Berlin: Strong demand and limited supply lead to further price increases on residential market

Berlin continues to grow in popularity, with more and more people from all over the world drawn to the city – for its unique urban flair, vibrant arts and cultural scene, diverse employment market, and wide range of educational opportunities. More than 3.8 million people currently live in the German capital, marking a 4.4 percent increase over 2015. Due to the pandemic, Many cities saw a decline in their population in 2020 due to the pandemic, but this was not the case in Berlin. The ongoing growth in population has had a knock-on effect on the housing market: Prices in Germany’s capital have undergone a consistent, unwavering rise. “Living in Berlin has never been more popular. Like almost all major cities though, Berlin also has a housing shortage, with the city’s vacancy rate currently at 0.8 percent. The regions surrounding Berlin are also being impacted more and more by the shortage of supply. New construction activity can only meet the growing demand for affordable homes to a limited extent, and this has meant that prices have risen sharply in all segments,” says Christian von Gottberg, Managing Director of the Engel & Völkers Market Center Berlin Hohenzollerndamm.

Hamburg - (Image source: Engel & Völkers Berlin Market Center Hohenzollerndamm)

Sales revenues on Berlin property market driving transaction volume

The high prices and strong demand for residential property are also reflected in transaction activity. In the first half-year of 2021, the number of apartments sold in Berlin increased by over 40 percent compared to the previous year, with a total of 9,202 properties sold. This resulted in a transaction volume of 3.79 billion euros in Berlin’s freehold apartment segment, which corresponds to a 66 percent increase. In the category for detached and semi-detached houses, the number of properties sold in the first half-year of 2021 rose by 9 percent to 1,374. The total transaction volume was 946 million euros, which is an increase of 30 percent compared to the previous year. An increase in both segments is also expected for the entirety of 2021. 

Excess in buyer demand results in price highs

In the category of existing real estate, the average asking price for freehold apartments in Q3 2021 is 5,588 euros per square metre. This represents an 11.5 percent rise in prices in this segment over the same quarter last year. One square metre of living space in a new building development in Berlin had an average asking price of 7,798 euros in the same period, which corresponds to an increase of 14.7 percent. For detached and semi-detached houses, the average asking price rose by 13.4 percent over the same period last year and now stands at 709,000 euros. Districts close to the centre of Berlin rank among the most sought-after residential locations in the city. But districts closer to the outskirts are now increasingly attracting the interest of buyers. Besides the districts of Mitte, Tiergarten, Grunewald and Dahlem, the highest priced residential areas include Wilmersdorf, Prenzlauer Berg and Friedrichshain. Prices per square metre for freehold apartments in these district range from 6,500 to 21,000 euros. Detached and semi-detached houses can reach here prices of between 900,000 and 10 million euros. Also worthy of particular note is the significant rise in apartment prices in the districts of Spandau and Treptow-Köpenick.

Outlook: City outskirts and surrounding region to become increasingly attractive

Engel & Völkers expects property prices in and around Berlin to continue to rise in the coming year, on the basis of the strong demand and limited supply. Buyer interest is turning in particular to locations in more natural surroundings, as the search radius for many prospective clients grows due to the new option of remote working and the fact that prices in such areas remain relatively low compared to the city centre. Areas such as Falkensee, Kleinmachnow or Königs Wusterhausen are especially popular with young couples, families with children, and professionals with flexible employment conditions – thanks to their peaceful location and country-like, feel-good atmosphere. The average asking price for detached and semi-detached houses is around 460,000 euros in the more rural districts around the edge of Berlin, representing a 19 percent rise over the previous year. “The border between the city of Berlin and the state of Brandenburg surrounding it is becoming more and more blurred, leading to a homogenisation in the mindset of the general population that is now tangible. Communities and neighbourhoods around Berlin, in particular, are very active and engaged in working towards a higher quality of life for residents. This process is reflected not only in the enormous rise in property prices but also in an ever-stronger shift of vibrant urban life to the outskirts of Berlin,” says Günter Th. Fischer, Managing Director of the Engel & Völkers Market Center Berlin-Mitte.

Other trends relating to purchase power and property prices in German cities can be found (in German) in the “Engel & Völkers Market Report for Residential Property in Germany 2020/21”.

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