Market Analysis
Analysis of the Berlin apartment market
Berlin property prices 2017: analysis and forecast
Apartment prices in Berlin have been rising for years. But first studies warn of overheating and a possible bubble. Which scenarios are realistic for investors and owners?
Peter Guthmann
Berlin's property market has been on an upward trend for more than five years. Purchase prices for apartments and houses have risen in nearly all locations. While many market participants expect continued growth, the first skeptics warn of overheating. The question for owners and investors: does the price rally continue or is a correction ahead?
Arguments for stable to rising prices
Several fundamental factors support the current price momentum. The market development in the capital rests on robust demand.
Berlin's vacancy rate is close to zero. Demand for housing far exceeds supply. Demographic projections point to continued strong in-migration. Current estimates put Berlin's housing shortfall at around 40,000 apartments just to cover present demand. Low interest rates offer few yield-bearing alternatives to property investment. And should domestic demand weaken, growing international demand would partially compensate.
The skeptics' case
Despite these fundamentals, critical voices are growing louder. A study by the empirica institute has attracted attention with its forecast of a market cooldown. The main arguments: purchase prices in Germany's top seven cities have risen much faster than new-lease rents, compressing yields. Adjusted for foreign immigration, migration gains in cities like Berlin have actually been declining. And the rising number of building permits will eventually bring more supply to market, potentially causing rents to stagnate.
A price crash remains unlikely
The skeptics miss one point: Berlin is still building too few homes to absorb the population growth of recent years. The city has grown by more than 300,000 residents in the last decade alone. Studies by the IW and DIW show that Germany's seven largest cities built roughly 60,000 too few apartments over the past five years.
Market cooling, not crash
A sharp price drop is not on the horizon for Berlin. More likely is a stabilization at a high price level. The era of rapid, across-the-board price increases is drawing to a close. Location quality will matter even more going forward. Prices are already diverging more sharply: prime locations like Mitte or dynamic boroughs like Neukoelln should remain price-stable, while simpler locations or properties with renovation backlogs may see slight corrections. For investors and owners, this means micro-location analysis is becoming more important than ever.