Berlin: Around one million residential units still running with oil and gas

A look at the housing stock in Berlin illustrates the scale of the energy transition. In the capital, home to the largest urban housing stock in Germany, around one million apartments are still heated and supplied with hot water using fossil fuels. About 77% of these buildings were constructed before 1986, and around 75% of them are occupied by tenants. (Source: Office for Statistics, results of the 2011 census, status as of 2014)

About us

• We are a family-run business with a strong emphasis on brokering (selling) multifamily homes in Berlin, while also providing services in marketing, research & analysis, and property management. Every team member undergoes extensive training in real estate economics. We are multilingual and highly specialized. We invite you to consult our selective reference list showcasing a range of multifamily home sales from 2015 to 2023.

Pricing factors for 2023 and 2024

• Altered interest rate levels
• Changed bank valuation behaviors
• Higher equity requirements
• Increased differentiation according to locations
• Energetic cost uncertainty
• Growing importance of the overall condition
• Rising net rents
• High migration rates 

Decline in sales volume stopped

We examined the number of sales of multifamily houses in Berlin from 2006 to the status as of July 11, 2023, by districts. A total of 261 sales cases for residential and commercial buildings have been recorded for the year 2023. A purchase price was available for 116 sales cases as of the cutoff date. Compared to previous quarters, market dynamics are noticeably increasing again. Factors and purchase prices are transitioning into a lateral movement at an overall lower price level.

Based on the value-relevant floor area, the average value of rental houses in Berlin is currently around EUR 2,248 per square meter. Converted to living space, it is approximately EUR 2,800 per square meter.

• We are familiar with all relevant price parameters and are able, thanks to nearly 20 years of experience and our official database, to name a realistic price for your rental house in Berlin.

Average price level by district

The price level on the rental house market is increasingly differentiated by location, in addition to the factors mentioned above. Using the data from the GAA (Appraisal Committee Berlin), we have determined the average price level in EUR/m² living space for all 22 Berlin districts. Looking at the entire Berlin area, rental apartment buildings with and without a commercial proportion cost about 2,800 EUR/m² living space. This value deviates upwards or downwards from case to case. In our district reports, you can find more detailed information if you are interested.

• We will create a reliable analysis of how you can increase the achievable sale value of your multifamily house in Berlin after a detailed and individual examination of your property.

Winners and Losers: District Ranking

The overall trend on the rental housing submarket in Berlin is showing signs of levelling off at the start of the second year. The decline in purchase cases in the first half of the year has stopped. The average value, which declined in the first quarter, has stabilized. 

In 2023, the sales of rental houses in Berlin districts compared to 2022 were as follows:

In the Mitte district, it was 30% of 2022 sales (full year), in Tiergarten 14%, in Wedding 82%, in Prenzlauer Berg 35% and in Friedrichshain 47%. In Kreuzberg, sales reached 35% of the previous year, in Charlottenburg 55% and in Spandau 29%. Wilmersdorf was at 50%, while Zehlendorf and Schöneberg even exceeded the previous year's figures, with 111% and 120% respectively. Steglitz reached 114% and Weißensee 117%. Tempelhof came in at 71%, Neukölln at 50%, Treptow at 83% and Köpenick at 86%. Lichtenberg achieved 28%, Pankow 75% and Reinickendorf 48%. In Marzahn, sales rose to 133% of the previous year, while in Hohenschönhausen they fell to 33% and in Hellersdorf to 29%.

 In Berlin as a whole, sales figures were 54% of the entire previous year. The actual slump therefore did not occur from 2022 to 2023, but rather already from 2021 to 2022.

Energetical Aspects

The market value of a rental house depends on factors such as age, condition, location, and demand indicators such as interest rates and inflation. In the current debate on energy efficiency and historical building substance, a change in buying behavior is imminent. The push for energetic renovation, coming from both Berlin and Brussels, increasingly requires owners to focus on climate measures. It doesn't matter whether the measures are carried out by new or existing owners. This leads to the fact that characteristic architectural features such as stucco facades become secondary when the goal of energy efficiency overshadows aesthetic aspects. The tension between monument protection and CO2 emissions will pose a central challenge in the building sector in the coming years and will also influence the purchasing impulses of investors. Thus, a building that is easy to renovate from previously less popular construction years may move up the scale, while classic old buildings are being reassessed in terms of capital expenditure (Capex).

Interest rates putting pressure on factors

Since 2009, there has been a consistent downward trend in the transaction volume for apartment blocks in Berlin, a development which has paralleled a steady reduction in the key interest rates set by the European Central Bank (ECB). However, in July 2022, the ECB shifted its stance and initiated a series of rate hikes. As of July 2023, the key interest rate has reached 4.0 percent, with further increments anticipated within the year before the ECB is expected to halt additional rate increases.

Creating Added Value Together Through Personalized Consultation for Your PropertyIn a world of fluctuating interest rates, determining the actual value of your property can be quite challenging. That’

In a world of fluctuating interest rates, determining the actual value of your property can be quite challenging. That’s where we come in – to help you navigate the various factors that can influence the value of your rental property.

The "multiplier method" serves as a solid foundation here: it represents the number of years needed to amortize the purchase price of a property through rental income. Simply put, this “multiplier” is calculated as the purchase price divided by the annual net cold rent.

However, this calculation can overlook important details – such as investments carried out by you, potential rent increases, and capital services. Especially in times of high interest rates, these factors can significantly affect the profitability of your property for you, but also for the buyer.

That's why we go a step further: Together with you, we develop a personalized strategy that not only considers the current situation but also focuses on the potential of your property. We take into account the location, condition, and expected development of your property to achieve the best price for you.

Let us assist you in transparently and understandably presenting all aspects of your property, creating the optimal basis for successful sales negotiations.

Typical timing of a sale

The transaction duration for the sale of a multi-family house (MFH) in Berlin can be expedited and made more efficient and secure through professional preparation and execution. 

• Consultation: Clarifying the initial situation and determining a market-appropriate price.
• Professional Documentation: Accelerating the review by clients and banks, fostering trust through transparency.
• Marketing: Discreet off-market brokerage within a solvent internal client base.
• Contract Handling: Contract review with lawyers and notaries, notarization.
• District Review Period for Preemptive Right (Read our blog post on the preemptive right).
• Completion and Payment Due.
• After Sales: Smooth transition and follow-up support.

In sales located in areas protected for social milieu (more information on social milieu protection can be found here), the districts are still formally entitled to review the process despite the court-ordered stop to the preemptive purchase practice. With the introduction of the Building Land Mobilisation Act, the review period has been extended from two to three months. If a rental house is managed in accordance with the regulations of the preservation ordinance, there is no right of first refusal. In practice, the districts should therefore respond more quickly to the application for issuance of a negative certificate. The period of three months from the delivery of the purchase agreement to the district corresponds to the full utilization of the deadline.

Navigating Through Challenging Times: Your Strategic Roadmap for Selling Multi-family Houses in Berlin

The current situation on the market for multi-family houses in Berlin is challenging. Although the market is picking up again after a quantitative slump, the trend varies widely across the districts. Even the decline in overall sales cannot be applied to all locations. Specific property characteristics such as maintenance, energy efficiency, potential for expansion and rental development must be in line with the purchase price and future capex, especially since sharply higher lending rates and much higher equity requirements for buyers are significantly reducing risk appetite. At the same time, rental demand in Berlin is so high that the fundamental question of whether an apartment building in Berlin makes sense as an investment really does not arise. 

Despite some gains here and losses there, the numbers point to a cooling of the market. This makes it all the more important to remain calm and avoid hasty sales. With the right strategy and good preparation, we can handle your sale successfully and profitably.  

The keys here are careful preparation, including transparent documentation of your property, a targeted marketing strategy and a focus on maximizing your proceeds. Proper preparation allows potential buyers to better understand investment risk and efficiently navigate the due diligence process. A well-planned sales strategy can counter trends and prevent value erosion.

Our goal is to help you overcome these challenges and make the sale process as efficient and profitable as possible. 

Regulation: What could still come

Although there is currently less talk about regulation, there could be new measures coming for landlords/property owners, considering the rising rents.

There are several points on the political agenda:

• Tightening of rent control, e.g. a legislative proposal from Hamburg and Bremen: Federal Council try to stop furnished rental
• An expert group in the Bundestag is working on the revival of preemption rights
• The Greens and the Social Democrats are considering a rent moratorium, meaning a freeze on rent for a certain period of time
• Profit taxation. The abolition of the speculation period or extension of the holding period is being discussed repeatedly
• Reduction of the permissible rent increase from 15 to 11 percent over 3 years
• It has been decided that municipalities are obliged to create a standardized rental index

In the regulatory radar, we have summarized the proposals circulating regardless of their feasibility.