Market Analysis
Berlin housing market
Record condominium conversions: 11,296 Berlin rental apartments converted in 2014
Conversions from rental to condominium apartments rose 23 percent in 2014. Friedrichshain-Kreuzberg leads the boroughs. The Senate responds with a permit requirement for social preservation areas.
Peter Guthmann
The Berlin Tenants' Association has published new figures based on the Expert Committee's property market report: in 2014, 11,296 rental apartments in Berlin were converted into condominiums. That is 23 percent more than in the previous year.
Friedrichshain-Kreuzberg leads
Over 21 percent of all conversions took place in Friedrichshain-Kreuzberg. According to the Tenants' Association, this is particularly notable because the borough holds only 7.8 percent of Berlin's total housing stock, while the purchasing power of its residents sits below the city average. Tenants on medium or low incomes are finding it increasingly hard to secure a suitable apartment when moving within the borough.
Impact on the rental market
Every converted apartment disappears from the regular rental market. With supply already tight, this intensifies the situation for those searching. At the same time, apartment purchase prices in Berlin continue to rise, because although the supply of condominiums is growing, demand remains equally high.
For owners of apartment buildings, splitting into individual units has been a profitable model: the sum of individual sale prices typically exceeds the value of the whole building.
Permit requirement in social preservation areas
The Senate responded in the first half of 2015 by introducing a permit requirement for converting rental apartments into condominiums in designated social preservation areas (Milieuschutzgebiete). In these areas, splitting a building now requires official approval. The Tenants' Association therefore expects conversion numbers to decline in 2015.
For investors planning condominium conversion projects, this changes the calculation. The legal framework needs careful review, particularly in the popular inner-city boroughs where many social preservation areas are located. The broader market development for condominiums remains independent of this: as long as demand in Berlin stays high, conversions will take place wherever they are legally possible.