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Blog | 29. August 2016

IN BERLIN IT’S CHEAPER TO BUY A CONDOMINIUM THAN TO RENT AN APARTMENT

Not many people own real estate in Berlin – the capital is a city of tenants. 84 percent of Berliners live in a rental apartment and not in their own condominium. But that could well change in the future. In the face of ever higher rents, more and more Berliners are seriously considering buying a condominium. On the one hand, this development is largely due to historically low interest rates, which make real estate more affordable, and, on the other hand, to the increasing wages in Berlin. Last year, the city’s residents earned about 2.1 percent more than in the previous year; the average monthly income climbed to around €3,100.
There is also another aspect at play: It has never been cheaper to buy real estate – and this remains true even though prices for condominiums have risen in recent years. In Berlin, condominium prices have risen by nine percent per year since 2013. For example, in Mitte, the square meter price for an apartment in a period building can reach more than €3,500; for an apartment in a new building at least €4,700. In Berlin, the average square meter price across all districts and categories amounts to just under €3,000.

 

BUYERS MAKE THE BIGGEST SAVINGS ON CONDOMINIUMS IN LICHTENBERG AND NEUKÖLLN

At first glance, it seems contradictory that it is cheaper to buy real estate rather than renting it. Currently, it is indeed cheaper to buy a condominium on the Spree than to rent one – even if this is not the case in all parts of Berlin. On behalf of the Norddeutschen Landesbausparkasse Berlin-Hannover (LBS Nord), the research institute, empirica, has recently identified which districts are more advantageous for real estate buyers in comparison with renters. The result: It is cheaper to buy a condominium than to rent one in ten of Berlin’s districts. Would-be real estate buyers make the biggest savings in Lichtenberg. On average, a buyer would pay about €115,000 for a previously owned condominium. The monthly mortgage payment would be about €359, around €170 less than the equivalent rental price. Buyers in Neukölln would also save about €150 if they bought instead of renting, with an equivalent apartment costing roughly €650 per month to rent. And even in Steglitz-Zehlendorf, buyers save €59 per month compared to renters.

 

THE CALCULATION FOR BUYING REAL ESTATE IN BERLIN: CASH RESERVES PLUS LOW INTEREST RATES

The opposite of the above situation is true only in Berlin’s most expensive districts – in Mitte and Friedrichshain-Kreuzberg, renting is more affordable than buying. The average purchase price for a condominium in Mitte is roughly €213,000. Renting the same apartment would cost €620 per month, whereas buying would add up to €667 – an extra €47 per month for the buyer. In Friedrichshain-Kreuzberg, renting generates savings of €27 per month compared with the higher monthly cost of buying an apartment.
The research from empirica is based on condominium buyers paying 25 percent of the purchase price upfront, with interest of 2 percent per annum on their 75 percent mortgage, and repayments of three percent per year. Based on these assumptions, an average buyer in Lichtenberg would be looking at financing their condominium with 3.5 times their annual net income. The equivalent figure for Neukölln is 4.8, and in Spandau 5.2. For a condominium in Mitte, an average buyer would have to borrow 8.7 times their annual net salary.

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Blog | 29. August 2016

IN BERLIN IT’S CHEAPER TO BUY A CONDOMINIUM THAN TO RENT AN APARTMENT

Not many people own real estate in Berlin – the capital is a city of tenants. 84 percent of Berliners live in a rental apartment and not in their own condominium. But that could well change in the future. In the face of ever higher rents, more and more Berliners are seriously considering buying a condominium. On the one hand, this development is largely due to historically low interest rates, which make real estate more affordable, and, on the other hand, to the increasing wages in Berlin. Last year, the city’s residents earned about 2.1 percent more than in the previous year; the average monthly income climbed to around €3,100.
There is also another aspect at play: It has never been cheaper to buy real estate – and this remains true even though prices for condominiums have risen in recent years. In Berlin, condominium prices have risen by nine percent per year since 2013. For example, in Mitte, the square meter price for an apartment in a period building can reach more than €3,500; for an apartment in a new building at least €4,700. In Berlin, the average square meter price across all districts and categories amounts to just under €3,000.

 

BUYERS MAKE THE BIGGEST SAVINGS ON CONDOMINIUMS IN LICHTENBERG AND NEUKÖLLN

At first glance, it seems contradictory that it is cheaper to buy real estate rather than renting it. Currently, it is indeed cheaper to buy a condominium on the Spree than to rent one – even if this is not the case in all parts of Berlin. On behalf of the Norddeutschen Landesbausparkasse Berlin-Hannover (LBS Nord), the research institute, empirica, has recently identified which districts are more advantageous for real estate buyers in comparison with renters. The result: It is cheaper to buy a condominium than to rent one in ten of Berlin’s districts. Would-be real estate buyers make the biggest savings in Lichtenberg. On average, a buyer would pay about €115,000 for a previously owned condominium. The monthly mortgage payment would be about €359, around €170 less than the equivalent rental price. Buyers in Neukölln would also save about €150 if they bought instead of renting, with an equivalent apartment costing roughly €650 per month to rent. And even in Steglitz-Zehlendorf, buyers save €59 per month compared to renters.

 

THE CALCULATION FOR BUYING REAL ESTATE IN BERLIN: CASH RESERVES PLUS LOW INTEREST RATES

The opposite of the above situation is true only in Berlin’s most expensive districts – in Mitte and Friedrichshain-Kreuzberg, renting is more affordable than buying. The average purchase price for a condominium in Mitte is roughly €213,000. Renting the same apartment would cost €620 per month, whereas buying would add up to €667 – an extra €47 per month for the buyer. In Friedrichshain-Kreuzberg, renting generates savings of €27 per month compared with the higher monthly cost of buying an apartment.
The research from empirica is based on condominium buyers paying 25 percent of the purchase price upfront, with interest of 2 percent per annum on their 75 percent mortgage, and repayments of three percent per year. Based on these assumptions, an average buyer in Lichtenberg would be looking at financing their condominium with 3.5 times their annual net income. The equivalent figure for Neukölln is 4.8, and in Spandau 5.2. For a condominium in Mitte, an average buyer would have to borrow 8.7 times their annual net salary.

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