Why it is cheaper to buy property in Berlin than in other European capitals
- 5 years ago
Property prices continue to climb in London and in other major European cities, but Berlin has defied the trend.
While property prices have soared in European capital cities such as London and Paris, the city of Berlin remains an exception.
Twenty-five years ago Berlin’s east side was in a shabby state. But even after years of renovation and development, a square metre in the German capital costs between €2500 and €3500, about a third of prices in London or Paris.
So why is it still much cheaper to buy property in Berlin than other European capitals?
First, Germans, especially Berliners, tend to rent property over the course of their lives instead of buying. Just over 42% percent of German properties are owner occupied according to the German federal statistics office. But only 15% of Berliners are home owners. With such a low demand for buying property, sellers cannot be too brash with their prices.
Second, tenant co-operatives in Berlin are strong. Landlords cannot easily raise rents or evict bad tenants, which makes buying property to let less attractive as an investment.
Finally, Berliners earn 7% less per year than the German national average. This may be because the city does not attract big companies. Of the 30 biggest companies listed on the Frankfurt Stock Exchange that make up the benchmark DAX Index, not one is based in Berlin. As a result the city attracts fewer high-income professionals, meaning that their salaries don’t trickle down to the city’s service economies.
Although prices for standard apartments remain affordable, this may not last long. The development of new luxury apartments near the centre could drive up prices, making it more difficult in the future to find a bargain in Europe’s cool capital.
While property prices have soared in European capital cities such as London and Paris, the city of Berlin remains an exception.
Twenty-five years ago Berlin’s east side was in a shabby state. But even after years of renovation and development, a square metre in the German capital costs between €2500 and €3500, about a third of prices in London or Paris.
So why is it still much cheaper to buy property in Berlin than other European capitals?
First, Germans, especially Berliners, tend to rent property over the course of their lives instead of buying. Just over 42% percent of German properties are owner occupied according to the German federal statistics office. But only 15% of Berliners are home owners. With such a low demand for buying property, sellers cannot be too brash with their prices.
Second, tenant co-operatives in Berlin are strong. Landlords cannot easily raise rents or evict bad tenants, which makes buying property to let less attractive as an investment.
Finally, Berliners earn 7% less per year than the German national average. This may be because the city does not attract big companies. Of the 30 biggest companies listed on the Frankfurt Stock Exchange that make up the benchmark DAX Index, not one is based in Berlin. As a result the city attracts fewer high-income professionals, meaning that their salaries don’t trickle down to the city’s service economies.
Although prices for standard apartments remain affordable, this may not last long. The development of new luxury apartments near the centre could drive up prices, making it more difficult in the future to find a bargain in Europe’s cool capital.