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The cost of housing in Germany: buying an apartment

Berlin: a market with great potential
West Germany: liquid real estate market
East Germany: dynamic market development
The German economy is the largest and most stable in Europe, so the country attracts foreign investors. One of the ways to preserve and increase capital here is investment in real estate.

The German real estate market is heterogeneous: the situation in West and East Germany differs substantially, and Berlin, the capital of the country, is characterized by particular specifics.

The cost of real estate in Germany
Investments in German real estate are reliable and promising due to key factors:

Stable economy. At the end of 2017, Germany’s GDP increased by 1.9% and exceeded 3.1 trillion euros (fourth place in the world).
Low unemployment. By May 2018, the unemployment rate fell by 0.4% year on year and reached 5.6%, the lowest figure since 1990.
Population growth. In 2017, about 82 million people lived in the country – 2.4% higher than during the last recession in 2011. The number of residents is constantly increasing due to the high level of immigration.
Increase the income of the Germans. In the fourth quarter of 2017, the average salary in Germany reached a historic high of 3,745 euros per month.
One of the main incentives for the demand for real estate in Germany is cheap mortgages. If the average interest rate over the past 20 years was 4.7%, then in May 2016 it dropped to 1.5%. Payments on loans have become less burdensome, so the demand for real estate, and then its prices have increased significantly.

Berlin: a market with great potential
The economy of the capital of Germany is booming. In 2017, Berlin’s GDP grew by 4.6%, which is 1.3 percentage points higher than the national average. Key industries are IT, medicine, electrical engineering and tourism. Berlin has the largest number of Internet startups in Europe: a new company opens here every 20 hours.

– How does the population of Berlin grow? – Mainly due to novice professionals who move here in search of work. Each year, the number of residents increases by an average of 40,000, which is more than 1% of the population of the capital.

Berlin real estate market is one of the most dynamic in the world. The growth of the economy and population spurs demand. Due to this, property prices are constantly rising.

From 2011 to 2017, the average cost of residential real estate in Berlin has more than doubled to 3,795 euros / m².
The average rent for housing over the same period increased by 70% and reached 10.99 euro / m² per month.
The most expensive locations in Berlin are the four administrative districts, where the median purchase and rental price is higher than in the whole city: Mitte, Friedrichshain-Kreuzberg, Charlottenburg-Wilmersdorf and Pankow.

The lively Friedrichstraße shopping street runs through the entire central part of Berlin.
The lively Friedrichstraße shopping street passes through the entire central part of Berlin: the Mitte and Friedrichshain-Kreuzberg counties. Photo: Dl.mooz / Wikimedia
Buying an apartment in Berlin, you should not rely on quick rental income. Accommodation here is promising primarily in terms of its capitalization in the future. Real estate in the capital brings a reasonable rental income of 3-4% and grows in price every year.

In Berlin, non-residential real estate is also in demand. In 2017, the volume of investments in the commercial sector amounted to 4.9 billion euros. The demand for such property continues to increase, especially in the central areas. The rise in prices led to a decrease in rates of return to 3–6% per annum.

West Germany: liquid real estate market
West Germany is a commercial and industrial region with a well-developed infrastructure, low unemployment and high purchasing power of the population. For the real estate market in West Germany are characterized by:

high demand for purchase and rent;
fewer offers than in East Germany;
high rental rates: for housing – 12–15 euro / m² per month, for commercial properties – 35 euro / m²;
high real estate prices: an average of 4,000 euros / m²;
low yield: 3–6%.
Munich, Stuttgart, Frankfurt am Main, Düsseldorf, Hamburg – the largest centers of highly liquid real estate in the western region.

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