Economics

Why Berlin looks set to become hot property

It's been 26 years since the wall came down and Berlin’s economy is undergoing dynamic growth. As the demand for housing soars, the real estate market is witnessing buoyant residential development activity.

16 November 2016

City: Berlin, Germany

Index ranking: 63

Share of national economy: 4%1

Strengths

  • Berlin is one of Europe’s most dynamic destinations for tech companies. Brexit means it could attract start-ups which previously would have gone to London
  • The city is also benefiting from growth in tourism and the continuing transfer of government ministries from other parts of Germany

Weaknesses

  • There is still significant long-term unemployment

Why Berlin is a global city

The index seeks to identify those cities that have the most potential from a real estate perspective. At number 63 in the Schroders Global Cities Index, Berlin is outside the top 30.  But it has some serious potential, thanks to its status as one of Europe’s fastest growing destinations for start-ups and technology companies.

Berlin’s tech scene is booming thanks to its strong universities, low cost of living and bohemian culture. The main clusters are in former east Berlin, around the iconic Alexanderplatz and to the east in Friedrickshain- Kreuzberg. These areas have attracted both US majors such as Amazon and Google and home grown start-ups  such as Zalando, Rocket Internet, Delivery Hero and SoundCloud.    

According to Ernst & Young, Berlin’s startups collected €2.4 billion in venture capital last year. That’s more than the total among startups in London - and Paris and Stockholm2

The country is eager for more. A quirky advertising scheme after the Brexit vote saw a van driving around the streets of east London brandishing the slogan “Dear startups, Keep calm and move to Berlin”.

In addition, Berlin is benefiting from a steady increase in tourism and the continuing transfer of government ministries from other parts of Germany.  The long delayed new airport should finally be open in 2018.

Our assessment

The future looks bright for Berlin. Following German reunification, Berlin is once again in the heart of Europe and has established itself as an international centre of culture and technology.  Oxford Economics expects Berlin to be one of the fastest growing cities in Germany over the five years to 20213.

Crucially, this growth is boosting the residential sector. CBRE4 reports that there is a sharp rise in demand for housing in the city, being driven by increases in population and household numbers, as well as disposable income.   Between the end of 2010 and the end of 2015, the total number of inhabitants in the city rose by 6 per cent to 3.5 million.   As a result of the growing population, the number of households in Berlin is rising by more than 20,000 per year. In 2011, Berlin’s Senate expected the population to rise by approximately 250,000 by 2030.

However, some argue this is too conservative. While construction activity is on the up, the supply of housing cannot keep pace with this growing demand. The potential for real estate growth is significant.


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  1. Federal Statistical Office of Germany, 2015
  2. Source: Ernst & Young (http://www.bloomberg.com/news/articles/2016-07-28/berlin-s-startup-hub-wants-to-prove-it-s-more-than-just-a-scene)
  3. Source: Oxford Economics,  September 2016
  4. Source: “Housing Market Report Germany 2016” – CBRE

 

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