Berlin 2020: a property market under stress
Berlin's property market faces a double challenge in spring 2020: while the effects of the rent cap are already being felt, the Covid-19 pandemic adds further uncertainty. After a nearly 15-year super-cycle of large price increases, a slowdown had already become visible in 2019. The current situation accelerates this consolidation. A price crash, however, is not on the horizon. Market data points to a sideways movement instead.
First quarter: stability before the crisis
The Q1 2020 figures confirm the picture of slowing momentum. The median asking price for resale apartments stands at 4,770 EUR/sqm. Year on year, prices are still rising, but the growth curve is flattening noticeably. Since 2010, prices have increased by roughly 207 per cent, yet the era of double-digit annual gains is over for now. The Covid-19 crisis thus hits the market not in an overheating phase, but during a period of consolidation. Operational hurdles such as contact restrictions are slowing transactions but have so far not led to meaningful price corrections.
Which factors matter for investors?
Several factors currently matter for property owners in Berlin. In the short term, the government's tenant protection measures create liquidity risks for landlords, even though the obligation to pay rent is merely deferred. In the medium term, interest rate trends remain a key factor; a rise is not expected at present, keeping apartments in Berlin attractive as an asset class. The biggest uncertainty remains long term rent-policy regulation beyond the rent cap. Despite declining in-migration, excess demand will persist for years and supports values fundamentally.
Differentiation by location and segment
A blanket view of Berlin does not do justice to the situation. While prime locations in boroughs such as Mitte or Charlottenburg-Wilmersdorf are likely to show high value stability, price corrections are possible in less central areas or for properties in need of renovation. Distressed sales are unlikely in the residential segment, though possible in commercial property. For long term investors, Berlin remains attractive. Yield expectations, however, need adjusting: the focus is shifting from short term rental growth to long term value preservation.
