May 2019

Berlin Property Market 2019

Demand is high, supply is scarce. That is correct. But anyone who works with real estate in Berlin must have more on the radar: Catch-up effects, inflows, hip factor, universities, science, interest rates, Europe, investors, rent development, tenant protection, regulation and much more. The property market in Berlin is complex. A first overview.

Berlin property market at a glance

Berlin is one of the most dynamic and attractive cities in Europe. The German capital is developing into a hub for science and research, tech start-ups and increasingly also for global players. Berlin ranks among the most sought-after capitals in the world, especially among Millenials. For the "Digital Natives", Berlin is number 1, ahead of London, New York or Amsterdam. The Berlin economy is also catching up rapidly, while the unemployment rate is falling. Against the background of an increasingly crowded city, there are different views on how to quantify the acute housing shortage. It can be assumed that the Berlin real estate market is acutely lacking up to 200,000 apartments. In addition, Berlin is growing year after year by the size of a small town. While the initial situation offers a number of interesting opportunities for investors, property ownership is also becoming increasingly important for owner-occupiers. Take a look with us at the overall situation in Berlin. 

Existing buildings

Median Asking price
4,390 EUR/m²
+11.70 %
Median Asking rent
11.55 EUR/m²
+5.40 %

New buildings

Median Asking price
6,290 EUR/m²
+4.50 %
Median Asking rent
15.00 EUR/m²
+4.20 %

Migration

The German capital is cosmopolitan, multicultural and offers room for people of all nationalities and ethnic groups. The attractiveness is expressed in the continuous influxes, which are constantly changing in their composition. In addition to economic and political motivation, Berlin is also becoming more and more a centre of interest as a science hub that offers academics at universities and in the private sector interesting options. The wave of migration from conflict regions, which has kept Berlin busy for years and increased the pressure on the housing market, seems to have almost completely stopped. Unfortunately, migration figures are always somewhat blurred, and the error rate is relatively high. The motivation to register with the authorities as a newcomer is higher than to cancel your registration when you leave the city. Also, many people register in Berlin without actually living here, others eventually live here without registering.

  • All migrations
  • International
  • National
  • Suburban
  • Binnen
  • Hotspot

Where apartments are scarce

In the context of the growing city, there are different views on how the acute housing crisis can be quantified. However, it is assumed that the Berlin real estate market is acutely lacking up to 200,000 apartments. In addition, Berlin is growing year after year by the size of a small town. The graph below shows where the housing deficit is located.

Price development Berlin

The purchase prices in Berlin have developed upwards. Looking at the city, the following situation arose in the 10-year period:

Price index Berlin

Period Existing buildings Median Offer price Index (base 10 years = 100) New buildings Median Offer price Index (base 10 years = 100)
Today 4,390 EUR/m² - 6,290 EUR/m² -
1 Year 3,930 EUR/m² 11.70 % 6,010 EUR/m² 4.50 %
3 Years 3,060 EUR/m² 43.80 % 4,750 EUR/m² 32.20 %
5 Years 2,540 EUR/m² 72.90 % 3,690 EUR/m² 70.20 %
10 Years 1,540 EUR/m² 184.50 % 2,800 EUR/m² 124.50 %

12 months Berlin

The birds eye view of the Berlin real estate market over the past 12 months shows how prices are influenced by years of construction, locations, occupancy rates, condition and other factors. We cluster the market according to construction year class and show in the diagram the supply distribution according to size and square metre prices. For reasons of clarity, we set the upper limits at an apartment size of 300 m² and a price per square metre of 12,000 EUR/m². You can deselect the construction year classes in the menu. You can find this analysis at local level in the carrier route reports. 

Existing apartments and new buildings

In Berlin, in the past 12 months about 36,390 existing apartments have been advertised. The median is currently about 4,390 EUR/m². The price correction compared to the same period last year is thus approx. 11.70 %. In the new building segment the median for all locations and apartment types is currently about 5,810 EUR/m²,measured by 7,440 offers. New building projects are on average priced at 4.50 % higher than a year ago.

Evolution of price segments

For our analysis, we split the supply market into four price segments. It can be seen that a reduction in the number of offers and a shift from the lower price segment to the middle and higher segments has been taking place in parallel with the price increase since years. There is no sign of the trend slowing down, but an increasing price differentiation by location is becoming visible. The trend in the segments varies across the districts. Local analyses can be found in our district reports.

Distribution according typology of apartments and buildings

Segmented according to apartment and house typology, the rule still applies: the higher the location in the building, the higher the purchase price. In recent years, upper floors have increasingly been constructed as staggered floors and marketed as penthouses. We do not distinguish between free and rented objects.

Rents in new constructions

Rents are the major discussion topic in Berlin. The reasons for the sharp increases in recent years are not only to be found in the scarcity of supply and the slow pace of new construction. Significantly higher construction costs and land prices are playing a key role in the development of rental prices and purchase prices. In privately financed residential construction, about 50 percent of the production costs come from the main building costs and ancillary costs. Across all construction sections, construction work has increased considerably within 10 years. Approximately 30 per cent are at the expense of the building ground, for which the prices have increased up to five times within five years. In addition to property and construction costs, developers also have to factor in capital costs and financial risks. In total, even subsidised rents in the often cited target corridor of 6.50 EUR/m² to 10.00 EUR/m² cannot be realised under the aforementioned conditions in new buildings.

Accordingly, rents have developed in the new construction segment. New contract rents are currently advertised at a median rent of 14.65 EUR/m², which corresponds to a price adjustment of about 10.90 % compared to the same period last year, based on 8,810 Offers in 12 months. Within the last 5 years the cold rents in new buildings thus developed by about 38.40 %

Rents in existing housing

Rents for existing housing are also rising against the background of scarcity. In addition, part of Berlin's housing stock shows more or less strong signs of degradation. After many years of letting, in which only maintenance measures were possible, extensive modernisation is often necessary before new lettings can be made. The associated investments must be balanced by higher rents. Plans for more far-reaching regulatory measures, which force landlords to anticipate rent adjustments, are also having the effect of boosting rents. A recent example are initiatives for a rental moratorium.

According to our analyses, in the last 12 months about 85,250 rental apartments (existing units) were offered for re-rental. The new contract rents advertised during this period averaged around a median of 11.25 EUR/m². This corresponds to a price adjustment of about 6.80 % compared to the same period of the previous year. Within the last 5 years the new contract rents in Berlin developed by about 36.80 %.

Rent index Berlin

Period Existing buildings Median Offer price Index (base 10 years = 100) New buildings Median Offer price Index (base 10 years = 100)
Today 11.55 EUR/m² - 15.00 EUR/m² -
1 Year 10.95 EUR/m² 5.40 % 14.40 EUR/m² 4.20 %
3 Years 9.05 EUR/m² 27.30 % 12.45 EUR/m² 20.70 %
5 Years 8.45 EUR/m² 36.80 % 11.55 EUR/m² 30.10 %

Snapshot

The Bubble Chart shows the supply situation of the last 12 months on the property market in Charlottenburg. The colors mark the year of construction classes, the size of the bubbles the quantity of offers, the location in the coordinate system price radius (square meters) and apartment sizes.

Rent evolution

The chart shows the changes in the price structure of the district based on four price segments. A clear shift can also be seen in the rental price segments. In the 12-month period about 4,820 existing apartments were offered on the market for new rentals. We register the largest number of offers in the medium price segments of 8 - 11 EUR/m² and 11 - 14 EUR/m². In recent years, we have registered a significant increase in the higher price segments. 

Berlin districts at a glance

How are the districts positioned? You can see this here for existing and new buildings, as well as purchase prices and rents.

District Buy (EUR/m²) existing properties new properties Rent (EUR/m²) existing properties new properties
Charlottenburg 4,920 8,590 14.00 18.70
Friedrichshain 4,500 6,430 14.45 16.65
Marzahn-Hellersdorf 3,140 3,690 8.90 12.00
Köpenick 3,290 5,140 10.15 12.75
Kreuzberg 4,750 8,650 14.60 18.00
Lichtenberg 3,690 5,000 9.90 13.55
Mitte 6,690 8,030 17.10 20.00
Moabit 3,850 6,210 13.95 15.40
Neukölln 4,120 5,980 11.00 16.15
Pankow 3,860 4,950 10.95 12.45
Prenzlauer Berg 5,270 6,590 15.00 18.00
Reinickendorf 3,020 4,510 10.20 11.55
Schöneberg 4,530 6,320 13.30 16.30
Spandau 2,810 4,910 9.05 11.00
Steglitz 4,160 5,510 10.95 13.50
Tempelhof 3,540 4,460 9.95 12.70
Tiergarten 5,180 7,380 15.05 17.05
Treptow 3,010 4,510 10.20 13.50
Wedding 3,970 5,670 12.15 16.65
Weißensee 4,280 4,630 10.85 13.70
Wilmersdorf 5,130 7,620 14.00 18.05
Zehlendorf 5,160 7,300 12.15 16.95

General background

The general conditions for real estate investments in Berlin are good, but complex. Population growth is still very strong despite a slight slowdown in dynamism. The German capital is following the worldwide urbanization trend towards large metropolitan areas and a reversal is not to be expected despite sporadic, locally limited signs of suburbanization. In the dilemma between population growth, the associated excess demand and scarce space reserves, purchase prices and rents in Berlin have only known the upward trend for years.

The country and the districts are not interested in this development. Paradoxically, however, politics and administration do not focus on the systematic construction of housing to expand the supply of affordable housing. On the contrary, the city and districts rely on the regulation of the market, especially in inner-city locations. The regulatory measures, the transformation of the free housing stock into municipal stock ( pre-emptive purchases) and the targets of the preservation statutes are criticised for various reasons.

  • Regulation does not create new housing.
  • The Transformation Ordinance ("Umwandlungsverordnung") prevents the creation of residential property in existing properties.
  • It is not reasonable for dividing owners to sell only to tenants for a period of 7 years.
  • Conservation statutes counteract energetic and other modernizations.
  • Climate targets are disregarded, the existing stock erodes and the living quality drops.
  • The demographic change is not taken into account in the building equipment.
  • Pre-emptive purchases make tenants better off than apartment seekers.

Despite increasingly difficult political circumstances, the Berlin real estate market remains a sought-after European address and is considered a safe haven despite the regulation that also exists in other major European cities. The price increases in Berlin are primarily due to the shortage situation. As long as supply cannot keep pace with demand, government intervention will at best dampen the development of rents and purchase prices. Investors have not yet been withdrawing from the Berlin real estate market. On the contrary, a shift towards long-term investment strategies can be observed due to declining returns and progressive market regulation. This realignment has a calming effect on the market. There are fewer price exaggerations than before.

Trotz schwieriger werdender politischer Umstände bleibt der Berliner Immobilienmarkt weiter eine gefragte europäische Adresse und gilt trotz der Regulierung, die es auch in anderen europäischen Großstädten gibt, als sicherer Hafen. Die Preisanstiege in Berlin bauen primär auf Knappheitsverhältnisse. Solange das Angebot der Nachfrage nicht folgen kann, werden staatliche Eingriffe die Entwicklung der Mieten und Kaufpreise allenfalls dämpfen. Investoren ziehen sich bislang nicht aus dem Berliner Immobilienmarkt zurück. Vielmehr ist, bedingt durch sinkende Renditen und mit voranschreitender Marktregulierung, eine Verschiebung zu langfristigen Anlagestrategien feststellbar. Diese Neuausrichtung wirkt sich beruhigend auf den Markt aus. Es kommt bereits jetzt zu weniger Preisübertreibungen.

This report was last updated in May 2019

Disclaimer

The Guthmann Market Report is a semi-automated report about the property market in Berlin. All information has been carefully researched and is given to the best of our knowledge and belief. We assume no liability for completeness, deviations, changes and errors. Our report does not represent an investment recommendation.

Sources

Amt für Statistik Berlin-Brandenburg: Einwohnerregisterstatistik (Bewegungsdaten), Fortschreibung des Wohngebäude- und Wohnungsbestandes, Ergebnisse des Haushaltegenerierungsverfahren KOSIS-HHGen, Baufertigstellungen. IMV GmbH: Rohdaten Preise und Mieten. Senatsverwaltung für Stadtentwicklung und Wohnen: Umwandlungsdaten (2018), Geoportal Berlin (FIS-Broker). Immobilienverband Deutschland IVD (2018/2019): Immobilienpreisservice 2018/2019.

Methodology

Housing deficit (Treemap): The Statistics Office updates the household data based on the 2011 micro-census. Determination of household count and statistical household size via household generation procedures (KOSIS). We calculate the real household size / housing deficits via the ratio number of inhabitants to number of apartments.
Purchase prices and rents (charts and reports): Calculation of the median on the basis of raw data, own visualization.
Migrations: Aggregation and visualization based on transaction data.