After fifteen years of stagnation, the Berlin property market is finally starting to stir as foreign investors snap up property in the city, experts have said.

According to property investment firm Assetz, canny investors are attracted to Berlin by low start-up costs and commercial office space which is much cheaper than in both Munich and Frankfurt.

Berlin, the capital of Germany, has recently seen huge multi-billion pound investments in property from UK and European investment banks such as Terra Firma, which are buying up vast blocks of apartments.

In addition, leading multinationals such as Sony and DaimlerChrysler have set up headquarters in the city.

This injection of investment has kick-started property market growth - 2006 saw a tentative 0.2 per cent rise in prices after losses in the previous year.

The German economy as a whole expanded by 2.5 per cent in 2006, the fastest growth since 2000, and looks set to increase by a further 2.5 per cent in 2007.

Also, unemployment in Berlin fell to its lowest level in four years in November 2006, and according to Assetz, this trend is set to continue.

Stuart Law, Assetz: "Germany is a new market for most overseas investors and it will take time to develop, so I would advise taking a ten-year view rather than expecting instant returns."

The property group believes it will be the influx of foreign investors that will in time help to drive a growing preference for home ownership that has not been witnessed before in the city.

Government figures show that just 14 per cent of the Berlin population own their own home.

Stuart Law, chief executive of Assetz, said: "Germany is a new market for most overseas investors and it will take time to develop, so I would advise taking a ten-year view rather than expecting instant returns.

"However, the growth triggers investors have been waiting for are starting to occur, with prices in some residential areas such as Charlottenburg, Wilmersdorf and Shoneberg seeing small rises after years of declining or static prices.

"It is a unique situation to have property prices in a capital, as they are in Berlin, which are half those of the surrounding cities of Munich and Frankfurt.

"With economic conditions remaining favourable, it is inevitable that the Berlin market will catch up, as the UK-led phenomenon of buying your own home continues to spread rapidly across Europe."