315 Sales by July 2024

Steglitz currently shows the highest market activity citywide for the second consecutive year. With 39 sales, the district leads the list ahead of Neukölln (30), Reinickendorf (24), Wedding (19), and Kreuzberg (19). With a total of 315 transactions as of August 1, 2024, the figure citywide is just below the level of 2023. Since not all closings have been fully evaluated, the trends for prices and factors can only be roughly estimated, with prices around 300 euros per square meter of living space below the previous year. Based on a series of our own transactions and figures from the Berlin Committee of Valuation Experts, we conclude that the price correction has now been completed in almost all districts. 

Positive Outlook for Investors

Following a largely completed consolidation of purchase prices and factors in the Berlin apartment block market, we anticipate an increasing decoupling of price-determining factors from the interest rate environment towards location factors. This means that the already excellent conditions for investors in Berlin will improve further.

Investment security for decades is guaranteed

The investment environment in Berlin is well-known: demand for housing remains strong with a rental rate of around 84 percent and high influx rates. Berlin's economic performance ranks third among EU capitals, while household net incomes are in the mid-range for Germany. As an international center for science and technology, supported by the largest German university landscape, Berlin offers ideal conditions for secure and long-term investments in residential real estate.

Price Development and Micro-locations

Prices are expected to rise throughout the city, with increasing differentiation by districts and micro-locations. We expect significantly rising prices, particularly in young neighborhoods with small households or shared apartments. Intelligent management with turnover control is relevant in these areas.

Advantages for Established Locations

Established locations with large apartments and renovated properties remain very attractive. Turnover rates and investment needs are often lower than in emerging hotspots, while price stability and security through predictability offer more planning certainty for investments. Rental demand is established, and the environment is less affected by development measures such as redevelopment areas. Examples from Mitte, Prenzlauer Berg, and Charlottenburg, where the highest factors in Berlin are paid across all construction year classes, demonstrate high stability.

Rent Index 2024: Recalibration in the Rental Market

In the Berlin Rent Index 2024, pre-1949 old buildings and post-2010 new constructions stand out as "winners" due to significant rent increases across all residential location categories. Particularly, the upper values for old buildings have increased by 10 to 18% in simple, medium, and good residential locations.

New constructions from 2010 onwards have also seen increases in medium and good residential locations. Rental index rents exceeding 20 euros per square meter were rarely seen in previous indices. Additionally, methodological changes in data collection and evaluation have led to more detailed and differentiated values in future rent indices. The higher values reported for 2024 mainly affect smaller apartments with higher turnover, which have seen disproportionately high rent increases due to strong demand from single-person households. Overall, the first qualified rent index in Berlin shows a heterogeneous development. In many properties, rent increases have not been enforceable until recently due to unrealistically low rent index values, which could change in the future. Rent increases are expected in these properties over the next two years until the next rent index, positively impacting the prices of rental properties through the multipliers of annual net cold rent.

Factors Temporarily Decreased

In 2023 and 2024, the factor describing the multiple of the annual net cold rent has significantly decreased. This trend covers almost all districts and locations. In this context, rent development becomes a central pricing factor. Higher net cold rents partially offset lower factors. The rental development is also positively influenced by the declining operating and heating costs following the 2023 energy crisis. These costs, often referred to (unjustly) in the media as the "second rent," reduce the leeway for net rents.

Prices per square metre

The correlation between location, multiplier (factor) and square metre prices for apartment buildings is complex and cannot be reduced to a simple formula. The multiplier is primarily influenced by macroeconomic parameters, such as the interest rate level of financing. In contrast, the price per square metre is primarily based on the location and condition of the property. A low multiplier can be offset by higher net cold rents. Although the price per square metre is determined to a certain extent by the condition of the property, an above-average condition in a less sought-after location can have a positive impact on the sales result and exceed the typical price per square metre for this location. This applies up to the point where it becomes possible to buy in a better location at a lower price level. We offer an individual valuation of your property to determine the maximum market value and advise you on measures that can increase the value of your property. The following table provides an overview of the current prices per square metre for value-relevant floor space in the Berlin districts. This floor space corresponds more or less to the gross area (BGF).

Interest rates, economic and population development form the macroeconomic framework within which small-scale location factors as well as the technical and visual condition adjust the value. In Berlin, a combination of catch-up effects and low interest rates led to significantly rising prices, largely decoupled from macroeconomic factors, over more than 10 years.

Due to high inflation caused by rising resource and energy costs following the start of the Ukraine war, the ECB's key interest rate and subsequently construction interest rates increased.

The demand for tenement houses collapsed, and square meter prices and factors fell for two consecutive years. In 2024, we see a bottoming out and initial signs of a widespread recovery. After significant price corrections, market dynamics, highly differentiated by districts and micro-locations, are picking up again.

Investors are now examining micro-locations more closely and increasingly comparing locations, supported by a larger supply of real estate. A well-maintained apartment block reduces the investment risk for the buyer and can be the decisive factor in a purchase decision.

We are pleased to offer you an individual and free valuation of your property to determine the achievable market value and advise you on measures to optimize the value of your property.

Our 21 district reports provide further information on developments in all Berlin districts.

Purchase price spread

The purchase price ranges within which residential and commercial buildings in Berlin are notarized show the differentiation of prices by location.

Outlook: Inflation, Construction Interest Rates, Market Dynamics

Inflation is decreasing: In June 2024, consumer prices rose by only 2.5 percent, aligning exactly with the projections of the European Central Bank (ECB). Although ECB President Christine Lagarde anticipates some hurdles in the second half of the year, the risk of inflation remaining persistently above the target value of 2.0 percent is now considered lower than it was recently. In May, inflation stood at 2.6 percent, and in April at 2.4 percent. For investors, this means that the window of lower prices and greater selection could soon close.

Typical timing when selling

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.

We Guide You to the Notary

The current market for apartment blocks in Berlin is challenging. While the market is picking up, the development varies significantly across districts. Specific property characteristics must align with the market.

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