News this week German insurance giant Allianz reports Q4 2010 showed an increase of 11% in profits, partly due to increased income from property, and from Germany’s Bundesbank that Germany has bucked the European trend of falling prices and actually seen prices rise, it’s reported that apartment prices in some cities have risen as much as 5% in 2010, as reported in the Financial Times, one of the reasons given in the rise in the monthly report for February 2011 were pretty good fixed 10 year interest rates of as low as 3.6% in some cases, with interest rate rises inevitable at some point that’s going to have an effect on 2100 prices…that’s all well for owner occupiers of apartment but what about investors with buy to let’s?
These investors fall into two camps, firstly people who have purchased single apartments as buy to let investment with a single source of income from the property so little scope to optimize the rent, the second is more the professional investor who has purchased a building full of apartments, that’s a very different opportunity, with multi apartments in a building there is plenty of scope to optimize the potential of a building, the report compares 2005 as it’s datum to current values in 2011, so how do buildings compare to single apartments?
A building of say 20 apartments in 2005 in Neukolln would have had tenants renting for between €3m2 and €5m2 so an average of about €4m2, 20110 is a very different picture, trendy Neukolln has rents of more like €6m2 – €10m2 on average for a good apartment being about €8m2 so double in 6 years, and in terms of property price increases that’s obviously had an impact, although it’s still possible to source buildings with rents around €5m as tenants who have been in a property for say 10 or more years will be paying about half the current open market rental value or less.
So it’s not only owner occupier properties that have increased in value in Berlin, and with banks still happy to lend up to 85% of the purchase price of a property to overseas investors, with net yields in the 8% range, loans with 10 years fixed rates it’s a very stable and safe city to invest in, tenants even pay all the service charges for a building you purchase, worth peeping over the wall from the West to check out the East side of Berlin’s vibrant property market.
John Aitken
