Berlin housing prices rise steadily as rental supply shrivels
Berlin is seeing anything other than the intended relief on its housing market from its new housing regulation, with the supply of available housing continuing to decline while demand pressure is still increasing, according to German property portal ImmoScout24.
The Berlin law on rent caps (the ‚Mietendeckel’) prohibiting ‘excessive rents’ comes into effect on the 23rd November, a date rapidly approaching. For the purposes of the law, a rent is considered to be excessive if it is more than 20% above the relevant rent cap in the locally valid ‘rent table’. In which case landlords are obliged to reduce the rents of affected existing flats in Berlin to the permissible rent ceilings from this date.
ImmoScout’s data shows that over the past year (Sept. 2019 to Sept. 2020) the offered rents for apartments affected by the rent cap fell by 5%, from an average of €12.91 per square metre in September 2019 to €12.26 per square metre in September 2020.
However, the total supply of rental apartments in Berlin has decreased by 41.5% within one year (Sept. 19 to Sept. 20). This effect is almost entirely accounted for by existing rental apartments completed before 2014. Thus, the supply in this segment fell by 59.1% in the same period. By contrast, new apartments completed after 2014 are increasingly offered on ImmoScout24 with an increase of 6.7%.
Since February this year, the number of contact enquiries per advertisement for apartment completed before 2014 has exploded by a triple-digit percentage year-on-year. In September, this figure was as high as 172% compared to the previous year, indicating a big surge in demand.
It’s clear that this is very much a Berlin problem, as a look at the other Top 7 big cities in Germany shows. In Hamburg, Düsseldorf, Frankfurt am Main, Cologne, Munich and Stuttgart, the supply of residential property on ImmoScout24 has increased significantly over the same period. In the top 6 cities, for example, the total supply of rental apartment rose by 35.3% (Sept. 2019 to Sept. 2020). The supply of rental apartments completed before 2014 also rose by 38.5% in these cities.
ImmoScout24’s managing director Dr. Thomas Schroeter said, "Even though rents for apartments completed before 2014 have fallen in Berlin, the rent cap does not provide relief for the Berlin housing market. On the contrary. The total supply of affordable housing has been reduced by the rent cap. This means that the legal regulation is making the search for accommodation in Berlin more difficult. The pressure of demand is enormous, especially for existing apartment, and finding accomodation is harder than ever."
Over the year, the total supply of condominiums (apartments for sale for owner or third party occupation) in Berlin on ImmoScout24 simultaneously increased by 13.2% (Sept. 19 to Sept. 20). The supply of condominiums completed before 2014 increased by 23% in Berlin during the same period. Despite the increasing supply, the supply prices for existing condominiums built before 2014 rose by 5.8% in the same period. While the average price in September 2019 was 4,788 euros per square metre, the average offer price one year later is now €5,068 per square metre.