Berlin property market to boom

Tuesday, 14 March 2006 12:00 AM

The property market in Germany could be set to boom after 15 years of static prices, according to overseas property experts.

Property prices in the centre of Berlin are as much as five times lower than equivalent properties in Paris, London and other major European capital cities.

According to property investment firm Assetz, just 13 per cent of the population of Berlin own their homes, compared to 43 per cent in Germany as a whole, 66 per cent in the UK and 85 per cent in Spain.

A two or three-bedroom 100 square metre (1,100 square foot) apartment in a 19th century building in central Berlin now costs about ?200,000 (£137,120), which is just ?2,000 a square metre.

An equivalent property in London or Paris is likely to cost up to ?10,000 per square metre.

"With the German economy starting to recover, and the market awakening to the opportunity of property investment with low interest rates, we can expect to see significant price rises over the next five to seven years," said Assetz managing director Stuart Law.

"Areas in Berlin such as Charlottenburg and Mitte, among the most exclusive and expensive in the city, are likely to see the biggest rises over the next five years, of as much as 15 per cent a year for the next five years once the growth starts properly."

Demand for property in Germany will be increased by the growth of the number of households, which is set to rise from 39.3 million to 41.3 million by 2020.

An ageing population and immigration from countries such as Poland will help to underpin the rental market, just as it has in the UK.

Average rents are about 4.5 per cent and have not increased significantly during the last ten years, which combined with low property prices and historically low interest rates means investors can enter the market in Berlin without considerable risk.

"Germans are guarded about taking on debt, having seen their economy in decline for more than a decade, their spending power plummet and unemployment soar," Mr Law added.

"In the meantime, the UK-led phenomenon of buying your own home has been spreading across Europe and with the Germany economy turning around, we forecast that the German population will soon be following in the footsteps of their European counterparts."

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