Foreign Luxury Buyers Find a Home in Berlin

Berlin, the capital of Europe’s strongest economy, is seeing notable growth in its luxury residential market, fueled in part by foreign buyers. Foreigners now account for nearly 30% of high-end property buyers in Berlin compared with 10% a decade ago, according to international real-estate brokerage Engel & Völkers. The sale of luxury property has nearly doubled in the last five years in the city. Brokers say the relatively weak appetite for prime property in the domestic segment is a reflection of local culture and preferences. “Germans don’t like it very shiny or expensive. German clientele is rather conservative,” says Sebastian Fischer, managing director of Engel & Völkers. “Foreigners like to show what they have. The clientele has totally changed in the last five years. Just a few years ago, only a handful of buildings had a concierge, but almost every luxury building has that now. Gym and spa used to completely not be normal, but is fairly common now.”

High-end projects with star architects reflect the changing face of the buyers in the luxury market, Mr. Fischer said. Among these projects are the Palais Varnhagen, the work of architect David Chipperfield, located in the Französische Strasse in Berlin-Mitte, a side street of Friedrichstrasse, an area well known for its boutiques and high-end dining. It is within walking distance of Brandenburg Gate and Checkpoint Charlie, the well-known crossing point during the Cold War between East and West Berlin. The development features penthouses, galleries, roof terraces and panoramic views of Berlin. Also in the Mitte is Sapphire, star architect Daniel Libeskind’s first residential project in Europe. The building resembles a cut gem, reflecting Libeskind’s signature style of rough edges. The Mitte, along with Charlottenburg and the side streets of Kurfürstendamm, are among top locations for prime property in Berlin, according to Engel & Völkers. Russians and Chinese are among leading investors in high-end property in the city.

The weakness of the euro has also helped fuel foreign investment from the U.S. and reduced European buying in the past year. But the overall appeal of the German capital stems from a combination of other factors. Famously described as “poor but sexy” by former Berlin mayor Klaus Wowereit, the cool quotient of this once-divided city has been on the rise for a number of years. “The economy is a safe haven within Europe, Germany is dynamic, but within it, Berlin is the most attractive city because it reminds most people of New York or Paris or London with an attractive arts and cultural set up,” Fischer said. “In recent years, Berlin has also emerged as the start-up hub of Europe with more corporations founded here than in London.” The Emerging Trends in Real Estate Europe 2015 study published jointly by Urban Land Institute and PwC ranked Berlin as the best city in Europe for real estate investment and development. Despite strong fundamentals, the total market for luxury property in Berlin remains small. Only 5.2% of all transactions exceeded purchase prices higher than €1 million ($1.13 million) and only 1.4% exceeded purchase prices higher than €2 million ($2.26 million) in 2014. The pricing of prime property at the lower end relative to major cities around the world, particularly Europe, has helped draw investors, though they have been steadily rising for the past decade. “Average property prices remain significantly lower compared to the rest of the top European capitals, but they have risen by approximately 33% from 2003 to 2011,” according to Anita Gärtner, managing partner at Berlin Sotheby´s International Realty. “You can find new development projects in the center of the city, with exclusive and top-of-the-line-fittings, from just €3,300 per square meter ($370 per square foot)." Similar properties in London are priced at $4,444 per square foot, and at $1,600 per square foot in Paris, according to Knight Frank's 2015 Wealth Report.