2013 was a peak year for Berlin real estate

The German and especially the Berlin real estate market is doing as well in 2014 as in 2013.

by Peter Guthmann Published on:

Despite some frictions caused by political regulations, there are no signs for a deceleration on one side or a price bubble on the other side in the housing market in the German capital. The housing and investment market is driven by a continuously high demand for real estate of all kinds and additionally being pushed by low interest rates.

Price increases in 2014, especially in the residential real estate segment, are expected to reach approximately the results from 2013. The German and Berlin real estate price increases do not show any sign of a price bubble, especially since the price trend in both the historical and the international comparison comes rather moderate. The significant price increases in 2012 and 2013 were mostly caused by a substantial catch-up effect. At the same time, the building costs per square meter increased. Building companies have full order books and planning, waiting times are rising and the building authorities as well as architects offices are handling an increasing workload. “Rental brake” is a risk for the next years.

A main concern of the housing industry regarding the next years’ investment strategy is the so called “rental brake” that is planned by the grand coalition of the Social Democrats and Conservatives in Berlin. The rental brake is an instrument that cuts rents at a certain threshold. Basis for the calculation in Berlin is the so-called “Mietspiegel” (residential rental index) that is published by the Berlin Senate. If the rental brake is introduced, rents can only be raised to a threshold of 10 percent over the official rental index. Although the rental brake is not planned (so far) to be applied to new buildings, it undermines an essential element of a free market economy, demand and supply. Currently landlords in Berlin are allowed to increase rents by 15 percent every three years. Constructors and investors are waiting with retained tenseness how the new regulation will look like.