Berlin property prices have seen strong growth in the last five years

Mainstream and prime property prices in Berlin have recorded strong growth over the last five year due to a shortage of new supply, an expanding population, a strong economy and a robust labour market, says a new report.

Average prices in Berlin increased by 14.9% in the year to March 2018, outperforming London but in line with rate of growth in Amsterdam and Edinburgh over the same period, according to the research from international real estate firm Knight Frank.

It says that among overseas buyers, those from the UK, the United States and Switzerland are the most active at the moment and looking for properties in the €300,000 to €700,000 price range.

Turkish buyers have been active since 2015 along with other Middle Eastern purchasers with many putting Berlin at the top of their safe haven list. Residents and non-residents are treated identically in terms of tax and purchase costs with many international buyers drawn to the market because of its high quality of life and relatively low cost of living.

It also points out that according to Deutsche Bank Research, rents increased by 11% in 2017.
In Berlin new regulations introduced in 2015 prohibits landlords from increasing rents by more than 10% above the average for each area but the report points out that this only applies to existing homes, not new build apartments or refurbished flats.

It also suggest that supply is set to become an issue. In 2017, although 24,740 building permits were issued, only around 15,670 residential units were completed and this equates to around 1% of the total number of existing homes. But Berlin needs 20,000 units per annum to keep pace with demand.

According to Claire Locke, Knight Frank’s account manager for Germany, the housing market in Berlin is unlikely to see demand weaken in the near future and of all the German cities with a population above a million people, Berlin has the lowest house prices. An apartment in Munich, for example, can cost double that in Berlin.

‘There are of course headwinds in the form of Brexit, tighter monetary policy, affordability concerns and greater regulation, but the city’s economic forecast, low unemployment, good schools and strong wealth creation prospects act as firm foundations,’ she explained.

She also explained that Charlottenburg to the west of the city has long been Berlin’s prime district. It remains popular with families and young professionals. Friedrichshain, part of the up and coming area to the east of the city centre, is experiencing strong demand. Its proximity to Mediaspree, one of the biggest media and telecommunications developments in Berlin, which is now home to Mercedes-Benz, Coca Cola and Universal Music Studios, acts as a big draw for young professionals.

Unlike in London or New York, Berliners like to walk to their place of work. Lichtenberg and Treptow-Köpenick to the east of the city centre are seeing a number of urban renewal projects with families drawn to the green spaces and good transport links.