quality homes/locations in the near future following improvements in personal economic conditions due to recent strong growth in Germany and Berlin this may however be overestimated as the cost of living increases and heating costs soar. The % reduction in rent for Mitte referenced should be tempered by most of the reports for Berlin which indicate good growth in many parts of the borough.

Due to the very low starting level it will be some time before rental costs have recovered sufficiently to restart speculative investment in Multi-Family" new builds. Berlin does not suffer from any shortage of space for building unlike most European cities. This constraint has contributed to the dramatic increases in prices in most large European cities however this is not the case in Berlin. Berlin was designed on a large geographic scale and while there have been and remain areas with high population density overall there is an almost unlimited availability of suitable land for residential development within the City limits.

There has remained a steady small supply of high end "New Build" to cater for the continuous demand for this type of property in the best locations in the city as seen in the new developments in Mitte and the attractive/desirable waterside areas. Building permits issued for new "Multi-Family" homes remains at an all time low at approximately 2500 units a year well below any realistic demand projection.

Property Demand Developments.

Looking forward the main drivers for improved demand in the Berlin Residential Market include:

Reversal of the movement of residents out of the city.

Following the initial inflow to Berlin after unification there was a steady outflow of residents from the city for the duration of the 2nd half of the 1990s.

Since 2000 population growth implies that there has been a reversal of this trend and there has been an almost constant increase in the population of the city of approximately 5,000 residents per year.

With a birth rate in Germany below the accepted minimum sustainability rate any increase in the population must be primarily attributed to the net inflow of residents to the city.

This rate of increase is currently forecast to reduce within the next ten years with the population estimated to peak at 3.45 Million by 2020 and a subsequent decline following long term demographic trends.

The latest immigrant profile is substantially different than that seen previously in Berlin. Earlier immigration flows was mostly based on economic migrants who were attracted to West Berlin by the availability of low skilled service jobs which residents were reluctant to accept. Many immigrants from this period originated in Turkey resulting in Berlin now having one of the largest Turkish communities outside turkey.

In recent years the typical immigrant is highly educated comes from a more affluent homeland and arrives for Quality of Life/Lifestyle reasons rather than for purely economic motives. This change in the immigrant profile can be seen in the residential developments in the districts where most of this new wave of immigrant has settled. This is most noticeable in the district of Prenzlaur Berg which has undergone rapid change into a very Arty / Café Life locality with some of the most expensive residential rental rates in the city.

Without a core industrial base Berlin is developing as a more creative/artistic centre with this as one of the drivers for economic development and has resulted in a strong inflow of artists and creative media personnel. This is seen as one of the major areas for economic growth in the City which has already built critical mass within the creative and media world.

High Energy Cost Influences on the In-Flow of residents to the City.

Recently there has been evidence that the dramatic increase in Energy Costs may force a re-think by families where they will live in a "High Energy Cost Society". Longer distance commutes from larger more rural residential developments will more and more be seen as an excessive demand upon the household budget. Combined with the higher energy costs associated with larger rural homes the economic attractiveness of city living will be a driver towards re-establishing the city as the location of choice for many households.

There is strong evidence of this development in the US where property price drops resulting from the "Sub-Prime" shock and a doubling in the oil price has resulted in larger property price drops in many "Commuter-Belt" districts when compared to their city equivalents. Were this trend to develop momentum in the US it is not hard to imagine similar pressures resulting in a similar outcome in many European cities including Berlin.

Birth Rate Improvements and the Demographic Time Bomb.

As elsewhere in Germany in Berlin, and in particular within the core population of German Descent within the city, the birth rate has been steadily declining for many years and is now below the "Sustainable Rate" where the birth rate can maintain current population levels in the long term.

However, the most recent statistics show that the long term decline in the birth rate in Germany was reversed at the start of 2008 with the birth rate increasing from 1.33 per woman to 1.45, this has been helped by the introduction of a special benefit for parents, known as "Elterngeld/Parents Money". This provides a state payment to a parent who stays home with a new child 67 percent of that parent's current net income, up to a maximum of €1,800 a month, for up to 12 months.

This reversal is still at an early stage and it is still not evident whether this reverse can be maintained until the Sustainability-Rate is reached. Berlin, with a large immigrant population where birth rates tend to be higher, should see higher birth rates than elsewhere in Germany and with a better economic environment seen as one of the contributors to increasing birth rates improvements in the economic environment of Berlin should also be a positive contributor to this growth.

Combining net immigration with an increase in the birth rate should help maintain population growth in the medium term. Long term forecasts of population growth are very poor for Germany, and the east of the country in particular. However, these projections may have underrated the influences of both neighbouring countries and international movement.

Better Micro and Macro Economic Environment.

Recent strong economic growth in Poland has probably changed its influence from a negative to a positive on the East of Germany. With comparatively high rates of inflation in Poland and a rapidly increasing cost of living there it's possible that the better quality of life, high quality cheap housing and classic historical towns close to the polish border will ensure more and more Polish people settle in Germany long term, the imminent removal of labour restrictions in Germany will help further this development. In some areas Polish companies now establish bases over the border into Germany where there are many cheap vacant industrial premises and the all important "Made in Germany" stamp can be put on their products.

Note. There is good anecdotal evidence that German companies who have in recent years established manufacturing bases within Poland have been frustrated by workforce reliability issues, infrastructure problems etc and have not really seen the anticipated cost savings. Companies who went down this route a few years ago are, in many cases, now quietly returning production to Germany where they can also be closer to the large manufacturing bases who are their main customers.

There has been a steady reduction in the number of residents per household within Berlin since early in the last century. With more and more people living alone and smaller families this trend is forecast to continue and result in ever greater household numbers even if projected decreases in the total population do occur.

Demand changes based on the reduction in the number of Residents/Dwelling.

Berlin has seen a long term trend, as per the rest of Germany and the developed world, towards smaller households. This has been brought about by less children per family and an increase in the number of single person households.

Based on the current projections of a population increase of nearly 50,000 at 1.8 people per dwelling implies demand for approximately 30,000 new dwellings for the projected increase in the population.

The predicted reduction in the number of residents/dwelling to less than 1.7 indicates additional demand for another 100,000 dwellings implying there will be a total increase in demand of approximately 130,000 new multi family homes in the near term.

Overall State of the Market.

Current market conditions for rental costs.

The following tables are based on the figures quoted for the most typical properties sold and rented within a borough and care should be taken when extrapolating for extreme properties such as the high specification "New Build" in the most desirable parts of a borough of at the other end of the spectrum the raw un-renovated older properties without any central heating or modern kitchen/bathrooms.

Comparison of Market Dynamics within the Boroughs of Berlin

Rental costs and prices vary dramatically from Borough to Borough with typical properties in Marzahn-Hellersdorf renting for less than €4.7/m2 while the affluent areas of Charlottenburg-Wilmersdorf easily pass 7€/m2. Many properties will be rented for significantly less than these figures however this will relate more to their individual condition/position and tenant history (tenant's enjoy strong rights including limits to how often and by how much rents can be increased). Similarly flagship developments in the trendiest areas currently rent for more than 12€/m2 but these should be seen as specialist properties rather than mainstream investment class. Investors who are looking for shorter term capital gains are more likely to be interested in boroughs where yield compression has fallen behind other boroughs with resulting higher yields and greater potential for capital increases. On the other hand long term investors will probably be more attracted to the more established residential investment districts and accept the lower yields offered by properties in these areas.

As can be seen from the table below, based on data for the last 2 years, there is a very mixed picture for rental cost changes. Reinickendorf and Spandau saw a large fall in rental costs in early 2007 which has somewhat stabilised, Marzahn-Hellersdorf had deteriorated markedly since 2006 but the very low rental costs have seen some recent improvements although the improvement is still below the average city increase. Treptow-Kopenick muddles along just below the city average but rents are steadily improving. Mitte has been unpredictable due to the range of properties and tenants in the borough, the data for 2008 shows that its central location is steadily improving its overall position in the market. Neukolln and Lichtenberg have seen rental costs recover from their lower initial levels with only a slight fall back in 2008, Friedrichshain-Kreuzberg and Pankow have reversed their position from below the average for Berlin to above average while Tempelhof-Schöneberg has steadily increased. Charlottenburg-Wilmersdorf powers forward at the top of the rental market and is followed by Steglitz-Zehlendorf which has dropped back slightly.

The average rate for new rental contracts in Berlin were 5.95€/m2 in March 2007, 5.80€/m2 in Oct 2007 and 5.90€/m2 in March 2008 and 6.0€/m2 in October 2008. This indicates that rates have mostly stabilised with tentative indications of a reversal of the steady decline in average rental costs that has been evident for many years.

"Yield Compression" has been the story up until 2008.

The twin drivers of Yield, rental returns and cost price, follow slightly different paths. With the long term trend since the late 1990's to lower rents bottoming out at the end of 2007 contributing to a temporary increase in yield between October 2007 and March 2008. However the long term trend for yield compression has seen the steady increase in prices which has been evident for the last couple of years primarily driven by foreign investors looking for better value away from their home markets. International market turbulence has forced foreign buyers from the market in the last twelve months and this is mare noticeable in the yield data for 2008.

With any recovery in rental rates quickly feeding into increased prices any recovery in yield is likely to be temporary with continuing yield compression forcing prices ahead of any rate of rental increase. The short term dislocation of the international financial markets and increased finance costs will probably slow down the rate of yield compression however Berlin's unique position in the international residential property market will draw property investors back earlier than the other markets. In international markets where property values have boomed investors will struggle as the long slow decline in values in these markets hits net yield for many years to come.

Recent evidence suggests that there has been a drop off in the number of foreign investors almost certainly driven by difficulties in the international financial markets however with such a widespread property slump across many parts of Europe and the absence of "Value" in emerging markets it is anticipated that Berlin will benefit when financial markets eventually return to a more ordered state. Within Germany there has been some signs of a tightening of finance availability. It is interesting to see Berlin being marketed in the UK/Ireland as an "Emerging Market", not quite what the capital of the largest city in Europe should bring to mind.

While it was possible to purchase large residential investment properties at yields of 7% in 2006 buyers tended to come from abroad as local investors looked for higher yields and thus stayed out of the market. By 2007 local investors began to show an interest in properties at yields of 7% only to find that yields had typically dropped to 6% and again avoided the market as further foreign buyers made hay. The bottom of yield in the current cycle was approximately 5% at the end of 2007. In 2008 yield recovered somewhat however as the properties coming to the market are mostly inferior to those being sold in the previous couple of years this is more a statistical/mix based recovery rather than any fundamental long term change in the direction of yield in the city.

The sudden change in the market in 2008 is reflected more in the yield on recently sold properties rather than new rental contract costs which evolve much slower. As can be seen from the table below, based on data for the last 2 years, there is a very mixed picture for residential rental property yield with significant variations across the city in 2008. The premium areas of Charlottenburg-Wilmersdorf and Steglitz-Zehlendorf have generally seen some of the lowest yields and with strong sales here in 2008 the yields have dropped back as buyers return to these core investment areas from the developing parts of the city that they targeted in 2007. The originally high yielding boroughs of Friedrichshain-Kreuzberg, Lichtenberg, Pankow and Treptow-Kopenick have seen a steady decrease in yield even as rents have increased due to very strong price growth. Marzahn-Hellersdorf, Reinickendorf and Tempelhof-Schöneberg have continued to offer below average yield with a noticeable deterioration in 2008. Mitte, as ever remains a bit of a conundrum with pockets of high priced low yield properties in premium central areas countered by the higher yielding re-developing districts of "Wedding" and "Gesundbrunnen" as a result yield is relatively high for such a central area. Spandau has seen an improvement in yield from the lowest level in Berlin 2 years ago even while the cost of new rental contracts has dropped indicating how badly prices have performed here in recent years, investors may however see this as a buying opportunity.

The average yield in Berlin was 6.0% in March 2007, 5.80% in Oct 2007, 4.75% in March 2008 and 6.0% in Oct 2008. The steady decline in yield from late 2006 until mid 2008 was indicative of the yield compression that was occurring throughout the city. However, in 2008 the absence of "low yield" accepting international buyers and an increasing lack of finance due to the credit crunch has led to a dramatic increase in the yield based on the latest sales and rental contracts. This sudden change can only partially be attributed to the continued increase in average rents and is mostly attributable to recent lower property prices. While this may be interpreted as a dramatic reversal in property price rise's it is more likely a change in the mix of properties being sold. When comparing Yield by Borough the figures used are based on the local practice of Net Cold Rent Rates (Netto) which includes some owner costs.

Net Rent/Yield "The Facts"

The table below should help clarify the terms used and how they should be used to give a true picture of "Rental Income" and "Yield". As can be seen, based on a typical property, the quoted "Net Yield" of 4.75% will actually be somewhere between 2.5 and 3.0% depending on whether the property is self managed or an agent is used. For further information on this see the "Renting the Facts" page on our web-site.

Individual Property Considerations when evaluating Yield

Detailed evaluation of individual properties and districts need to see the market as three distinct elements.

For an insight into the "True Yield" of a property and the real costs associated with running a residential investment in Berlin/German see our "Renting the Facts" web page.

Older Tenement Buildings dating from pre-1920

The large volume of old "Multi family" properties, approximately 25% of properties in Berlin are over 85 years old, and there position in the rental/investment market means that this type of property would represent a majority of the investment opportunities in Berlin. For additional information on this type of property visit our "Description of Property Types" web page. The traditional driver for yield will tend to be lower yield within the most desirable districts with correspondingly lower yields in the poorer quality/less desirable areas. On top of this consideration runs the quality of the property and its condition.

Thus the Best Quality older properties in the best areas can have significantly lower "Net Yield" sometimes as low as 2-3% while the poorest quality properties in the least desirable areas may show a nominal "Net Yield" of 10% or even greater. Where yield differs dramatically for apparently similar properties this will almost certainly be due to the variation in the long-term maintenance costs in the properties.

Property maintenance costs (paid for by the landlord and not the tenant) can typically be as low as 0.5% of the market value in the best quality older properties where continual high quality repair/maintenance has been carried out or where there has been a complete property renovation (ideally done since the 1990's). On the other hand maintenance and repair costs can almost be unlimited in the very worst of the period tenements. In many cases investors showing a nominal net Yield of 10% may end up in deficit both in the short and long term. The moral of the story should be that a property selling with a 10% yield is probably too good to be true.

Tenant profile is another driver towards yield, where there is a very stable long term tenant profile renting punctually at full market rates this will flash "Well Managed Property" and with the corresponding lower risk of vacancies/arrears this will be another driver towards lower yields for the property than that quoted for the locality. High tenant turnover, poor payment history/high rates of rent default/regular vacancies should be reflected in relatively higher "Net Yield's" than is normal within the locality.

There are many tenants in Berlin in receipt of rent subsidies which if matched to the properties potential should not necessarily be seen as a negative. The regular payment at a rate that matches full value for the property should ensure a regular and reliable payment. In many cases the tenancy management company will make arrangements for social rental payments to be made directly to the landlord.

"Plattenbau" Buildings in old East Berlin dating from pre-unification

The Plattenbau (Pre-Fabricated) properties were low cost mass produced multi-family homes built in East Berlin during the last years of partition. These properties are generally not seen on the market for private investors and are typically held by the very largest Institutional Investors, it is very difficult to raise finance for this type of property, there are currently no known suppliers of finance in Berlin for private investors wishing to purchase a Plattenbau Building. With less competition for these properties and there low selling price they tend to offer much higher yields than other properties in Berlin and the rest of old East Germany. Yields ranging from 15 to 25% may be seen for this type of property. Many of the Plattenbau developments in Berlin have either been demolished or undergone comprehensive upgrades under the ownership of the larger housing bodies. However the uncertainty over the long term future for these properties make them a high risk investment and not properties that we would see as suitable for the private investor.

Modern quality "New Build" apartment buildings

Modern "New Build" developments have less of a mystery when reviewing yields with less consideration required for the unknown costs due for repair and maintenance thus true costs and yield are more transparent. This transparency means that overall yields are lower on average, investment returns for this type of property will tend to be closer to the medium and thus for the risk averse investor who see long term value in the Berlin residential property market this type of property should provide a balanced exposure.

This typically consists of two distinct classes of property:

Finance for this type of property is generally available however for a purchase at the average yield for Berlin, currently 4.75%, and at current finance costs, approximately 4.8% fixed for 10 years, when all costs are factored in an equity holding of approximately 45% is required. See the table below for a breakdown of costs for a typical example. Thus even a new property where maintenance/repair costs are minimal will not facilitate any significant leverage.

Market Comment.

Passive Investors run out of opportunities

The passive investor (our definition) sitting at home on the sofa, notebook in hand trawling all the agents, web-sites etc will no longer make money from emerging markets. This buyer has missed the boat, no longer have they the possibility of purchasing cheaply in the early stage of the development cycle where the one time only cushion of first mover advantage has gone.

A recent paper on property investment in Eastern Europe in the Financial Times highlighted that "it was impossible for the passive property investor to make money in Eastern Europe". This can clearly be seen in many of the former satellite countries of the old USSR where prices have peaked, net rents have not turned out to be close to what was originally indicated/promised. The resulting poor yields have led investors to abandon these markets with early signs of a dramatic drop in re-sale values in many areas. Only early investors with good "Capital Appreciation" now show any long term profit from their investments, when capital appreciation is removed (it should be now seen as a negative where prices are falling when calculating true yield) it is doubtful whether yields ever made investment finance viable.

At least for now with Berlin having already passed the minimum in property prices after an earlier boom it should be possible for the savvy investor to at least make up some of the shortfall in yield with the slow (there will be no new boom) but steady growth predicted in Berlin property prices as the price gap with other comparable cities narrows. Investment based on equity release and high leverage is probably not possible due to current finance restrictions and would fail as price growth rates will not support the strategy.

Costs, Costs, Costs

Property investment funds and specialist property management companies targeting UK and Irish investor's will provide many of the support structures needed for a foreign investor however this comes at a price which is usually not easily quantified. This includes rent guarantees, management costs, guaranteed repair costs etc. In the end there are no free lunch's and in the end the investor pays, usually with the cost of these added services buried within the purchase price.

For example a 1000€/m2 property can be marketed at 1250€/m2 with rent guarantees at 6% yield and a three year guarantee covering all maintenance costs. In truth the 25% extra on the sales price allows for 7.14% to the agent, 2 or 3 % to cover the shortfall from the "Real Net Rent" and another 5% to cover the anticipated 1 to 2% annual repair costs.

A major issue for investors should be establishing greater transparency of costs and revenues. This is particular true when it comes to the cost of an agent's fees, which are always paid for by the buyer. It is quite normal to see an "Agent/Makler" fee of 7.14% (6% +VAT at 19%), when combined with other costs paid for by the buyer this will add approximately 14% to any property purchase. The effect is that approximately 2 years of price growth, at current growth rates, is required to cover these high transaction costs.

While the initial thought would be that sellers will want to maximise their selling price by driving down agents costs or marketing properties themselves as there are so fewer owner occupiers in Berlin, and thus private sellers, the market has developed quite differently than outside investors may be used to.

It is still possible to build up a "contacts base" with a small investment of time in Berlin who can help minimise these costs and identify properties which have more realistic "Current Market Rates" and more transparent costs for all aspects of the purchase and management of the properties. At the "Berlin Property Portal" we aim to identify individuals and companies who we have found to be reliable and fair in all their dealings with us. In addition, periodically we will feature properties for sale direct from the owner and which offer good investment potential, please visit our "Special Projects" page for details of any properties we currently have sourced. We would like to refer buyers/investors to the disclaimer at the bottom of our Web Site.

Anecdotal evidence of a change in the market ? "Bottom Feeder's" struggle.

In recent years opportunistic buyers have seen some exceptional opportunities to buy property at prices much lower than the already cheap publicly quoted property prices. Mostly this has involved the disposal through the courts in Berlin of "Non Performing" residential investment properties and other distressed property sales. It is evident when one looks at the "Forced Sales" and other less public sales that the days of the "opportunistic" buyer picking up properties without competition and at there ease has passed. When attending "Forced Sales" now there are liable to be many buyers and fewer opportunities. Should 2007 prove to be the peak year for "Zwangsversteigerungen/Bankruptcy Orders" this will further hamper the activities of these "Bottom Feeder's" who have historically profited from exploiting the gap between their cost price and the open market value.

When talking to these buyers they all agree that it is becoming harder and harder to get a good property at a good price. And while this may be the case for them they are colourer by the good times they have had in recent years. On the other hand incoming property buyers tend to come to the market with the over-riding impression of "everything just seems so cheap". The truth is somewhere in between and as in any market the more astute and better informed buyer will secure the best deals.

No "Leveraged Property Boom" just steady market development.

In general Germany has never experienced a "Boom" in property prices, within the old "West Germany", where normal market economics existed, property prices had shown a consistent and predicable increase in property prices matching the long term stable post war growth in the German economy.

However following the economic problems associated with absorbing "East Germany" within the enlarged re-unified Germany this steady growth stopped with overall property prices in Germany stagnant from 1990 to 2005. Only in the last two or three years has there been any sign of any recovery in the German property market with the most recent figures showing this recovery has petered out.

History points to the absence of any "Bubble" mentality within the Germany property market. Long term fixed rates and an absence of easy property purchase finance combine to re-enforce stability within the market and this historical situation has protected the property market from excessive short term speculative growth. There has been much publicity about "Sub-Prime" based losses at some German banks, perversely this speculative investment outside Germany runs completely against their domestic policies.

The Berlin property market has been quite unique from its days during partition and post re-unification where over-investment, income subsidies and Tax breaks for investors provide only a short term impetus which is only now finally being overcome as stable market economics develops. While foreign investors may slightly drive the market the shear size and scale of the private rental market in Berlin will always drag things back to the fundamentals of "Net Rent and Yield".

"There will be no Second Property Boom in Berlin" so any attempt to follow a highly leverage growth strategy will fail with the conservative investor more likely to reap the rewards of long term market development.

Our "Raison D'Etre"

At the Berlin Property Portal we aim to provide, comprehensive, clear and unbiased information on the Berlin Property market. We will only promote the services of professionals in the Berlin Property Market who we have positive personal experience of.

All comment is our personal opinion and should not be taken as professional advise. Independent professional advice should be taken before entering into any financial commitments based on information on our Website.

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