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Blog | 3. August 2017

BERLIN’S REAL ESTATE MARKET IS KEEPING ITS FEET ON THE GROUND AS IT GROWS


 


 

Berlin is booming. The population is growing, there are more and more jobs, and wages are increasing – as are rents and property prices. For years now, Berlin has been trying to build enough apartments to keep up with these developments. But the supply of housing has lagged behind demand and prices have risen. Too high? The faster Berlin expands, the louder the voices claiming that Berlin’s real estate markets are in danger of becoming over priced become. Is a property price bubble on the cards?

A range of indicators counter any such fears. First of all, in the space of just four years (2011-2015), Berlin gained around 220,000 new inhabitants – equivalent to the entire population of Erfurt. The latest forecasts from Berlin’s urban development department indicate that, by 2030, another 181,000 people will arrive in Berlin – adding the equivalent of a whole city like Saarbrücken. By the end of 2016, Berlin’s population had climbed to 3.761 million, and by 2030 it will have risen again, to 3.852 million. Property price bubbles are normally typified by speculative construction – these figures, however, prove that exactly the opposite is the case in Berlin.

CHRONIC HOUSING SHORTAGE CAUSES RENTS AND PURCHASE PRICES TO SKYROCKET

Berlin’s governing Senate has calculated that 20,000 additional new apartments need to be built each year. And that’s on top of the more than 1.9 million apartments that the Berlin-Brandenburg Office of Statistics reports already constitute the city’s housing stock. Since 2011, some 44,700 apartments have been built – primarily in Pankow, Mitte and Charlottenburg. But the supply of new housing is nowhere near enough – as demonstrated by continuously rising rents. Anyone looking for an apartment last year soon realised that they would have to pay five percent more than apartment-seekers in 2015. According to the Berlin Hyp/CBRE Housing Market Report, a 60-sqm apartment now costs an average of EUR 540 per month, before utilities and service charges; in Berlin-Mitte, rents can easily be twice as high. The district of Mitte has experienced the most dramatic population surge (8,400 new Berliners in 2015/16), growth that has pushed average rents up to EUR 10.70/sqm. Even the Mietpreisbremse (rental price brake), introduced in Berlin two years ago, has been unable to slow the pace of rental price increases.

Condominium prices are also rising – since 2004, according to figures compiled by Hypovereinsbank, by a staggering 120 percent. The average price of a condominium in Berlin has now climbed to EUR 3,247 per square metre. In coveted neighbourhoods, such as Friedrichshain-Kreuzberg, prices have risen to between EUR 4,400 and 8,000 per square metre.

HIGHER EMPLOYMENT, RISING DEMAND FOR OFFICE SPACE

Strong population growth and rapid property and rental price growth are both clear indicators of Berlin’s prosperity, rather than indicators of a property price bubble. In the first quarter of 2017 alone, employment rose by 2.9 percent – more than in any other German region (Berlin-Brandenburg Office of Statistics). The 55,000 new employees almost exclusively joined service sector companies. This is driving corresponding growth in demand for office space – bulwiengesa expects more than 60,000 new office employees in Berlin by 2020, requiring up to 1.6 million square metres of new office space. But office space is a rare commodity in the City on the Spree. The office vacancy rate has fallen to around 3 percent, while the peak office rent has added almost 50 percent. In just six years, the average rent for modern office space rose from EUR 20/sqm to EUR 30/sqm, as revealed by the latest Consensus Office Market Survey. Forecast: Further increases.

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Blog | 3. August 2017

BERLIN’S REAL ESTATE MARKET IS KEEPING ITS FEET ON THE GROUND AS IT GROWS


 


 

Berlin is booming. The population is growing, there are more and more jobs, and wages are increasing – as are rents and property prices. For years now, Berlin has been trying to build enough apartments to keep up with these developments. But the supply of housing has lagged behind demand and prices have risen. Too high? The faster Berlin expands, the louder the voices claiming that Berlin’s real estate markets are in danger of becoming over priced become. Is a property price bubble on the cards?

A range of indicators counter any such fears. First of all, in the space of just four years (2011-2015), Berlin gained around 220,000 new inhabitants – equivalent to the entire population of Erfurt. The latest forecasts from Berlin’s urban development department indicate that, by 2030, another 181,000 people will arrive in Berlin – adding the equivalent of a whole city like Saarbrücken. By the end of 2016, Berlin’s population had climbed to 3.761 million, and by 2030 it will have risen again, to 3.852 million. Property price bubbles are normally typified by speculative construction – these figures, however, prove that exactly the opposite is the case in Berlin.

CHRONIC HOUSING SHORTAGE CAUSES RENTS AND PURCHASE PRICES TO SKYROCKET

Berlin’s governing Senate has calculated that 20,000 additional new apartments need to be built each year. And that’s on top of the more than 1.9 million apartments that the Berlin-Brandenburg Office of Statistics reports already constitute the city’s housing stock. Since 2011, some 44,700 apartments have been built – primarily in Pankow, Mitte and Charlottenburg. But the supply of new housing is nowhere near enough – as demonstrated by continuously rising rents. Anyone looking for an apartment last year soon realised that they would have to pay five percent more than apartment-seekers in 2015. According to the Berlin Hyp/CBRE Housing Market Report, a 60-sqm apartment now costs an average of EUR 540 per month, before utilities and service charges; in Berlin-Mitte, rents can easily be twice as high. The district of Mitte has experienced the most dramatic population surge (8,400 new Berliners in 2015/16), growth that has pushed average rents up to EUR 10.70/sqm. Even the Mietpreisbremse (rental price brake), introduced in Berlin two years ago, has been unable to slow the pace of rental price increases.

Condominium prices are also rising – since 2004, according to figures compiled by Hypovereinsbank, by a staggering 120 percent. The average price of a condominium in Berlin has now climbed to EUR 3,247 per square metre. In coveted neighbourhoods, such as Friedrichshain-Kreuzberg, prices have risen to between EUR 4,400 and 8,000 per square metre.

HIGHER EMPLOYMENT, RISING DEMAND FOR OFFICE SPACE

Strong population growth and rapid property and rental price growth are both clear indicators of Berlin’s prosperity, rather than indicators of a property price bubble. In the first quarter of 2017 alone, employment rose by 2.9 percent – more than in any other German region (Berlin-Brandenburg Office of Statistics). The 55,000 new employees almost exclusively joined service sector companies. This is driving corresponding growth in demand for office space – bulwiengesa expects more than 60,000 new office employees in Berlin by 2020, requiring up to 1.6 million square metres of new office space. But office space is a rare commodity in the City on the Spree. The office vacancy rate has fallen to around 3 percent, while the peak office rent has added almost 50 percent. In just six years, the average rent for modern office space rose from EUR 20/sqm to EUR 30/sqm, as revealed by the latest Consensus Office Market Survey. Forecast: Further increases.

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