Berlin: Buying abroad

Conrad

Although I invest in Unit Trust ISAs and Pensions I am a firm believer in property.

Having sold my modest UK portfolio I set about looking for a new location.
After months of detailed research Ive found it - Berlin. A short flight, robust laws and a massively depressed market was too good a cocktail to ignore.

Despite being an ancient bohemian capital prices are typically 5 - 10x less than London, Dublin, Edinburgh Paris etc. This is due to a 10 year recession and the effects of communism.

I beleive the German economy will now emerge from recession after years of structural reform.

Its always best to buy when no - one else is.

However, having found my little secret I find many UK institutional investors have been qyietly buying up thousands of Berlin properties in the last 24 months.

No doubt many of you will consider this a 'hassle' investment. Its not the case. A few weeks work will hopefully provide me with significant capital growth.
BERLIN IS LONDON 15 YEARS AGO.

Go for new appartments or land. Im seeing land with building permission between e30000 - 100000 EUROS. Thats 10 x less than land prices in other capitals. Even cheaper in Pottsdam.

Happy hunitng.

Pal

Moved to the property board. You can try and talk the Berlin property market up over there.

dunstonh

European property funds have been on the rise in recent years. Personally, I would prefer to invest in a UK authorised fund that invests in property overseas than do it myself. A lot less hassle and risk.

What you are talking about doing is high risk and I am not sure the gain potential is on par with the risk taken. You could do very nicely out of it but it wouldnt be for me.

Pal

The problem with property funds is that you can't leverage the investment by borrowing to fund the purchase.

dunstonh

Hence the increased risk...

Conrad

dunstonh wrote:

What you are talking about doing is high risk

As you may be aware Ive worked in financial services over 15 years.

I recall IFAs dismissing B2L right throughout the ninities and instead advised people take out all manner of packaged investments and complex bonds, and many people lost a lot of money.
It always amazed me how, to a man, they dismissed property without a second thought.

I recall argueing that With Profit Bonds were a waste of time and very expensive. I used to be dismissed as a maverick.

In the end property massively outperformed packaged investments. Now its time to sell UK property and invest in places that are 10 x cheaper, ie Berlin.

So Dunstohn, Im not having a go at you, but I just want to unpick your language - "what you are talking about doing is high risk".

Again, this is what IFAs said when evryone was getting into B2L.

The point is, I dont consider it high risk. The Berlin market is massively cheaper than any other western nationals capital city. I beleive Berlin is London Leeds or Edinburgh 15 years ago. It wont drop so even if I make no gain I can sell and get my cash back, unlike packaged investments.

Wheres the risk? Its a 2 hour flight (lot less than a 5 hour drive to Liverpool when freind invest), my German lawyer speaks fluent English, letting is highly organised (short term lets are possible), the brand new appartments in the centre are £60000, the yields are 7 - 11%, or I buy land and simply hold.
Also the laws and regulatory framework give me piece of mind (unlike say Bulgaria).

For me this is minimal risk. If Edinburgh and Leeds and Lisbon and Manila can have a boom then so can Germany / Berlin. Humans are humans.

I also have SM and packaged investments but you need more than that to become financially independant at a youngish age.

I looked into packaged european property funds but concluded Id make a lot more money doing it myself.

Berlin is Harringey or Clapham 15 years ago, dont let it pass you by.

Ian_W

Private row? Or can anyone have a pop?

Dunston, why is overseas property purchase always "high risk" - seen you say that before with other threads? If you research your market properly both for revenue and potential capital growth then I'd accept it's "higher" risk - but far less boring than funds and far more likely to make a decent return cos there aren't as money fingers in the pie and pockets to be filled with fees. Is it simply that cutting out the middleman [IFA] makes it high risk in your eyes? If so, look on the bright side, Conrad won't be putting your indemnity costs up if his investment goes t*ts up!

Conrad, it's only anecdotal from German's who we were neighbours with at our holiday home in the Canaries, but they suggested that most German's [60+%] rent their primary residence and, if they can afford it, tend to buy holiday or retirement homes instead. There is no property owning "holly grail" mentality, unlike UK. Wouldn't this go some way to explaining lower property prices, as well as their long standing & well documented economic troubles? Appreciate it wouldn't affect revenue but may not provide boom type capital growth you suggest even with recovery. Any thoughts?

EDIT: "Humans are humans", hmm yes, but Germans are ... well Germans!!

GDB2222

I do own a property in Germany that is let out. Main problem is that rents are controlled, and tenants have security. (I mean those are problems from point of view of an investor.)

I would take the 11% rental yields with a pinch of salt, I am afraid, at least based on my property which is in Wiesbaden. You obviously need a local agent to take care of things for you, but no reason why you should not find one who speaks English - or you learn German.

BTW, why did you choose Germany and not, say, France or Austria? What conparisons have you made, may I ask?

Conrad

GDB2222 wrote:

I do own a property in Germany that is let out. Main problem is that rents are controlled, and tenants have security. (I mean those are problems from point of view of an investor.)

I would take the 11% rental yields with a pinch of salt, I am afraid, at least based on my property which is in Wiesbaden. You obviously need a local agent to take care of things for you, but no reason why you should not find one who speaks English - or you learn German.

BTW, why did you choose Germany and not, say, France or Austria? What conparisons have you made, may I ask?

Re - tennant security rules; Im looking at land (esp commercial land not affected by lack of appetite for home buying) or letting to corporates to get round such rules.
11% yields are taken with mug full of salt. More like 6%.

Why Germany? I chose Berlin as I believe once they climb out of recession land values will rise to become parity with other western cities.
Im looking at a plot of land right in Berlin central for e100000. Its big enough to build shops and flats upon so its 'utility use' is very high.

Even a plot in poxy Croatia I saw was e600000 in a small town!!!

Berlin is the German capital. Once Germans regain thier confidence (which is just a matter of time) capital values will soar.

Ive explored other parts of the world and each time held back only to then see the market double or more overnight, this time Im going for it.

I think Im sticking with commercial land rather than B2L properties.
Choosing a well positioned site with high utility value (once recession ends) should prove a useful investment.

GDB2222

Conrad wrote:

Im looking at a plot of land right in Berlin central for e100000. Its big enough to build shops and flats upon so its 'utility use' is very high.

That's absurdly cheap. Are you sure? Where's the catch? On the face of it, I'll take half a dozen at that price. How did you find this one?