Market Analysis
Housing market under pressure
Property prices in Berlin 2017: Why 10,000 approved apartments per year go unbuilt
Berlin approves around 22,500 building applications annually but completes only 12,500 apartments. Rising construction costs, land scarcity, and regulation explain the gap.
Peter Guthmann
Berlin is growing. Forecasts project nearly 4 million residents by 2030. To meet demand, 20,000 to 25,000 new apartments would need to be built each year. But a gap persists between approvals and completions.
Land is scarce
Using its housing land information system, the Senate has identified around 1,300 sites with potential for 150,000 apartments. Another ten large-scale sites could yield up to 50,000 units. But developing these sites takes time: land use plans need amending and administrative procedures must be completed. In sought-after locations like Mitte or Pankow, available building land is extremely rare.
Approved but not built
In 2015, Berlin approved 22,500 building applications, a fourfold increase from 2010. Yet only around 12,500 apartments were actually completed in the same period. Roughly 10,000 approved units per year end up shelved. Some developers hold back projects in anticipation of further price increases. Others fail because of rising costs. The Senate is considering higher property taxes on undeveloped but construction-ready land.
Political countermeasures
The Housing Construction Acceleration Act, passed in early 2016, aims to simplify planning and approval procedures. Among other things, it overrides older regulations on monument protection and green spaces. Since 2014, Berlin has also resumed subsidizing rent-controlled new construction, expanding the program to 3,000 units for 2017. Relative to the demand of up to 25,000 apartments per year, this remains a small share.
Costs under scrutiny
According to the BBU (Association of Berlin-Brandenburg Housing Companies), new-build construction cost over 2,600 euros per square meter in 2016. In central inner-city locations, that figure can easily exceed 3,000 euros, not including financing costs. Tightened energy efficiency regulations and a revised building code push costs further. Many projects are only viable in the premium segment as a result. Investors either need to count on further price increases or hope for more generous depreciation allowances. The market development remains tense.