Sharp upward trend for rents and property in Berlin
Rents and property prices in Berlin on a sharp upward trend
In Berlin, according to property data portal RIWIS, prices for existing townhouse stock went up by 4% year on year in 2016, while prices for detached family houses rose by 5.75%. These strong growth rates were comparable with other cities; however, the overall level of house prices in Berlin remains quite low. The difference in prices is particularly pronounced when compared with Munich. You can buy three houses in Berlin for the price of one detached family house in Munich, and the price ratio is the same for townhouses. However, property prices for existing stock have almost doubled since 2005 and are reaching the level of certain major cities in western Germany.
According to Numbeo, the price per square metre for property outside the city centre stood at EUR 2,800 at the end of 2016. Property prices increased by 13% year on year in 2016, a particularly sharp increase that was higher than in all other major German cities. In Berlin, too, the rapid acceleration in prices is being caused by an acute shortage of homes, with a lack of development land often cited as one of the main reasons for the deficit.
According to the latest Berlin property market barometer, there is a particular shortage of affordable housing in the lower price segment. There is no likelihood of a quick remedy, as the number of building permits and housing completions are increasingly diverging. For example, 82,500 permits were issued between 2009 and 2015, but only 44,000 homes were completed. In no other major German city is there a greater disparity between approved property developments and completions, with 1.9 permits issued for every completed development in Berlin compared with 1.4 in Hamburg and Düsseldorf and 1.3 in Frankfurt and Munich.
At the same time, the city’s population has risen by approximately 150,000 and the number of households by around 75,000. Despite the boom cycle which has persisted since 2009, demand for housing is still rising at a faster rate than supply. This demand is in part due to the strong Berlin labour market, with job growth of 4% in 2016 and more than 20% since 2009 – both impressive statistics. Consequently, Berlin’s unemployment rate has been on a downward trajectory for a number of years and in 2016 fell to below 10% – its lowest level for a quarter of a century.
A number of factors are thus at play in Berlin’s ‘super cycle’ and they could persist well beyond 2020. The current trend could lead to Berlin becoming one of the most expensive cities in Germany, whereas it is currently ranked 13th for prices of existing housing stock.
Source: Deutsche Bank research German housing market 20217