“To buy or not to buy, that is the question” would say Shakespeare if he were moving to Berlin. If you ask that question to a German, they will most likely say they prefer to rent. If you ask an American or a Brit, they will lean toward home ownership as a sign of wealth and stability.
That leads us to the question, if I move to Berlin, should I rent or should I buy? Much depends on your financial circumstances, work situation and personal preferences. This article will analyze the pros and cons of each decision.
Reasons to Rent in Berlin
If you are an expat and this is your first time living in Berlin, you may want to rent for a period of time to familiarize yourself with the city. As in most big cities, not all areas offer the same amenities and market appeal. It takes time to familiarize yourself with each area. If you are renting and find that you do not like one area, you just simply move. That is not so easy if you own a property.
Another reason to rent in Berlin is that the initial costs are less. Moving is expensive. If you are starting a new job there may also be some cash flow concerns as well. Qualifying for a mortgage can be a challenge. Simply paying a monthly rent payment has a lot less stress.
If you are moving because of a job transfer, then timing is of the essence. Finding a property to rent is going to be much quicker than closing on a real estate purchase. A buyer must be willing and able to handle the delays that inevitably come with buying real estate.
Reasons to Buy in Berlin
By purchasing a property before moving to Berlin, you will only need to move once. If you rent for a time before buying, you will not only move multiple times (and who of us likes to move) but you will most likely need to switch the school your children attend. This can be traumatic to children and stressful for adults, to say the least.
Buying real estate is a good investment in the long term. Germany has been lagging behind in real estate appreciation since 1990. The German housing market, according to the OECD, is undervalued by 20%. Housing costs remain extremely inexpensive by international standards. It is poised to see strong price appreciation over the next decade. Buying a home places the investor in a nice position to reap hearty yields while enjoying a comfortable place to live.
Property values in Berlin are much lower than in other major European cities. This offers added appeal to purchasing your home rather than renting. Berlin apartments average about €2,000 m2 a rate that is less than one-third of the going rate in Paris and less than a quarter of London’s values.
Another consideration in favor of a purchase is that rents are rising. As real estate values increase, you are going to see an increase in rental rates. Though rents are very competitive in comparison with other locations in Europe, a steady increase in rents could shift the balance considerably. Purchasing a property while prices are low and locking in a loan for 20 years is a good way to stave off an increase in housing costs.
The Final Decision is…
Honestly, this weighty decision must be based on the needs of the individual. Renting does have benefits over the short term. For example, if you frequently move due to your job, it may make more sense to rent. On the other hand, if you buy and then must move, you can always rent out the unit to cover your expenses and then capitalize on the value appreciation.
If however, you are planning on staying in Berlin for the long-term, there are good reasons to consider buying rather than renting. Berlin is poised to see higher than average value gains in the real estate sector. Buying a property now will secure a cost of living while watching a growth in equity yield while in the comfort of your own home.
