Germany Berlin residential market report 2024

Inflation, rising construction costs and high interest rates dashed many a dream of home ownership in 2023. As a result, purchase prices have fallen, slightly in the case of condominiums and more sharply in the case of apartment buildings. Meanwhile, pressure on the rental housing market continues to increase, and as a result, rental prices are continuing to rise sharply, and there is a sustained trend towards moving to the surrounding area, despite prices also rising there.

Despite the rent freeze, asking rents in Berlin rose by 18,3 pct year-on-year to EUR 13,60 per sqm. While rents in the high-priced segment rose by 8,7 pct to EUR 26,00 per sqm - a slightly weaker increase compared to previous years - the lower-priced segment recorded an increase of 4,9 pct to EUR 6,25 per sqm after a minimal decline in the previous year. The spread between rents in the upper and lower market segments was almost EUR 20 per sqm at the end of 2024.

The drastic decline in the number of unfurnished rental apartments on offer in Berlin is continuing in view of the strong demand for housing and the low fluctuation rate. In addition, small private landlords are increasingly relying on furnished apartments or short-term rentals, partly in order to be able to cover the debt service of the financing. This is resulting in significantly higher rents. The supply of available rental apartments is so limited that, for the first time, there were more offers for owner-occupied apartments than for rental apartments on the Berlin residential market.
Michael Schlatterer, managing director at CBRE in Germany

In 2023, asking prices for condominiums fell slightly across all segments in Berlin for the first time by 1,4 pct to EUR 5.75 per sqm - after many years of sometimes sharp increases. The upper and lower market segments also recorded declines, with the upper segment falling by 2 pct and the lower segment by 5,4 pct. Nevertheless, the upper market segment remained above the EUR 10.00 per sqm mark for the second year in a row. The asking prices for multi-family homes fell by 11,7 pct to EUR 3.17 per sqm in 2023.

Residential construction in Berlin and the surrounding area

A total of around 220 construction projects with around 35,000 apartments are currently in the concrete planning, development or construction phase in Berlin. Only 15,1 pct of these apartments are being built within the S-Bahn ring. Particularly in the outer districts, where the state-owned Berlin housing associations are predominantly active, some of the large-scale rental housing construction projects are continuing.

The proportion of additional apartments within the S-Bahn ring is continuing to fall and major new construction potential appears to be exhausted, meaning that developments are concentrating on areas outside it. This is because demand for housing remains high in the areas surrounding Berlin as well, due to population growth as a result of migration gains, although hardly any privately financed construction projects are being started. Despite this demand, prices for detached and semi-detached houses have fallen almost everywhere in the surrounding municipalities due to the uncertain economic outlook and higher interest rates on financing.
Michael Schlatterer

New construction activity urgently needs to be stimulated again. I therefore very much welcome the current draft for the Berlin Senate's 'Faster Construction Act' and hope that it will come into effect 'quickly'. A standardization of building regulations as well as a relaxation of building regulations and digital interfaces would help housing construction to pick up speed again. It is now high time to act, to simplify and speed up procedures. Energy requirements should also be standardized with a sense of proportion at a good ecological level in order to create calculable framework conditions and take social aspects into account. But I don't just want this for Berlin.
Sascha Klaus, chairman of the Board of Management of Berlin Hyp

Institutional residential real estate transaction market

The portfolio transaction volume on the Berlin institutional transaction market amounted to around EUR 1,8 bln in 2023 – EUR 600 mln less than in the previous year, while the 10-year average was around EUR 5,7 bln. Project developers accounted for less than EUR 200 mln, around EUR 502 mln less than in 2022. The slump in new construction and the resulting lack of supply were clearly noticeable here.

The general wait-and-see attitude, especially among international investors, is still noticeable despite the strong fundamental data in Berlin – with rising rents and falling vacancy rates coupled with too little new Berlin residential construction. The market expects interest rates to fall over the remainder of the year. On this basis and with simplified procedures, more investment decisions can then be made again for the future-oriented capital city of Berlin. There are still differences between buyers and sellers in terms of price levels, but we are slowly seeing a convergence here. In particular, new-build projects in multi- storey residential construction from an ESG perspective would be a sought-after investment product, but there is currently a lack of corresponding offers.
Sascha Klaus