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Berlin buffs up its appeal as a post-Brexit haven – Financial Times

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Berlin, long famous as Europe’s capital of hipsters, students and semi-retired rock stars, is being reborn as a haunt of the super-rich. When David Bowie moved to West Berlin for three years in the 1970s, the city was awash with cheap housing and a thriving underground music scene.

Today, Schöneberg, the district where Bowie lived, and neighbouring Kreuzberg, popular with Turkish immigrants, are unrecognisable. The punks and revolutionaries have been replaced by young professionals, and squats have given way to penthouses and artisanal coffeehouses even as graffiti decries the area’s gentrification.

Germany is home to more than 13,000 ultra-wealthy individuals (those with a net worth above $30m), according to Wealth-X, the research company which tracks the activities of the super-rich, up almost 5 per cent compared with 2016. In terms of appeal to the wealthy, its research ranks Berlin as the 11th most attractive place to invest.

“With Brexit looming, Berlin is seen an opportunist investment for sovereign wealth and big-name investors from all over the world,” says Winston Chesterfield, director of Wealth-X Custom Research.

There has been a steady expansion of top-end hotel and apartment developments across the city in the past two decades. Berlin’s Hotel Adlon, host to Marlene Dietrich, Charlie Chaplin and John D Rockefeller, reopened in 1997, since when it has been joined by a Ritz-Carlton (2004) and a Waldorf Astoria (2013). In 2012, the five-star Das Stue opened in the former Danish embassy.

Berlin is still a centre for tech start-ups and international students © Getty

While the super-rich now have plenty of places to stay, they are also on the hunt for investment opportunities. Sovereign wealth funds are close behind.

“The equity flooding the German real estate market comes from everywhere,” says Gerhard Lehner, head of fund management Europe at Savills’ investment management arm. “Obviously for foreign money, especially from Asia, Berlin is an incredibly attractive market for investment.”

For foreign money, especially from Asia, Berlin is an incredibly attractive market

Berlin’s Sony Centre was acquired last month for close to €1.1bn by investors led by an Canadian pension fund, in one of the largest deals in the European property market this year. Savills sold the 1990s Potsdamer Platz complex, which includes 267,000 sq m of retail space, to Brookfield Property Partners and Korean Investment Corp for €1.3bn at the beginning of 2016. “Berlin has become Germany’s most dynamic city, playing in the same league as London, Paris and Amsterdam,” Mr Lehner says.

A recent South China Morning Post headline proclaimed: “Now is the time to invest in Berlin property”.

Total property investment in Berlin rose to €5.9bn in the year to September, according to property advisers JLL, up by 74 per cent the same period in the previous year. In the third quarter, the city registered its highest rate of office take-up for the past 10 years, it adds.

The attractions are manifest. Berlin is still a centre for tech start-ups and international students, with low property prices compared with other European capitals — though prices have picked up strongly in recent years, says Wealth-X. Rents are rising at 7-12 per cent a year and, with a relatively small housing stock, property experts expect this trend to continue for several years.

In the wake of Brexit, Berlin is expected to be one of the main beneficiaries for international capital seeking a home © Getty

“Germany is widely regarded as the new haven for capital,” notes a report from PwC, the consultancy. “The five leading cities for overall investment and development prospects in 2017 are Berlin, followed by Hamburg, Frankfurt, Dublin and Munich.” The report cited one leading investor, who said: “Berlin is a big city where we see most growth over the next 10 years.”

Yet buyers remain keenly aware of potential bargains, says Hugh Wade-Jones, group managing director of mortgage broker Enness. “We’ve seen a huge jump in interest in foreign investors in Berlin,” he says. “Historically it’s been viewed as undervalued, which first drove the interest in the area, initially from locals as rents started to rise and buying made financial sense, but latterly with foreign investors as people looked away from the traditional European hotspots for value.”

Add ultra-low European interest rates and German financial security, and the city is very much “en vogue”, adds Mr Wade-Jones. “One of the top-level headhunters I work with in Monaco is currently solely focused on Berlin, such is the demand for top-end talent there.”

With London, Europe’s busiest property market, facing turmoil in the wake of Brexit, Berlin is expected to be one of the main beneficiaries for international capital seeking a home.

“At present, interest is growing from the US and Turkey. Berlin is perceived as a safe harbour in these countries,” says a spokesman for Ziegert, a local property agent. “This also applies to investments from Asia and the Middle East. Chinese buyers are growing steadily and are looking for high-quality new developments in [central area] Berlin Mitte. The demand from Singapore has more than doubled during the past year, and buyers from the United Arab Emirates are also strongly represented in Berlin.”

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