Market Survey Q4 2022 Berlin

The Berlin residential market was not spared from uncertainties last year. In particular, it is affected by the combination of interest rate developments and increased construction costs. Similar to other major German cities, these among other factors have led to a decline in the intensity of demand for condominiums. In the capital, this effect is slowed down, due to the existing housing shortage and the high influx rates, so that there is no stagnation on the demand side.

Despite existing uncertainties, prices for condominiums in Berlin have risen by an average of 4.48 per cent for all segments over the course of the last year. What is interesting here is that this price increase took place almost exclusively in the first half of 2022, while asking prices stagnated in the second half of 2022. Since the end of 2021, Berlin has seen the largest increase in median prices in the new-build segment, at 9.39 per cent. Here, the increase clearly results from the first quarter of last year. The asking price for existing units also increased in 2022, with the median price for flats not requiring occupancy rising by 4.08 per cent and that for rented flats by 3.50 per cent. Asking prices for existing units stagnated in the third quarter and were even followed by slight price reductions in the fourth. While the median asking price for rented flats fell by 0.65 per cent compared to the previous quarter, the median asking price for non-occupied units fell by 1.33 per cent.

It could be assumed that the more price-sensitive clientele is concentrating on the existing market, as new ESG building guidelines have been announced. As these influence the value of an energetically unrefurbished property, no shift has taken place. Also, or perhaps especially in the last year, sustainability aspects have emerged as an important purchase criterion. Demand for flats with renewable energy sources appears relatively stable in the current market situation and has even increased markedly compared to the previous year. This movement can be explained by the savings potential in independence from fossil fuels, which has been clearly highlighted by the crisis.

On the following pages you will receive insights into the development of the individual segments on the Berlin residential market in 2022.

The number of new flats advertised (online) has developed differently over the past 24 months due to the crisis. The supply of units offered (online) increased slightly again in the third quarter of 2022 after an almost constant decline and hardly changed in the fourth quarter. Nevertheless, there are about a third fewer units on the market than at the beginning of 2020. Charts 1 and 2 show the increase in the median asking price over the course of the year 2022. The stagnation of the asking price development becomes clear with the increase in the number of new flats advertised in the second half of 2022.

While the median increased from 6,463 EUR/sqm to 7,714 EUR/sqm - by 19.35 per cent - from the fourth quarter of 2020 to the fourth quarter of 2021, price growth halved last year, falling by almost 10 percentage points to 9.39 per cent. The median asking price increased by 0.89 per cent in the fourth quarter to 8,438 EUR/sqm. The arithmetic mean fell slightly - from 8,628 EUR/sqm to 8,619 EUR/sqm - compared to the previous quarter. This decline in the arithmetic mean is negligible due to its size, because in absolute terms the mean of asking prices changed by only around 9 EUR/sqm.

Since the beginning of 2020, the median asking price for new condominiums has increased by 38.73 per cent. It seems that the steady price increase of recent years has come to a standstill due to the rise in interest rates last year. A reduction in prices in the new-build segment remains unlikely due to the increased construction costs and the tight situation on the Berlin residential market. The number of transactions will not return to pre-crisis levels in the coming quarter either, as further interest rate increases have been announced. So far, the asking price has been a good indication of developments on the new-build market. For the last year, the figures from the expert committee are awaited with particular excitement, as only here will it become clear how strongly circumstances have influenced the demand side.

Over the course of the last year, asking prices for new-build units in Berlin have risen despite existing uncertainties in the market. The price increase took place in the first quarter, as already seen in Charts 1 and 2. Charts 3 and 4 show the development of the median at district level. The spatial differentiation shows large differences. Prices increased particularly strongly in the districts of Charlottenburg-Wilmersdorf and Spandau, although in the latter only 36 units were online in the fourth quarter and the price development here must be regarded as very susceptible to fluctuation. Positive price developments of more than 10 per cent can also be observed in the districts of Steglitz-Zehlendorf and Pankow. In Berlin-Mitte, Reinickendorf and Marzahn-Hellersdorf, price growth stagnated almost completely. Only in Neukölln did a price reduction take place over the last year. Since only 60 units have been available online since the fourth quarter of 2021, the significance of the reduction must be questioned.

The supply of existing units in Berlin available for occupation continues to rise significantly and is back at the level of the first quarter of 2020. With the rising supply, a decline in asking prices of 1.77 per cent became apparent in the last quarter. The average asking price for existing flats available for occupation in the fourth quarter of 2022 was 6,677 EUR/sqm. The median asking price was around 6,300 EUR/sqm in the last quarter of 2022, down 1.33 per cent from 6,385 EUR/sqm in Q3.

The supply of rented existing units has also grown again in the last three quarters. In the third quarter of this year, it is thus only 5.2 per cent below that of Q1 2020. The median asking price fell by 0.65 per cent compared to the third quarter of last year. The median price was 4,930 EUR/sqm, which is around 73 EUR/sqm lower than in the previous quarter, while the median fell by only around 31 EUR/sqm to 4,697 EUR/sqm. The median yield rose from 2.18 to 2.24 per cent and experienced the most significant increase from Q3 to Q4 since the beginning of last year.