Berlin: Europe's Number One Real Estate Market

It has long been obvious that Berlin's property market is booming. It isn't just German investors who have discovered the city on the Spree; Berlin is now also a firm favorite in the European arena. In fact, according to one recently published survey, Berlin is currently viewed as Europe's most exciting property market. This was the conclusion reached by the Urban Land Institute (ULI) and auditing and consulting firm PwC in their study "Emerging Trends in Real Estate Europe 2015". The approximately 500 European investors surveyed were unanimous: no other city is Europe is as innovative, creative and dynamic as Berlin. This is due not least to the city's booming start-up scene: respondents report that in the media and technology sector in particular, most product launches happen in Berlin, or at least have a connection with the city.


After a long period during which the city's property market was dominated by domestic investors, Berlin with all its advantages is now also drawing increasing interest from international investors. This trend is expected to continue. Eighty-three percent of the experts questioned by the ULI and PwC believe that the proportion of Asian investors in the Berlin market will increase. Respondents also expect deal volumes to climb again in 2015. Asked to name the European property markets with the best prospects, they put Berlin in fourth place after Amsterdam, Athens and Barcelona.


The survey shows that the German capital is benefiting from high pressure on players to invest: While there is currently plenty of available capital, alternative investments offering attractive yield prospects are virtually absent. As a result, residential property is currently particularly popular. As shown by the survey, two thirds of respondents have already invested in residential property. The reason for this is the widespread housing shortage in many European cities. At the same time, the market for the best properties is highly competitive. Investors see the increasing supply shortage as this year's biggest problem. Eighty-two percent of them believe that difficulty accessing suitable properties will have a moderate to significant influence on their business model. Two-thirds of respondents already view core properties as overpriced. This has also affected Munich's property market: The city has slipped from first place last year to eleventh place this year. By contrast, respondents felt that Berlin has "excellent fundamentals" and a comparatively favorable price level. The European investors also attest to good investment opportunities in Hamburg: According to the survey, the city ranks as the fourth most attractive property market.


Another of the study's findings is that there has been a significant increase in the willingness of European investors to take on risk. Intense competition is increasingly shifting focus onto markets that were particularly badly affected by the European financial crisis and are now beginning to recover. Investment in property in Ireland in Spain has recently increased as a result. Dublin and Madrid, which took second and third place in the survey respectively, are particularly fancied. The economic situation in Dublin has settled and is viewed as intact as far as the investment environment is concerned. A shortage of supply in the Irish capital has produced a strong growth in rents. Madrid too is of increasing interest to foreign investors. However, a few cautious investors doubt that this market will see long-term and thus solid growth. Nevertheless, the Spanish capital is a newcomer. However, propensity to invest is also increasing in Athens, Amsterdam, Birmingham and Lisbon. At the bottom of the table come Vienna, Rome and Moscow. The geopolitical crisis has significantly dimmed prospects in the Russian capital.