Market Analysis
Berlin rental market 2016
Berlin gross rents fall for the first time as ancillary costs offset rising base rents
In March 2016, gross rents in Berlin declined year on year for the first time. The reason: ancillary costs dropped by 4.0 percent, more than offsetting the increase in base rents.
Peter Guthmann
Something unusual happened on Berlin's rental market in March 2016. According to the Statistical Office of Berlin-Brandenburg, gross warm rents fell slightly year on year for the first time, even though net cold rents continued to rise. A closer look at the numbers is worthwhile for owners and tenants alike.
Base rent up, ancillary costs down
Net cold rents rose by 0.2 percent compared to the same month a year earlier. Ancillary costs, however, fell by 4.0 percent. The net effect: gross rents declined by 0.3 percent. The savings on ancillary costs outweighed the rent increase.
Ancillary costs have been falling for over a year. Initially, political decisions played a role, such as the forced reduction in Berlin's water charges. Later, historically low energy prices on the global market pushed heating and hot water costs down further.
A reversal is already in sight
The data suggest the effect is fading. Compared to the previous month, heating oil prices rose by 11 percent in February. Overall ancillary costs stagnated, while net rents edged up by 0.1 percent. Gross rents are likely to start rising again in the coming months.
What this means for owners
The moderate increase in net cold rents continues, which stabilizes yields. At the same time, a lower gross rent makes properties more competitive on the market and can make reletting easier, particularly for apartments in Berlin in sought after locations like Mitte.
Investors evaluating acquisitions should examine the composition of rents carefully. A gross rent that depends heavily on low energy costs can shift once energy prices rise again. The underlying dynamic of increasing base rents on the Berlin housing market remains intact.