To Buy In... Berlin

If you want to bag yourself a bargain in an up-and-coming city, Berlin is the place to look, says property guru Jonny Benarr

THE PLACE

Some 135 million people visited Berlin in 2010 and it's no wonder given the city's unique and vibrant energy. This is evident in everything from the eclectic architecture to the open, friendly attitude of its people.

Germany is also a financial powerhouse and one of the most stable economies in the world. An estimated 84% of the city's population rent rather than own. And, compared with capitals like London and Paris where you can expect to pay in excess of €10,000 per m2, in Berlin that figure is less than €3,000 per m2. Low-cost property combined with high rental demand equals an investor's dream.

THE PROFESSIONALS

Darrell Smith from Buy Berlin (www.buyberlin.co.uk) is an estate agent and property finder dealing with both residential and commercial sales and lettings.

"Although compared with other European capitals Berlin is considered cheap, that is not going to be the case for long," he says. "Historically, Berliners were happy to rent long-term, and many still will be, but with increasing rental costs they are switching on to the fact that it can be cheaper to have a mortgage."

THE PROCESS

"The first thing a buyer should do is familiarise themselves with the city's different areas," says Dr Esfandiar Khorrami, a Berlin-based lawyer with Bottermann Khorrami (www.bk-law.de).

"It all comes down to micro-locations - you turn a corner and suddenly you are in an area with a different price value and feel. While agents might try to sell a particular area for personal gain, a banker or lawyer may be more insightful, independent, and be able to provide a more personal view on location," he says.

Once you have successfully negotiated a price (handled by the agent) you then instruct a notary to act on your behalf, by signing a mandate and paying them the costs associated with the purchase, which will be about 12%. Note that the buyer pays the agent's fees, because it is free for a homeowner to sell their property. The process can take anywhere from four weeks to four months, depending on the needs of the parties involved.

Although the final step of having your name registered with the land registry can take several months after completion, you are still the legal owner once the purchase payment has been made.

Presently, non-German residents can expect to acquire a mortgage for 50% of the property price, increasing to 80-90% for residents and those with good credit. For investment purchases, around 70% of the financing can be acquired through a mortgage, 70-80% if you want to buy a block of apartments.

"Take advantage of local knowledge and local expertise and do not try to do it all yourself. And don't waste too many trips coming to Berlin for administrative purposes," says Khorrami. Although I don't think there is such a thing as a wasted trip to Berlin!

On the market

Entry level

WHAT? A fully renovated two-bedroom apartment, which includes a new bathroom and wood laminate flooring throughout. It's located on the second floor and looks onto a pleasant courtyard.
WHERE? On Ostseestrasse in Prenzlauer Berg, one of the trendiest areas in the city at the moment. Full of artists and students, it has a particularly bohemian vibe and a popular bar scene. Half of the area's population is aged between 25 and 45, and Prenzlauer Berg is regarded as a vibrant neighbourhoods for creatives.
HOW MUCH? A steal at only €120,000.
CAN I RENT IT OUT? The property is currently tenanted and generates a yield of 4.46% a year. Tenants tend to be young, single professionals, of which there are many.
WILL IT MAKE ME RICH? Extrapolating from recent growth, you could expect this property to increase in value by 50% to 75% over the next 5 to 10 years. At present it is only €1,486 per m2.

Mid-level

WHAT? A four-bedroom duplex apartment located on the fourth floor of a block. This place is finished to a high standard, including wood flooring and a balcony offering a fantastic view of the city. The building has an elevator.
WHERE? Friedrichshain, one of Berlin's most fashionable areas and home to numerous design and media companies. It has fast and frequent transport links, tree-lined avenues and popular schools, along with a thriving nightlife scene.
HOW MUCH? On the market for an unusually great-value price of €251,500.
CAN I RENT IT OUT? Yes. It currently commands an annual rent of €11,453 that equates to a yield of approximately 4.55%.
WILL IT MAKE ME RICH? Quite possibly, and maybe quicker than you think. Split it into two two-bedroom apartments that are both worth about €170,000 and there you have €90,000 gross profit straight away.

Executive level

WHAT? An awesome one-bedroom duplex loft apartment that is both big and beautiful, weighing in at 174m2, and offering huge picture windows that create a wonderfully bright living space. There's a stylish kitchen and bathroom, hardwood floors, and unique Prussian vaulted ceilings that ensure the spirit of the last century lives on.
WHERE? Directly across from the Landwehr Canal on Paul-Lincke-Höfe in Friedrichshain-Kreuzberg, a family friendly and peaceful part of the city. Small parks and boules pitches are evident alongside fine restaurants, idyllic beer gardens and a few trendy nightspots too.
HOW MUCH? At €450,000 it may seem expensive, but it is still only €2,586 per m2.Vacant properties command a higher asking price than tenanted ones, because new rental terms can be established to maximise yield.
CAN I RENT IT OUT? Similar properties will rent out at €2,000 a month.
WILL IT MAKE ME RICH? Exclusive loft apartments like this will always be in demand. Capital appreciation in this neighbourhood is strong and a five-year view could reward you with 25% growth.

If money's no object

WHAT? A superb colonial villa dating back to 1909 that has been lovingly restored using the finest of materials. The property boasts four large bedrooms, with the master having a large veranda from which to enjoy the beautiful gardens. Back inside, you have your very own sauna, a high-quality kitchen and bathrooms with marble sinks.
WHERE? Located on Matterhornstrasse in Zehlendorf, the traditionally exclusive residential area of Berlin. From the Wannsee Lake to the Grunewald forest, this is the ultimate location for Berliners as you have the best of nature on your doorstep while the fantastic traffic links ensure you get to the best of the shopping on Kurfürstendamm in less than 20 minutes.
HOW MUCH? Even in one of the most sought-after areas in the city you will only be required to part with €1,090,000 - an absolute bargain compared with its Continental counterparts.
CAN I RENT IT OUT? There is not much of a rental market for high-end properties such as this one. If you buy this, live in it and enjoy it.
WILL IT MAKE ME RICH? At less than €3,000 per m2 it has a long way to go to catch up with its European counterparts, but as more savvy Germans (and other investors) descend on the city for its charm, sophistication and stability, the property prices are expected to rise greatly over the next 10 years.

Fast facts

GETTING THERE
Berlin (Schönefeld) airport is just 20km from Berlin's centre and has excellent bus and rail services daily, and a journey time of about 45 minutes. Alternatively, book a hire car from Hertz (www.hertz.com), Ryanair's exclusive rental partner, offering special rates when you book your flight.

STAYING THERE
Our writer stayed at the Schlosshotel (www.schlosshotelberlin.com) which has a unique Grunewald forest location and boasts Karl Lagerfeld-designed interiors. The 53 rooms here are all unique and the Schlosshotel's facilities include a large spa and wellness area, complete with Finnish sauna. The conservatory has been converted into a top restaurant, called Le Jardin.