Corona, the war between Russia and Ukraine and rising interest rates could actually have a devastating impact on the housing market in Berlin. However, there is no sign of the super cycle stagnating. On the contrary, prices are continuing to rise, albeit somewhat more slowly than before. This means that a boom has been taking place in Berlin for 15 years now, benefiting homeowners and other investors.
The construction sector is clearly feeling the strain of the war. Prices for materials and energy have risen in recent months. Nevertheless, this has not yet had any impact on the Berlin real estate market.
The development of asking prices for condominiums in Berlin
Berlin is mainly home to apartment complexes with multi-storey apartments. Many of them are rented out, but there are also condominiums. In the fourth quarter of 2020, the median value for condominiums in Berlin was EUR 5,083 per square meter. One year later, in the fourth quarter of 2021, the median value was EUR 5,556 per square meter. This represents an increase of 9.3 percent within one year. Compared to apartment prices in 2017, prices have risen by 42.5 percent.
It is striking that new-build apartments continue to be significantly more expensive than existing apartments. The latter are offered for sale much more frequently. In 2021, 87.3 percent of listings were for existing apartments. While asking prices for existing condominiums have risen steadily, prices for new-build apartments have stagnated for several years. A sharp increase of 12.6 percent was observed in 2021. The average price per square meter for new-build apartments was €5,930 in 2021, rising to €6,678 per square meter in 2022.
Condominiums offered at a price per square meter of less than €4,000 can now only be found in Marzahn. Even outside Berlin, the median value for condominiums is €4,352 per square meter.
The current and future market situation
Most of Berlin’s districts have seen constant development in recent years. However, it cannot be overlooked that there is a clear excess demand in the Berlin area. The number of condominiums on offer cannot meet demand. For this reason, the market situation for condominiums is described as tense. Berlin continues to be a city where people mainly rent. Condominiums have a comparatively small market share.
What is the investment climate for condominiums in Berlin?
As already mentioned, Berlin has been suffering from a supply deficit for several years now. Significantly more new and existing apartments are being sought than are actually available on the market. However, prices, which have risen sharply in recent times, are dampening the willingness of prospective owners to invest. In view of the new population forecasts, however, experts assume that there will continue to be a surge in demand in the future. This surge applies to all price categories and apartment sizes. The investment climate for new-build apartments is stable in the average range. For existing apartments, it is predicted that the investment climate will level off in the coming years and will then also only be in the average range.
Which sizes and features are particularly in demand for condominiums in Berlin
The greatest demand for condominiums is for medium-sized and large apartments in the lower to medium price range. Potential buyers are primarily looking for apartments between 45 and 100 square meters, while demand for apartments smaller than 54 square meters is declining. Apartments in the high price segment are particularly in demand if their square meterage is over 100.
Overall, it can be observed that the demand for apartments with a medium size of between 70 and 100 square meters is increasing. These are mostly in the mid-price segment. Compact apartments, which are in the lower price segment and therefore affordable for all age groups, are also very popular.
In a survey, respondents were able to choose what they look for in a condominium. First and second place was taken by two features, each with a percentage of 73: Condominium owners want a terrace or balcony to enhance the quality of life in the big city. The energy status of a condominium is also extremely important. In third place is a stable social environment. It is also important to have a good infrastructure. Anyone buying an apartment in Berlin’s city center wants to be close to buses, trains and cycle paths. Shopping facilities, schools and doctors should also be within easy reach.
The affordable purchase price and a bathroom in mint condition were ranked fifth and sixth in the survey. Less important, on the other hand, are an attractive outdoor area and a fitted kitchen in mint condition.
What is the current supply situation?
The majority of residential buildings in Berlin have three or more apartments. Only 8.6 percent of buildings consist of a single apartment. Residential complexes with 2 apartments account for 1.8 percent. In 2020, Berlin consisted of a total of 1,982,825 apartments. 86.6 percent of the total stock belongs to multi-storey residential buildings. The number of living spaces is distributed as follows: 23% of apartments have a single living space. 32.8 percent, and therefore the largest group, are apartments with two rooms. Three-room apartments account for 26.7 percent. Only 11.3 percent of apartments have four rooms and 6.3 percent have five or more rooms.
It can be observed that small and medium-sized apartments in particular are being added to existing apartments. In contrast, there are rarely large new-build apartments with four or more rooms. 54.1 percent of apartments were built between 1949 and 2010. 25.9 percent fall into the “old building” category. They date from before 1918. 14 percent of the apartments are in residential complexes built between 1919 and 1948.
New construction and conversion of rental and owner-occupied apartments in Berlin
Only 5.9 percent are new builds completed after 2011. The structures of the housing market are changing significantly. Between 2011 and 2020, a total of 7.3% of the multi-storey apartment stock was converted from rental apartments to owner-occupied apartments. In Friedrichshain-Kreuzberg, the conversion rate was 2.13% and thus the highest in direct comparison to the other districts of Berlin. Charlottenburg-Wilmersdorf, Pankow and Tempelhof-Schöneberg also saw an above-average number of conversions. The rate was lowest in Marzahn-Hellersdorf at 0.14 percent. Conversion activity is therefore mainly concentrated in the city center of Berlin.
Where is a lot of new construction going on?
In 2020, a significant decline in housing completions was observed for the first time since 2005. A total of 16,337 new apartments were completed in Berlin in 2020. This corresponds to a decrease of 2,662 apartments. Since 2010, the number of apartments built each year had risen continuously. In 2019, a peak of 18,999 apartments was recorded. The coronavirus pandemic was the trigger for several bottlenecks. Construction capacities were significantly restricted by the global pandemic.
Berlin is moving ever closer together. The Housing 2030 urban development plan aims to create a total of 199,000 new apartments in Berlin by 2030. The district of Pankow is set to accommodate up to 48,000 new-build apartments, putting it in first place. Berlin-Mitte, Neukölln and Charlottenburg are in the middle of the field. Steglitz-Zehlendorf and Tempelhof-Schöneberg bring up the rear. They are expected to accommodate between 6,000 and 14,000 new apartments in Berlin.
Conclusion
Overall, it can be observed that there are large supply deficits in all price segments and apartment sizes. Households looking for a condominium in Berlin are encountering a highly competitive real estate market. The upper price range is the only one that continues to show a stable balance of supply and demand. The observations can be applied to all districts of Berlin, but are particularly acute in the city center. Anyone looking to buy a condominium has clear requirements. The most important aspects in this context include a terrace or balcony, low energy consumption and a good infrastructure. A stable social environment is also a decisive argument for those looking for a condominium. On the other hand, large outdoor facilities or fitted kitchens in mint condition are less important.
Demand for apartments smaller than 45 square meters has decreased overall, but is still far from being at an equilibrium.
According to experts, the investment climate for existing and new-build apartments is average to good. The investment climate for new-build apartments has improved compared to last year, allowing it to adapt to the general investment climate. The effects of the coronavirus pandemic are not apparent at first glance. On closer inspection, however, it is noticeable that significantly fewer new-build apartments were completed in 2021 than in the previous year. This is partly due to the bottlenecks in construction capacity. Demand for owner-occupied and rental apartments will therefore most likely continue to rise, leading to an increase in purchase and rental prices.
There are ambivalent impressions in other areas. The assessments of previous years could not be confirmed in every category. The experts surveyed state that the situation for building permits is unlikely to change, while investment in condominiums will increase overall. Even if the migration movement in Berlin is accompanied by overall population growth, the experts paint a rather positive overall picture.
