For years, real estate prices in Berlin have known only one direction: up. This trend could now be halted for the time being. Changes in the underlying conditions, such as the rise in construction interest rates, are depressing price expectations. Nevertheless, the German capital is in a good long-term position in terms of real estate value development. More information on the development of prices in Berlin and a forecast for the future can be found here in the blog.
Real estate prices have risen sharply in recent years in virtually all of Germany. Although demand for real estate has also risen in more rural regions, particularly as a result of the trend toward home offices, the increases in value have been particularly strong in the major cities. In Berlin, average prices per square meter for a owner-occupied apartment have risen by more than 250 percent in the past ten years to 5,502 euros in 2021, according to figures from the market research institute Empirica Regio.
Looking at it more closely, this is not surprising - in Berlin in particular, the excess demand is great. Not only the great cultural offerings, but also the diverse economic opportunities make the German capital a center of attraction for young people and families from Germany, Europe and all over the world. In addition, the supply of housing there is comparatively low - the construction of new apartments has been stagnating for years. The slow pace of land acquisition is now compounded by the high cost of building materials, rising interest rates and the increasing shortage of skilled workers. And political decisions such as the rent cap overturned by the Federal Constitutional Court and the designation of more and more areas for the protection of urban districts are also hampering investment in new housing.
Purchase price per sqm
Prices for owner-occupied apartments in Berlin vary depending on location. According to an analysis by the Empirica Institute on behalf of LBS Nord, the district of Charlottenburg-Wilmersdorf is the city's top performer, with an average price of €6,322 per square meter for an existing residential property. Apartments in the upper price segment, which account for around a quarter of all offers, are available there starting at €7,867 per square meter. Second place goes to the district of Friedrichshain-Kreuzberg, followed by Pankow and Mitte. While in Friedrichshain-Kreuzberg an average of 5,769 euros per square meter has to be paid, in Pankow the figure is 5,660 and in Mitte 5,641 euros per square meter for an existing apartment. In the other districts, average prices range between €4,000 and €5,000 per square meter. Only in Spandau and Marzahn-Hellersdorf are apartments still available on average for less than 4,000 euros per square meter. Altogether, prices rose in all districts compared with 2021.
Purchase price per sqm
After years of steady increases, some factors now suggest that prices could fall again for the first time this year. The war in Ukraine, high inflation, rising construction interest rates - all these factors are causing uncertainty in the market and could depress demand and thus prices in the short term. In contrast to what some sections of the public are describing, however, there is no threat of a real estate bubble bursting and prices plummeting, but rather a sideways movement in purchase prices is likely.
In the long term, however, a further increase in real estate prices in Berlin is to be expected, as the city remains attractive and an end to the strong influx is not in sight, as recently confirmed by a market report from ImmoScout24. The overriding demand - apart from the currently more difficult general conditions - remains high with supply expected to remain tight. Investors can rejoice, because they benefit in two ways: In addition to continuously rising rental income, they can also look forward to increases in the value of their properties. And for people who still want to fulfill their dream of owning their own property, the general conditions remain good. Despite the recent rise in interest rates, they continue to be at a historically low level.
Especially in Berlin, investing in a residential property is still recommendable. A study by PwC even sees Berlin as the most attractive real estate location in Europe. Although long-term forecasts are difficult, there is no indication of an end to the excess demand and thus an end to the continuous increase in the value of real estate. Whether as a capital investment or self-used freehold apartment, there is hardly any other asset class that offers such a low-risk, yet high return as real estate. If you are interested, please feel free to contact us - as a reliable and experienced partner, we at ACCENTRO will assist you throughout the entire purchasing process and find the property in Berlin that perfectly suits your needs.