Billionaire investor George Soros said Berlin homes are at risk of becoming overvalued because demand is being fueled by buyers seeking a safe place to put their money amid the European sovereign-debt crisis.
“You have a serious danger of a housing bubble developing in Berlin,” he said at a panel discussion yesterday in the German capital. “It has a lot to do with the flight of capital and negative real interest rates.”
Private-equity firms, affluent individuals and insurance companies are buying Berlin apartments, attracted by lower prices than other European cities, a stable economy and a dearth of alternatives as central banks keep interest rates at record lows. Apartment prices in Berlin jumped about 17 percent in the past 12 months, compared with a 7 percent increase nationwide, according to data compiled by ImmobilienScout 24.
The gains aren’t justified, said Steffen Sebastian, head of the Real Estate Institute at Regensburg University.
“International investors come here because they expect the capital premium, but Berlin is not like other European capitals,” he said. Prices in Berlin won’t reach Paris or London levels because Berlin doesn’t have a concentration of banks or other major industries, Sebastian said.
Investors are on pace to buy about 7.5 billion euros of Berlin homes this year, compared with 5.5 billion euros in 2011, according to data compiled by broker CBRE Group Inc.
Homes in Berlin still cost about a third of those in Paris and a quarter of the price in London, according to data compiled by Chicago-based Jones Lang LaSalle Inc. (JLL)
The Cologne Institute for Economic Research said in August Berlin is the only German city where supply has climbed faster than demand. This could indicate that apartment prices in the German capital “are a bit overheated,” the Institute’s head Michael Huether said at a press conference.
GSW Immobilien AG (GIB), a Berlin-based owner of 53,000 apartments, has gained 34 percent in Frankfurt trading this year as investors tried to profit from rising residential-property values.
Soros, 82, said German-led austerity demands worsen the debt crisis and risk pushing Germany into a depression that’s already taking hold of the euro area’s rim. The founder of Soros Fund Management LLC has a net worth of $21.9 billion and is the world’s 24th-wealthiest person, according to the Bloomberg Billionaires Index.