Apartment Buildings in Berlin
Dear readers.
Apartment buildings in Berlin have never been in such high demand as they are today.
For almost 20 years after reunification, the sales value was between 13 and 15 times the annual net rent. At that time, many owners associated the concept of an apartment building with high interest rates on loans and low returns. No wonder that apartment buildings in Berlin were not considered a good investment until well into the 2000s. Many owners were frustrated; during the Wall and post-reunification period, rents in Berlin were extremely low, the city offered little perspective and today's neighbourhoods were run-down. Economically, many apartment buildings were running at the limit. The buildings were energy inefficient and were further burdened by gross rents and high interest on loans. The Berlin apartment building, once a symbol of a wealthy bourgeoisie, was being sold off.
In view of decades of investment, rent restraint, rising costs and often losses, the ongoing boom is a fair development.
It was only in the wake of the subprime crisis in the USA and the subsequent financial crisis in Europe that the Berlin property market moved into the spotlight of investor interest. Those who dared to invest in an apartment building in Berlin around 2009 or 2010 are now rewarded for their willingness to take risks with an average factor of 32 times the annual net rent when the property is sold. In very good locations and with the right quality of property, factors of just under 39 times are no longer considered outliers. In direct comparison, in 2010 the purchase price of a technically stable apartment building in a simple location was at the current price level of a large flat in a good location, whereby the first catch-up effects already set in around 2008 but only led to an almost explosive increase in take-up from 2009 onwards.
Our chart shows the development of the multipliers from 1995 to 2020 and how, in addition to the factor, the gap between the lowest and the highest multiplier is growing (green bar).
2021 shows the highest level of activity in the market for apartment blocks in a long time.
Since 2011, the number of transactions in the market for apartment blocks and residential/commercial properties in Berlin has been in sharp decline. The market reached an all-time low in the corona year 2020. 2021 will see more than a tangible recovery in take-up and transactions. The trend will be accompanied by purchase price factors at the pre-Corona level. The wait-and-see attitude of owners, especially from abroad, seems to be over. This is indicated by the high number of apartment building sales by owners from the European region and Great Britain. Whether activity in the apartment building segment is due to sell-offs and profit-taking, or is a normalisation of the market, cannot yet be conclusively determined. The figures from the Berlin Valuation Commission (Gutachterausschuss Berlin), which we summarise for you in the chart below, show the development of transaction figures since 2009 up to the second quarter of 2021.
Investors adjusting strategies
Milieu protection, pre-emption rights (here it remains to be seen what effect the ruling of the Federal Constitutional Court will have) and §250 BauGB will inevitably lead to an adjustment of buyer strategies and profiles.
- Short- to medium-term commitments are turning into long-term holding strategies
Investors are simultaneously beginning to compare the political framework conditions with other investment locations.
- Will other countries, cities and municipalities follow suit with regulation?
- Berlin's real estate market is no longer seen as over-regulated, but as predictable.
- Corona has strengthened Berlin's position as a stable and secure investment location.
Value development in the coming years will also depend on how quickly the influx into the cities and metropolitan areas picks up again.
Due Diligence more and more important
With rising factors and purchase prices, the yield for evaluating a purchase is losing focus. Restrictions on the apportionment of investments, rent index, rent brake and further regulations limit the scope of action for buyers and lead to investors increasingly using indicators such as property condition (OPEX and CAPEX), actual rent (instead of target rent) and socio-economic factors for the purchase decision.
Services for your apartment block sale in Berlin
Guthmann Estate has a very large, established business and buyer network with which we maintain close relationships. Our buyers are financially powerful, experienced and motivated in order to exclude sales risks from milieu protection. Guthmann Estate is considered one of the most renowned estate agents for apartment buildings in Berlin. We broker apartment buildings almost exclusively within our internal buyer network.
When selling through our agency, we guarantee full transparency throughout the entire transaction. You get access to an individual 24-7 seller dashboard where you can track all our related activities. You can track enquiries, exposé mailings, reactions, viewings and refusals (with reasons) in a structured and clear manner.
Our services:
Selling most successfully despite regulation
Developing and selling apartment buildings in areas under milieu protection according to §172 and under the conditions of the new §250 BauGB is associated with a number of challenges, which we are happy to solve for you.
- For owners, there is currently a ban on the splitting of apartment buildings in Berlin
- In waiver agreements, buyers are obliged to refrain from partitioning for 20 years
- The owner's own use is restricted
Our expert team will guide you to success with a firm hand and proven strategies.
- Professional preparation of the sale
- Handling of all relevant documents
- Consultation on the drafting and drawing up of the contract of sale
- Seamless process and maximum added value
- Transparency at all times
Thanks to our experience, any potential hurdles can be eliminated and top prices achieved.
Ongoing market regulation
Generation owners and investors are happy about the good performance, but also share the same concerns.
- With the Building Land Mobilisation Act (§250 BauGB), transformation of residential properties to condos are stopped until 2025
- Milieu protection areas will remain in place
- The higher the multiplier, the lower the preemption probability does not apply anymore
For the coming years, various scenarios are considered likely by market participants.
- Abolition of the speculation period
- Extension of the speculation period to 20 years
- Introduction of a rent cap for areas with a tight housing market
- Establishment of a moratorium on rents
- Obligation of municipalities to draw up a rent index
- Standardisation and conversion of the rent index to a uniform procedure
- Tightening of the existing rent brake
Despite all hurdles, apartment buildings in Berlin remain extremely interesting for investors; international buyers in particular are increasingly shifting to a long-term value development strategy.
Milieu protection areas in Berlin
Use our milieu protection map to check whether your apartment building in Berlin is located in a protected area, under investigation or in a so called suspected area. The map is continuously updated.
From rent to ownership: conversions into condos
| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |
|---|---|---|---|---|---|---|---|---|
| Berlin | 7447 | 9201 | 11033 | 16783 | 12731 | 16165 | 12753 | 12685 |
Trend
How the market and prices for apartment buildings in Berlin will develop in the future is still subject to some uncertainties.
- Catch-up effects are becoming flatter and value growth more organic than before
- In a regulated market environment, buyers need to shift to long-term strategies
- The apex between regulated rents and prices per square metre is approaching
- Trendy locations must compete more strongly with classic A-locations
- Development and expansion potential must be leveraged in a fair share between vendor and purchaser
- Anchor projects in the surrounding area will become more important
With Guthmann you have found the best partner for your purchase and sale of apartment buildings in Berlin. We leverage the full value of your investment.
City of tenants
When buying an apartment building in Berlin, investors not only look at the immediate yield and square metre prices, but also at indicators for purchasing power, net household income and rent burden ratio. A rent burden ratio of 46 percent is often taken for Berlin. The rent burden ratio is understood to be the share of gross cold rent in net household income. The political figure of 46 percent implies that the rent burden for Berliners is already too high, with the consequence that investors must or should assume that, in addition to political restrictions, there are also socio-demographic hurdles that make an investment in a rented house uninteresting. In contrast, the sample survey conducted by the Office of Statistics in the course of the 2019 microcensus suggests that the rent burden ratios are much lower. The Office of Statistics has determined an average rent burden ratio of 28.2 percent. The almost 20 percent lower rent burden rate varies depending on the type of household and income category. Broken down by household type, unemployed households in Berlin spend the highest proportion of income at 42.1 percent. Senior households spend 30.5 percent, households with children on average 31.9 percent. A figure of 33 per cent is usually regarded as normal.
Net household income rising rapidly
Viewed over long time series, net household incomes in Berlin have increased considerably. In terms of urban area, income in 2018 was 40 percent higher than in 2002, with the biggest winner in this period being the Pankow district, where net household income rose by 75 percent. In Friedrichshain-Kreuzberg the figure is 61 percent. Overall, 2018 will see a balanced picture among the districts. Districts with previously low-income households have caught up:
Household income in EUR
| | 2002 | 2006 | 2010 | 2014 | 2018 | 2002-2018 % |
|---|---|---|---|---|---|---|
| Berlin | 1.500 | 1.475 | 1.575 | 1.750 | 2.100 | 40% |
| Mitte | 1.375 | 1.400 | 1.475 | 1.600 | 1.950 | 42% |
| Friedrichshain-Kreuzberg | 1.275 | 1.175 | 1.400 | 1.675 | 2.050 | 61% |
| Pankow | 1.375 | 1.475 | 1.600 | 1.850 | 2.400 | 75% |
| Charlottenburg-Wilmersdorf | 1.575 | 1.600 | 1.675 | 1.800 | 2.200 | 40% |
| Spandau | 1.525 | 1.525 | 1.575 | 1.600 | 1.975 | 30% |
| Steglitz-Zehlendorf | 1.975 | 1.850 | 1.925 | 2.100 | 2.350 | 19% |
| Tempelhof-Schöneberg | 1.525 | 1.575 | 1.675 | 1.925 | 2.100 | 38% |
| Neukölln | 1.375 | 1.300 | 1.425 | 1.550 | 1.825 | 33% |
| Treptow-Köpenick | 1.675 | 1.550 | 1.650 | 1.825 | 2.200 | 31% |
| Marzahn-Hellersdorf | 1.650 | 1.500 | 1.525 | 1.700 | 2.100 | 27% |
| Lichtenberg | 1.475 | 1.425 | 1.550 | 1.600 | 1.925 | 31% |
| Reinickendorf | 1.725 | 1.675 | 1.675 | 1.850 | 2.100 | 22% |
Decentralised structures: many centres and many neighbourhoods
Berlin is facing similar challenges as other metropolises. On the one hand, building density is already high, while on the other hand there is still an acute shortage of housing. Inner city areas such as the open space of the former Tempelhof Airport, which has developed into one of the most popular and most frequented inner city areas in the world, are particularly sought-after and just as controversially discussed.
Unlike most other larger cities in Germany, Berlin has a decentralised district and neighbourhood structure. Instead of concentrating on a few centres or even just one, Berlin has many smaller and a few larger centres, each of which is equipped with urban functions of administration and supply. Where the structure is determined by distinctive commercial structures and a lot of through-traffic, the more popular residential quarters are mostly in adjacent locations. Correspondingly, the potential of an apartment building in Berlin is measured less in terms of location centrality than in medium-sized cities, and more in terms of micro-macro quality.
Over the past 10 years, square metre prices have developed strongly in all Berlin districts. In some locations the price development has been explosive. These include in particular the hip locations in Neukölln and Wedding, Moabit, Kreuzberg, Lichtenberg and Tiergarten. In the meantime, prices have calmed down in some of these locations.
Migration and construction activity
Berlin is on its way to a city of 4 million. Growth through immigration slowed down noticeably in 2019 and was abruptly interrupted by the Corona pandemic in 2020. Many Berliners with an immigrant background had to leave the German capital for the time being and spent the Corona epidemic in their home country. A possible scenario for the post-pandemic period is a similar influx as in the years after 2007, when Germany and Berlin became an anchor of stability and a place of longing for tens of thousands of young Europeans. Berlin is also seen by investors as a safe haven and real estate, especially apartment buildings in Berlin, as a long-term investment strategy.
- All migrations
- International
- National
- Sub-Urban
Construction activities in Berlin
The construction of apartment buildings in Berlin has picked up in recent years, but is nowhere near meeting the basic demand for housing in the capital. Between 2006 and 2018, almost 39,000 buildings were constructed in Berlin, including commercial properties and single and two-family homes. Our chart shows the concentration of building completion notifications by old districts since 2012.
District Market Reports
This report was last updated on 24.11.2021 .
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.