Despite the control over the level of rent and despite measures designed to cool the real estate market in the city, housing prices in Berlin continued to rise sharply last year, according to a review for the 2022 summary of Bank Hyp AG in collaboration with a leading German real estate appraisal company. In fact, it seems that Berlin has a “real estate mini-climate”, which behaves differently from that of Paris, London and many other European cities, which experienced price declines in the past year due to interest rate hikes and rising mortgage prices.
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The high demand is also reflected in the local media, which publish documents of long lines, sometimes of hundreds of people, trying to visit an apartment offered for rent. The acute housing shortage in Berlin, due to positive immigration to the city and the paucity of vacant apartments, has also created a gray market for sublet apartments at high prices.
The data presented by Bank Hyp AG last week should reflect the average rent and purchase prices in the German capital. In Berlin, there are many apartments that are rented at prices lower than the market, to those who arrived in the city a decade or more ago, or even to old residents whose contracts were denominated in German marks. On the other hand, there are many apartments that are rented at very high prices to those who are now moving to the city. The bank collects reports on transactions – more than 23 thousand in the past year, which constitute a sample that should represent what is happening in the city.
The rent increased by 9.5% compared to last year
The average rental price in Berlin now per square meter, according to the report, is 11.5 euros – an increase of 9.5% compared to last year. The rental prices of brand new apartments and apartments that have undergone extensive renovations at the “luxury” level even jumped at a higher rate, to 23.91 euros per square meter
Prices are rising all over the city, and even the Lichtenberg neighborhood, which was previously considered a “designated” area due to extreme right-wing activity and general atmosphere, recorded a price jump of 23% in just one year. Renters desperate for a chance to find a place in the more attractive parts of Berlin, it seems, are turning to the once unfashionable suburbs. In the Mitte district, the average rent is 15.19 euros per square meter. In Charlottenburg-Wilmersdorf it is 14.92 euros per square meter and in Friedrichshain-Kreuzberg it is 14.5 euros per square meter.
“There is a large influx of non-residents to Berlin, but also of residents from other regional states within Germany causing the demand for housing in Berlin to intensify,” says the manager of the CBRE company specializing in real estate appraisals, which was a partner in writing the report.
About two weeks ago, a broad coalition, a sort of local unity government, came to power in Berlin – which is a state in the Federal Republic of Germany – led for the first time in more than two decades by the conservative CDU party. Kai Wagner, the new mayor of Berlin, promised the residents to act to alleviate the housing crisis, and was elected, among other things, against the background of the failure of the previous governments, led by the Social Democrats, to change the situation.
His task will be difficult. Construction in Berlin, according to the data of the latest report, fell by 14% in the last year, among other things due to the tightening financial conditions. “New construction has almost come to a standstill,” the report states.
Not only internal German and international immigrants encounter difficulties in finding a place to live in Berlin, but also young families who are looking for bigger apartments and houses as they expand. The way out for many of them is to buy apartments, due to the inability to rent, and despite the relatively historically high interest rates.
The result is that the prices of private houses around Berlin have risen sharply in recent years, more than twice, to 4,900 euros per square meter. In Berlin itself, apartment purchase prices have also risen at a similar rate to rents (8.3% in 2022) to a price of 5,833 euros per square meter ( NIS 23,800).
Creative suggestions on the left: divide the meterage differently
The difficult situation, which is shared not only by Berlin but also by cities such as Munich, Frankfurt, Stuttgart and Hamburg – but is most severe in the German capital – leads to creative proposals regarding a possible solution.
According to the initiative of the left-wing “Di Linka” party, the federal government should start promoting “apartment exchanges” between young families and elderly people who have been living in protected contracts for decades, in large apartments that they no longer need. “The problem in Germany is not one of square footage, but of its distribution,” declared the party, which was the one that initiated the failed housing price freeze in Berlin three years ago.
While the political system is not enthusiastic about the idea, researchers from the University of Regensburg published in recent weeks a more radical proposal – to allow a significant increase in the rent paid by adults with old contracts and large apartments, in order to “incentivize” them to leave, and free them up in favor of young couples and families.
An economics professor named Stephan Sebastian, from the University’s Real Estate Research Institute, suggested in interviews published in the German media to “partially remove protection for older tenants,” and perhaps even completely remove protection for their rents, in order to force landlords to raise their rents. , and make them vacate the large apartments – the rent is calculated according to the square footage – for smaller apartments that they can afford. Of course, the expert added, the economic and social situation of the adults must be taken into account, and moves that would harm the conditions must be avoided.
Germany’s powerful tenants’ associations (half of the country’s population lives in rent) rejected the ideas to “redistribute” the real estate. “The only thing that needs to be done is to build more and faster,” said in response to the suggestions from the researchers.
Inflation pushed rents up
The current federal government, which has been in office for almost a year and a half, has not yet dealt significantly with the housing crisis in Germany, which is especially burning in Berlin. In the coalition agreements signed in December 2021, it is stated that it will work to limit the permitted rent increase in demand areas to only 11%, instead of 15% or 20% as is currently allowed (for three years). Another issue that is about to be addressed is the reference to the attachment of the rent to the price index, which has soared in the last year in Germany. Some contracts include a clause that allows the landlords to raise the rent according to the index. This section has so far not received much attention due to the moderate inflation that has existed in recent years, and now threatens to make the rents more expensive by more than 10%, and even more.
Preliminary data regarding the first quarter of 2023 show that Berlin continues in a trend that is contrary to the real estate markets in other countries, and that apartment prices have increased there, after several quarters of decline. As in Israel, the United Kingdom, and other countries that face high inflation by raising interest rates, the Bank The European Central Bank is in the process of raising interest rates quickly.
According to a report in Bloomberg, the prices of new apartments in the city increased by 0.8% in the last quarter. According to the report, which uses other data from the Immobilienscout company, the average price per square meter in the German capital now stands at €6,093 (NIS 24,860).
