Dear reader.
The large number of daily visits to the Guthmann Reports shows how attentively trends on the Berlin real estate market are followed. There is a demand not only for our market analyses, but above all for transparency and relevant information in a complex market environment. This is not surprising, as the market for apartment buildings is fundamentally different from the residential market. In Berlin there are about 332,000 multi-family houses and around two million flats. This means that although the rental house market quantitatively represents only about 16 per cent of real estate sales in Berlin, it generates one and a half times as much turnover at the same time. According to the GAA (Gutachterausschuss Berlin), the typical Berlin apartment building with around 1,675m² of living space costs around four million euros, with room at the top. The figures make it clear how important it is to handle your values responsibly and sensitively. Our report can therefore only give you an initial idea of the development and state of the market for apartment buildings in the German capital. Anything further can be obtained from us at first hand.
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Decline in sales volume since 2006
We have analysed the number of sales of apartment buildings in Berlin by district from 2006 to the cut-off date of 31.10.2022. Similar to the appartment market, the number of transactions is constantly decreasing, while turnover is still growing to date. In 2022, according to our findings, the Berlin Valuation Committee registered 577 sales of rental apartment buildings with and without a commercial component by the end of October.
Average price level by district
The average price level of apartment buildings in Berlin has developed inconsistently in the districts over the four-year period. With the help of the GAA (Gutachterausschuss Berlin) we have identified median values. If you are interested, you can obtain further information in our district reports. A reliable assessment of the actual achievable sales value of your apartment building in Berlin should always be made after a precise examination and individually for your property. Our analyses serve as an initial guide concerning the price range in the old districts.
Building era and location
Classic old buildings up to 1919 make up the largest part of the housing stock. The highest factors are achieved in central city locations, although there is a wide spectrum in the differentiation according to micro-locations. The construction year class from 1991 onwards could have an advantage over classic old buildings in the future with regard to energy aspects. Post-war construction years currently achieve somewhat lower factors.
| Construction Era | City | |||
|---|---|---|---|---|
| Von EUR/m² | Bis EUR/m² | ø EUR/m² | ø Faktor | |
| until 1919 in poor condition | 1.436 | 1.700 | 1.608 | nicht bekannt |
| until 1919 normal building condition | 1.482 | 3.333 | 2.322 | 32,9 |
| until 1919 good building condition | 1.980 | 5.036 | 3.612 | 32,2 |
| 1920 until 1948 | keine Fälle | keine Fälle | - | - |
| 1949 until 1970 | 1.793 | 3.296 | 2.504 | 27,4 |
| 1971 until 1990 | 1.519 | 3.943 | 2.712 | 29,3 |
| 1991 until 2016 | 2.592 | 7.134 | 5.067 | nicht bekannt |
| from 2018 | 3.221 | 16.262 | 7.088 | nicht bekannt |
| Construction Era | Weiteres Stadtgebiet | |||
|---|---|---|---|---|
| Von EUR/m² | Bis EUR/m² | ø EUR/m² | ø Faktor | |
| until 1919 in poor condition | 984 | 2.983 | 1.928 | nicht bekannt |
| until 1919 normal building condition | 1.108 | 2.631 | 1.858 | 28,7 |
| until 1919 good building condition | 1.514 | 4.590 | 2.955 | nicht bekannt |
| 1920 until 1948 | 1.525 | 3.188 | 2.242 | 28,8 |
| 1949 until 1970 | 896 | 3.618 | 2.082 | 32,9 |
| 1971 until 1990 | 1.128 | 2.928 | 2.040 | 27,9 |
| 1991 until 2016 | 1.248 | 3.389 | 2.296 | 28,3 |
| from 2018 | 1.893 | 5.446 | 4.328 | 34,9 |
Interest rates putting pressure on factors
Since 2009, the transaction volume for apartment blocks in Berlin has been steadily declining. The development has been accompanied by consistent key interest rate reduction by the ECB. In July 2022, the key interest rate was raised for the first time in years to 0.5 percentage points, in October to 2.00 and further interest rate steps are expected.
Correlation of factors, interest rates and achievable purchase prices
The "multiplier" or factor stands for the multiple of the annual net cold rent of a property. The factor expresses in how many years the purchase of a property is repaid via the rental income. In times of low interest rates, the calculation is relatively simple, even if it does not take into account investments, rent increases and capital services. The calculation is factor = purchase price / annual net cold rent. As a result of higher interest rates, capital services increase and thus reduce profitability. In this situation, investors increasingly base their purchase decisions on a viable mix of location, property condition and expected development potential. It is crucial for the success of a sale to document the status quo of an apartment block precisely and make it transparent with our help.
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Typical timing of a sale
The transaction time for the sale of an apartment building in Berlin can be managed safely and quickly through professional planning and handling.
- Consultation: clarification of the initial situation, pricing in line with the market
- Professionally prepared documentation: Speeding up the review process by clients and banks, trust through transparency
- Marketing: Discreet off-market brokerage among solvent internal clients
- Contract handling: Contract review with lawyers and notaries, notarisation
- Examination period district in the case of pre-emption rights (read our blog article on pre-emption rights)
- Completion and due date of purchase price
- After sales: Smooth transition and follow-up support
In the case of sales in milieu protection areas (more information on milieu protection can be found here), the districts are still formally entitled to carry out an inspection, despite the judicially stopped pre-emption practice. With the introduction of the Building Land Mobilisation Act, the review period was extended from two to three months. Provided an apartment block is managed in accordance with the regulations of the conservation statutes, there is no right of first refusal. In practice, the districts should thus comply more quickly with the application for a negative certificate. The period of three months from the delivery of the purchase contract to the district corresponds to the exhaustion of the time limit.
Outlook 2023
2021 and 2022 were characterised by various twists and turns on the Berlin real estate market, which directly affected the submarket for apartment blocks. Within a few months in 2021, first the rent cap and then Berlin's pre-purchase practice were overturned by the courts. Shortly after the turn of the year 2022, prices for oil and gas rose in the wake of the Ukraine war, which led to an increase in inflation. In the summer, the ECB Governing Council initially raised the key interest rates in the euro area by half a percentage point and ended the period of negative interest rates. Further rate hikes followed in September and October.
No turnaround but changes
Geopolitical uncertainties, inflation and the interest rate swing will not lead to a paradigm shift or a turnaround in the apartment house market in Berlin. In an international price comparison, the asset class "Berlin apartment block" is still competitive and apartment blocks in the German capital will remain an internationally sought-after commodity in the long term. At the same time, the sharp rise in material and energy costs in the new construction sector makes existing properties an important form of investment, despite their energy disadvantages compared to new buildings. At present, the price per square metre of a solid apartment block does not even cover the pure material costs of a new building per square metre. And last but not least, the real estate market in Berlin is considered highly resilient and crisis-resistant.
Pressure on factors
The further development of interest rates in 2023 is not yet foreseeable. However, it must be assumed that the increasing pressure on profitability will lead to a further meltdown of realisable factors. The demands on sellers will also become more demanding. The comparatively very low number of transactions in 2022 will result in apartment blocks in Berlin being exposed to stronger competitive pressure and having to stay on the market much longer or go through price adjustments if the asking price is not in line with the market.
District Market Reports
This report was last updated on 23.01.2023 .
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.