It’s liberal, young and happening, and it’s cheap to live there ­ Berlin has been steadily building up a reputation as the place to be ever since the fall of its infamous wall. Today the city is attracting foreign buyers like never before, reports Shane McGinley

After a lengthy stay in Berlin, my friend Danielle Ffrench described the German capital to me as a "city that gives you a taste of history that cannot be forgotten and a future that can only be followed".

"It’s young, lively and with a great beating pulse of youth," she scribbled enthusiastically on a postcard. And, just as I was thinking that the late-night techno clubs or the cultural overload had taken its toll on her student mind, she fi nished with "oh yeah… and kebabs that are to die for!".

Berlin has always attracted the world’s attention, for good reasons and bad ­ from the years of Nazi rule and later the eastern part of the city’s Soviet-Communist years, to John F Kennedy’s famous declaration there in June 1963 "Ich bin ein Berliner" and the post-1989 party scene. It has long been a focal point for European politics, culture and science and its residents include people from more than 180 countries, a point that was highlighted during the 2006 FIFA World Cup.

But the city is not without its problems. Since reunifi cation in 1989, Berlin has accrued a large amount of debt, with the present defi cit standing at 1.8 billion ­ more than any other German city. Yet for keen property watchers that’s all good, because house prices are low and in some areas even stagnant. Savvy investors have been keen to invest, maintaining that what goes down must come up, and when it does they can ride it all the way to a nice profi t. The local government in Berlin has also invested 75 billion in rebuilding the city, in an effort to get it back on its fi nancial feet.

The second-most populous city in the EU, Berlin is often called "Europe’s New York", because of its lively nightclub scene and the feeling that it is in a state of constant change and reinvention. It’s a "cool" city, for those who care about such things. Each year, Berlin hosts the Art Forum, an international contemporary art fair, and there’s also the annual Popkomm, Europe’s largest music-industry convention. Although the massive techno Love Parade no longer takes place in Berlin, its rival the F**kparade is still going strong, and gets young folk out to demonstrate "against the destruction of the club scene".

Everyone cares about music in Berlin. The German capital is extremely liberal, and features Europe’s biggest political demonstration for the legalisation of hemp, the Hanfparade. On top of that, prostitution is legal in Germany, too, and you can’t get much more liberal than that.

Numerous global companies, including Universal Music Group and MTV, have made Berlin their European base. It was listed as a Unesco City of Design in 2005 and has a large population of young Germans eager to capture the zeitgeist. All of which has made it popular with global celebrities, too. Brad Pitt and Angelina Jolie are said to own property there, and other fans include Tom Cruise and Matt Damon. But they are not alone, as last year more than 7 million tourists visited Berlin, making it the third most-visited city in Europe.

Interestingly, only 12% of Berliners are home-owners, as Germans don’t have the same cultural urgency to get on the property market as other Europeans. On the plus side for investors, this means there are a lot of people looking to rent good accommodation if you buy in the right area. On the downside, however, it means that if you buy and then wish to sell your property in a few years the market is not as fl uid as in other countries because there is less demand.

The major point to watch out for when buying in Berlin is whether the property you want has a sitting tenant. If it does, what is their record and are they paying rent? As renting is so common, tenancy laws are very much in favour of tenants, so you could end up buying a beautiful property, thinking you’ll get rent and then fi nd out the occupant has not been paying and that you can’t get rid of them.

Take five old houses…

So you want to buy in Berlin? Do you also fancy a project to get your teeth into? You could go for a swanky modern-style apartment, but these are expensive — so why not pull your sleeves up and join the present trend of buying a graceful old property that needs a modern touch?

With prices in Berlin usually about a third of what they are in cities like London or Paris — and rising by about 20% over the last year and a half — experts like those at Jones Lang LaSalle recommend that the way ahead is to buy a beautiful old gothic-style property and renovate it.

As unemployment falls and the German economy starts going in the right direction again, the trend is also going to be for bigger apartments. Jones Lang LaSalle has looked into their real estate crystal ball and believes property sizes will increase by 14% until 2030, with demand for living space rising faster in the east part of Germany.

Or, as Norbert Klink, from local agent Norenva GmbH, suggests — if you have deep pockets you could buy a whole block of 10 apartments in Leipzig, an hour by train south of Berlin, for 450,000

GRUNOWSRASSE, PANKOW

From 43,000

33m 2 studios in a green tree-lined area, with rental yields of 5.3%. Built in 1905 and updated in 1997, the building has a mix of new facilities and original period features, which have been well maintained by the present tenant.

www.davidstanleyredfern.com

CHARLOTTENBURG

From 77,500

Built in 1906 it is in excellent condition, as it was already refurbished in the 1990s and has grand historical features, stucco ceilings and wooden doors. The properties are located in one of the most sought-after upmarket areas and 10 minutes from the Kurfürstendamm, Berlin’s famous shopping street. www.norenva.com

PRENZLAUER BERG

From: 44,152

Period building built in 1990 and modernised in 1998, with gas heating, glazed wooden windows and restored original wooden parquet or wood laminated fl oors. Close to public transport and amenities, has a sitting tenant and yield of about 5.5%

FRITSCHESTRASSE (CHARLOTTENBURG)

From 97,920

The tree-lined street known as the "Champs-Elysées of Berlin", the vibrant area has many elegant Wilhelmien residences, with existing tenants and rental income of up to 4.7%. A five-storey building constructed in 1909, it was modernised in 2005 with an upgraded façade, roof, stairs and attic.

www.imoinvest.com

MOCKERNSTRASSE, KREUZBERG

From 82,500

Popular with the German upper-middle-class in the late 19th century, this area is southwest of the central district. The centre of Berlin bohemian life the 1960s, its revival has been compared with Notting Hill 25 years ago. Built in 1898, the 28 units were upgraded recently and all apartments have terraces or balconies. www.aylesford.com

Facts and figures on Berlin

AREA: 892 km

POPULATION: 3.45 million

CURRENCY: eur

COST OF LIVING: 72nd in the world (Worldwide Cost of Living Survey).

HOUSE PRICES: across Germany prices grew by 1.2% in 2006.

RENTAL YIELDS: Berlin apartments now yield an average of 6.2%.

AGENTS: the National Association of Estate Agents in the UK has 10,000 agents in Germany, or you can source agents through the Association of International Property Professionals (www. aipp.org.uk) and Federation of Overseas Property Developers Agents and Consultants (www.fopdac.com).

BUYING TIPS: your agent or makler can represent other prospective bidders in an auction, so be cautious. The documents are in German, so hire a translator. Total fees on top of the purchase price usually work out about 10-12%.

TAXES: tax on rental income is high at 25%, but Capital Gains Tax is applied only to properties owned for less than 10 years.

AVERAGE PRICES: from 1,250 per m 2 on average, but more than double that in premium areas.

The Bavarian retreat

There is a fi zzy drink commercial on European TV screens at the moment, featuring a couple who go on a two-week holiday and decide to turn it into a year-long break ­ "do your thing", the actors proclaim happily.

In 2004, Margaret Leach and Martin Holborrow decided to "do their thing" and went looking for a holiday home in Central Europe. Now, only a few years later, they have a thriving business and are even thinking of swapping their home on the Welsh Borders for a permanent hideaway in the Bavarian countryside.

The couple own a publishing company producing business reports on Eastern Europe, and quickly began to tire of trekking back and forth across the European mainland. Margaret speaks fl uent German so having decided a holiday home was what they needed, a quick online search found their perfect retreat in the Bavarian Forest National Park. They had swapped one border address for another, as their holiday house was on the Czech/German border.

The buying process was simple ­ unlike the poker standoff Margaret had found trying to buy in the UK. In Germany once you decide to sell, the money and paperwork is exchanged and the deal is done, no strings attached.

The pair fell in love with the area and decided to utilise their property a bit more by renovating and turning it into a rental home for tourists. The house had previously been a B&B so didn’t need drastic work. They used local tradesmen and suppliers and were impressed with the results. They were even more impressed when the property was fully booked during the fi rst summer from May to September and during Christmas. The extra income also helped cover the 100,000 they spent buying the house

After their fi rst successful experience, Martin and Margaret have bought another property. And, as they are in their 50s, have not ruled out retiring to Germany in the future.

"It is very relaxed, the cost of living is much lower, the people are very friendly and you are in the middle of Europe so it is easy to get to places," says Margaret. When they fi rst bought the house they were "the only foreigners in the village", she says, but local people accepted them quickly ­ especially once they realised they were investing in a small business in the area, and were there for the long term. Visit www.holidaylettings.co.uk/17154

 

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