Apartment Building Berlin Market Report 2020

Lateral movement in prices and longer marketing duration

Offer prices for rental properties in Berlin have more than doubled between 2008 and 2020. From 2019 to 2020, a slight downward trend was observed for the first time in years. The rent cap introduced in February 2020, the increasing number of milieu protection areas, pre-emptive rights of the districts (in favour of third parties) and the corona effect have a dampening effect. Overall, a longer marketing period can also be observed depending on pricing. 

It should be noted that the pricing and marketing duration for apartment buildings in Berlin depends largely on the sales channel. Open marketing via portals is always the far less advantageous option. In any case, a discreet mediation via internal channels is to be preferred. Properties offered openly on the market usually reflect exaggerated prices and increase the risk of disruptive transactions, as well as the exercise of the right of first refusal in milieu protected areas. The discreet brokerage within our proven and highly solvent network regularly achieves the best possible results and protects seller and buyer from negative external influences.   

Berlin tenants in good shape

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:

Environmental protection areas in Berlin

Use our milieu protection map to check whether your apartment building in Berlin is located in a protected area, an area under investigation or a suspected area. Our milieu protection map is continuously revised and updated on the basis of the resolutions passed by the district assemblies (BVV). Please also visit our milieu protection area for further information.

Conversion Ordinance restricts the scope of action for buyers and sellers

Since 2015, the conversion of rental houses into condominiums in protected areas has been subject to approval. The Conversion Ordinance (Umwandlungsverordnung), which remains in force for 5 years, was last extended for another 5 years in spring 2020. It is common practice to extend the regulation at will, as the example from Hamburg shows. Contrary to what is often claimed by politicians, the conversion of rented apartments into condominiums is the only way for many Berliners to get from rent to ownership. In milieu protection areas, permission for former owners is made conditional on the condition that for a period of 7 years the property is sold only to the tenants, which makes it virtually impossible to split a rented house. If a former owner sells his or her tenement in an environmental protection area, the buyer is requested to waive the division of the tenement for a period of 20 years in an averting agreement. The table shows how the conversions in the old districts have developed.

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. 

Tenement building

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.