Ronan McMahon

Buy Berlin--With Strong Rental Yields and Prices Set to Rise

I have been following the property market in Berlin for almost two years, and recently I went on a scouting trip to take a more serious look.

While property prices across Europe and the rest of the world roared ahead in the past decade, the market in Berlin stagnated. In fact, prices slipped by 40% in real terms through the '90s and first part of this decade. And 85% of Berliners rent.

Germany today is seeing strong growth in economic output. With a population of 3.4 million, Berlin is the third biggest tourism city in Europe. The city's industries include media, IT, music, advertising, design, life sciences, and micro technologies. (Multinationals such as eBay, Sony, and Daimler Chrysler are choosing Berlin for their European headquarters.) Berlin is strategically positioned at the geographic and infrastructure heart of Europe and is Germany's administrative center.

With Germany's top universities, Berlin produces a huge pool of highly skilled workers every year. Employment growth will continue to come from services and tourism and its labor force has increased in the past decade. The city is also attracting highly skilled emigrants. These workers will fuel demand for real estate. That can only mean one thing: Property prices will go up.

In a leafy area in central Berlin, I viewed a 40-square-meter unit&on the market for $63,580. A studio like this would rent for $400 per month.

In one of Berlin's most desirable addresses, I saw a 66-square-meter, two-bedroom apartment with an asking price of $116,000. This would rent for $675 per month. Both apartments gross you a rental yield in the region of 7%. Figure on a net yield of 5.5% after expenses...almost double what you would expect in other European capital cities like London or Paris. Furthermore, I expect prices to grow by more than 10% each year in desirable areas like this for the next three years.

A 32-square-meter studio is for sale near the largest park in Berlin comes furnished and has a fitted kitchen and cellar. Price: $59,278. Expected rental income: 9%.

The rental market is strong and stable--85% of Berliners rent. This is set to change, however. When prices were falling there was no incentive to buy; now that prices are on the rise, Berliners are starting to buy property here.

The rental market is strong and stable--85% of Berliners rent. This is set to change, however. When prices were falling there was no incentive to buy; now that prices are on the rise, Berliners are starting to buy property here.

If using Google look for Apartments for Sale, Berlin, Germany

Ronan McMahon