Berlin property market 2022: outlook for investors

2021 shook up the Berlin property market considerably. Two central instruments of the red-red-green coalition's housing policy failed in court. At the same time, new federal regulations were passed that will shape the market in 2022.

Rent cap and pre-emption rights: two rulings, one outcome

In April 2021, the Federal Constitutional Court declared the Berlin rent cap null and void. Berlin had overstepped its legislative authority, the judges ruled. Rent legislation is a federal matter. The effects were immediate: the supply of rental apartments, which had collapsed since the cap took effect in February 2020, began a slow recovery. Many owners had preferred to sell their apartments rather than re-let them. That loss of rental stock still has consequences today.

In November 2021, the Federal Administrative Court then stopped the pre-emption practice of Berlin's boroughs. Boroughs like Friedrichshain-Kreuzberg or Neukoelln had aggressively used pre-emption rights to enter into private purchase contracts. After the ruling, this is only possible in rare exceptions. For buyers of apartment buildings, this means significantly more planning security.

Building Land Mobilisation Act: a new hurdle for owners

Alongside the court defeats, the federal government created a new regulation with the Building Land Mobilisation Act. At its core: a conversion ban. Since the Senate declared all of Berlin an area with a strained housing market, splitting apartment buildings into individual condominiums now requires a permit. For owners planning a conversion, this is a tangible restriction.

Outlook 2022: more construction, but also more federal regulation

Under the new Governing Mayor Franziska Giffey (SPD), a course correction is emerging. The focus is to shift towards new construction rather than regulatory experiments. However, the initiatives that failed in Berlin could get a second chance at the federal level. The new Federal Ministry of Housing, led by the SPD, has appointed two state secretaries, Soeren Bartol and Cansel Kiziltepe, who support both the rent cap and pre-emption rights.

Specifically on the agenda:

• A possible extension of the speculation period beyond ten years
• Tax tightening on share deals
• Further tightening of the rent brake
• Lowering the rent increase cap from 15 to 11 percent within three years

2022 will be defined by a tension: while Berlin sees a return to more market logic after the court rulings, new nationwide regulations from the federal government loom. Anyone following the market development in Berlin should keep both levels in view.