Berlin housing market 2020: how the rent cap and Covid-19 are shaping rents and supply

The first half of 2020 marked a turning point for owners and investors in Berlin's housing market. Two events define the market trend: the introduction of the rent cap in February and the Covid-19 lockdown from March. This interim review analyses the impact on listing volumes and rental prices.

Rent cap triggers immediate supply drop

The introduction of Berlin's rent cap on 23 February 2020 triggered a swift market reaction. As early as calendar week 9, right after the law took effect and still before the Covid-19 restrictions, new rental listings fell by more than 40 per cent. Many owners are holding apartments off the market for now, waiting to see how the legal and economic situation develops or considering alternatives such as selling.

Covid-19 lockdown deepens the shortage

From mid-March, the Covid-19 pandemic hit an already strained rental market. Contact restrictions and the de facto ban on apartment viewings caused a further collapse in listings. In calendar weeks 12 and 13, listing volumes hit an all-time low. Since May, the situation has been slowly normalising, yet weekly new listings remain well below the prior year. The market for apartments in Berlin is thinner on the supply side than it has been in years.

Sell rather than let?

Owners face the question of whether re-letting under rent cap conditions still makes economic sense. The alternative: selling at currently high purchase prices. The data shows that while rental listings have dropped sharply, sales listings have remained stable at prior-year levels. A massive shift from rental to sales listings is not yet statistically detectable. But the stability of sales figures alongside the collapse in rental ads suggests that the sale option is growing more attractive for some owners.

Asking rents under pressure

Advertised new-lease rents have stagnated since the start of the year. The average asking rent stands at around 11.50 EUR/sqm. The 11 to 14 euro per square metre segment is under particular pressure. In locations such as Mitte, the gap between statutory ceilings and previously achievable market rents is especially wide. The spread in asking rents remains broad, however, as many landlords are signing leases with a dual rent (rent-cap rent and civil-code rent) to protect themselves in case the law is later struck down by the Federal Constitutional Court.