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Facts and Figures: Berlin in 2015 and beyond

SchimmelpfengHochhäuserKombiWe’re well into February and there has been a recent rush of facts and figures arriving as a flood of studies and reports are released to provide analyses of an almost infinite array of statistics on the German real estate markets in 2015. We’ve covered a number of these developments in this blog before, but thought it would be interesting to highlight some of the key facts and figures relating specifically to Berlin and its markets.

Facts and figures: Employment and wages

Ever since the city’s former mayor, Klaus Wowereit, coined the phrase “Berlin ist arm, aber sexy,” (“Berlin is poor, but sexy”) in an interview with Focus Money in November 2003, this has been the view most outsiders have had of the German capital. More than a decade on you might say that Berlin has become even sexier, but is not quite so poor. Average wages in the city increased by 1.8% in 2015 and the unemployment rate is currently running at around 10%, the first time since 1991 that it has been so low – and a long way off its peak of 19% in 2005.

 
There have been many factors involved in this turnaround, and a lot has been achieved since the city’s Senate launched its “BerlinArbeit” (“Berlin works”) programme in 2012. Since then, the population has grown, the labour market has grown and there has been a boom in start-up activity in the city, which benfited from €2.1 billion of investment last year. Berlin has now even managed to leapfrog London to become the start-up capital of Europe.

 
According to the headlines (and the statistics that feed them), there has never been a better time to be in Berlin. All indications are that the city is dealing quite well with its population growth over the last few years, tourist visitor numbers are at an all-time high (having overtaken Rome last year), and the number of companies attracted to the city is also up. All of these factors have been having a growing impact on Berlin’s property markets, with office space take-up breaking through the 800,000 m² threshold last year and vacancies in the residential rental sector falling to record lows

Facts and figures: Property prices

Along with the tourists and new residents making a beeline for Berlin, there has also been an increase in the number of real estate investors and developer investors active in the city. Prices for buy-to-own and buy-to-let condominiums increased by an average of 10.1% in 2015. The largest price increases were recorded in Steglitz-Zehlendorf (+16.3%), Tempelhof (+14.9%) and Neukölln (+13.4%). The only district that saw condominium prices decline in 2015 was Lichtenberg (-4.2%). For investors competing for apartment buildings, the increases were in some cases even greater, with ImmobilienScout24 reporting jumps of up to 20%. Terraced, detached and semi-detached house prices also rose, although not by quite so much (approximately 5%).

Facts and figures: Rents

Average rents increased by 5.1% in 2015, with the biggest increases seen in Mitte (+7%) and Friedrichshain-Kreuzberg and Reinickendorf (+5.9%). Analogue to purchase price developments, Berlin-Lichtenberg again bucked the general trend, registering an average rent increase of just +0.9%. The Mietpreisbremse (rental price brake) came into force in June 2015 and many experts have so far been sceptical about the impact of what has come to be seen as a “toothless tiger”, although more cautious voices have suggested that it is simply far too early to make an accurate assessment and that the second round of Tenancy Act reforms will be decisive in determining the final outcome of the Mietpreisbremse.

Facts and figures: Real estate investment

Real estate investors, and in particular international investors, were as active as they could be last year. Many broadened, or were forced to broaden, their acquisition profiles beyond core and core-plus objects as they attempted to cope with a shortage of properties coming to market. In the commercial real estate category, including office, retail and hotel, transaction volumes reached €8.1 billion, more than double the volume of the preceding year. Of this total, 60% was invested in office, 20% in retail and 11% in hotel assets. Almost 50% of transactions could be attributed to international investors, including pension funds, insurers, real estate companies and HNWIs. In the residential real estate sector it has been the listed residential property companies who have led the charge over the last few years, and they upped the ante in 2015, investing over €3.6 billion in portfolio transactions (15% of the national total).

 
Prices and rents may have risen, but they are still fairly low in comparison with other major German, or global, cities. Most forecasts for 2016 predict that investment will remain high, limited only by availability, and that the population, employment and rents will continue to increase. For one more year, at least.

 
Sources: All of the figures quoted in this blog post have been taken from research studies and market reports published by Colliers, CBRE, Berlin Hyp and the Berlin-Brandenburg Statistical Office.

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