The housing shortage in Berlin remains high. The German capital now lacks around 145,000 flats, said Jürgen Allerkamp, CEO of the IBB Investment Bank Berlin, as he presented the latest IBB Housing Market Report (source: haufe.de). Yet despite the huge supply gap, the number of planning consents issued in Berlin in 2019 declined by seven percent year on year. The number of planning consents both for new flats in multi-unit dwellings (-6.7 percent) and for flats created through existing-building retrofits (-13.1 percent) plummeted (source: statistik-berlin-brandenburg.de). This means that housing construction in Berlin lags far behind the rest of the country – because nationwide, the planning approval figures were actually on the rise in 2019 (source: destatis.de).

This means that the downward trend that the German capital experienced in previous years persisted, as both 2018 and 2017 had seen the number of planning consents drop in Berlin (source: statistik-berlin-brandenburg.de). The trend could actually accelerate in the years ahead because the rent cap discourages many investors from investing their capital in housing construction in Berlin. According to Allerkamp, head of the IBB investment bank, the rent cap could indeed cause investors to lose interest in new-build construction in the German capital. He appears to see a need for investor incentives in order to get housing construction in Berlin up to speed: “We are doing everything we can under deteriorating conditions to create incentives that will motivate a wide variety of investors to help address the situation.” (source: ibb.de).  

Homeownership on the Rise in Berlin

That being said, the new IBB Housing Market Report does contain one piece of good news, namely that the number of homeowners in Berlin appears to have gone up over the past years. Between 2014 and 2018, the homeownership rate rose by one fifth to 17 percent. Berlin is admittedly still a city dominated by tenancies, but there is a clearly discernible trend among the population to go for homeownership.

This is obviously to some extent explained by the massive rent hikes of recent years, which put serious strain on average household budgets. 40 percent of the tenant households in Berlin spend at least 30 percent of their income on gross rent (including base rent and service charges, but not heating expenses). For what it’s worth, the rental dynamics have slightly slowed lately, with asking rents climbing at an average rate of 1.3 percent in 2019.  

Fast Growth in Selling Prices Continued in 2019

The price growth, by contrast, remains defined by keen demand for condominiums. During the fourth quarter of 2019, the average condominium price  was 9.4 percent higher than it had been during the prior-year period. Condominium buyers paid 4,777 euros per square metre on average (either new-build or existing).

Due to the potential effects of the coronavirus pandemic, it is too early to say whether the price trend in 2020 will follow a similar trajectory. However, Berlin’s condominium market was characterised by a supply shortage that is here to stay, not least because the number of approved new-build condominiums (not counting existing-building retrofits) plummeted from 6,863 to 3,655 flats in 2019.