One month after the Berlin election

On the evening of 20 September, the political direction was clearer, whilst the economic outlook was initially more uncertain for many market participants. Just under a month later, Berlin is debating anti-Semitism within the Left Party, exploratory talks that were suspended and then resumed, and a paper that explicitly calls for the socialisation of large private housing stocks. The political controversies have not subsided.

And the property market? Has it come to a standstill since then?

Since the election, we at Engel & Völkers Commercial Berlin have concluded 19 new purchase agreements and finalised the deeds for 11 properties. In just one transaction, political developments were specifically the reason for one party withdrawing. At the same time, rising financing costs also played a role in that case.

These are figures from our own business. They do not represent statistics for the entire Berlin market. But they do, at the very least, contradict the notion that investors are now turning their backs on the capital en masse.

Between political headlines and purchasing decisions

Naturally, the election is being discussed. It has been a topic of conversation with owners, banks and investors, and even more so since the publication of the exploratory paper. The crucial question, however, is what consequences this will have for specific investments.

A buyer’s calculations take into account the condition of a building, its location, cash flow, the purchase price, financing and development potential. Political risks are just one of several factors affecting this potential, just as the massive excess demand in the rental market is.

Berlin is not a market that has only had to deal with political uncertainties since 20 September. The sector has experienced the rent cap, far-reaching changes in financing, rising construction costs and a long series of regulatory interventions.

Investors have responded to this. They have adapted their strategies, reassessed risks and renegotiated purchase prices. It would be surprising if this mechanism were suddenly to be rendered ineffective by an election.

The market has changed. It has not, however, ceased to function.

What is actually driving the market

In current transaction activity, it is primarily financing costs that are having an immediate impact.

According to our observations, the relevant financing rates have risen from around 3.8 per cent to 4.5 per cent since July. A political announcement initially alters expectations. A change in financing rates immediately affects the purchase calculation.

At the same time, we are observing a price level for residential and commercial properties in Berlin that is currently around twelve per cent below that of 2025. This creates new entry opportunities for buyers. For sellers, it means having to come to terms with revised price expectations.

Why new-build housing will be the real test

This by no means implies that Berlin’s future housing policy would have no economic consequences.

The exploratory paper now presented envisages far-reaching interventions in the housing market. Whether these proposals will actually become law, under what conditions and with what legal consequences, remains to be seen.

For existing properties, additional regulatory risks can generally be factored into the purchase price calculation. If an investor anticipates lower future returns, they will bid accordingly lower.

With new-build projects, the situation is fundamentally different. A property developer cannot simply offset higher construction costs, financing costs, protracted planning permissions and additional regulatory uncertainty by paying a lower purchase price. At some point, the threshold is reached beyond which a project is no longer economically viable. Added to this is the question of whether the completed building can subsequently be sold at a satisfactory price or operated profitably in the long term.

It is precisely here that we see the greater risk posed by current political developments. Berlin needs additional housing. If the conditions for its creation continue to deteriorate, the existing shortage will not be overcome.

Berlin remains an exceptional location

Amidst all the justified discussion about regulatory risks, one thing is easily overlooked: Berlin’s fundamentals did not change on election night.

Berlin is the capital and seat of government, an international centre for science, home to major companies and a key hub for technology and start-ups. Research, culture, politics and business are all concentrated within a small area here. The city remains attractive to international talent, students, businesses and investors.

Equally unchanged are the problems Berlin must solve: a housing shortage, limited land availability, protracted planning permission processes and an infrastructure that is reaching its limits in many places.

What remains one month after the election?

On election night, we had warned internally against drawing conclusions about the economic reality of the coming years based solely on an election result. One month on, we can at least say this about our business: transactions are continuing.

Nineteen new purchase agreements and 11 notarised deeds since 20 September are no proof that investors are indifferent to political decisions. However, they do show that buying and selling decisions are still being made, even though political uncertainty has grown.

Risks are being calculated. Prices are being negotiated. Some transactions fall through, whilst others are becoming possible precisely under the changed conditions.

Anyone investing in Berlin must keep an eye on politics. However, they should not lose sight of the market in the process.

And politicians would do well to take seriously the difference between a property market that can cope with new risks and new-build housing, which may not even get off the ground in the face of these risks.