Market Report Residential & Commercial Properties Berlin 2024: Real estate prices and locations at a glance

Institutional investors more active

Following a weak first half of the year in 2023, the market experienced an upturn in the autumn. There have been no further rises in interest rates since September of last year, which has, in turn, relieved the anxiety of many market pla­yers to a certain extent. The market continued to be more dynamic in the first months of 2024, with double the volume of turnover generated in the first quarter as in the same period of the previous year. This was primarily due to a number of larger transactions. Furthermore, the number of investment properties which were available to purchase rose steadily.

In addition to classic reasons for selling, such as a change in personal circumstances, private property owners are citing ESG criteria as a key reason for their decision to sell. ESG-compliant refurbishment takes a consi­derable amount of time and is expensive. A growing number of properties owned by institutional investors also came onto the market.

Funds, for example, are experien­cing greater pressure due to equity outflows, making them more willing to sell real estate than in 2023. Parallel to the increased offering, demand has also grown. While the majority of potential buyers in the last two years were private investors with good credit ratings, since late 2023 an increasing volume of institutional capital is being invested in the residential investment property market. Existing properties with potential to add value in the mid- to long term are particularly popular.

Price levels in Berlin are attractive

Large amounts of money are being invested in affluent middle-class locations in the west of Germany’s capital, such as Wilmersdorf, Charlottenburg or Steglitz. Unlike other major cities, properties in good to prime locations can be acquired at comparatively moderate prices, making them a lucrative proposition for many investors.

The average purchase price is some 2,300 euros/m². Prices in recent months have not fallen significantly and are expected to remain stable for the rest of this year. Despite this, potential buyers continue to be highly price sensitive. Berlin is an investment hotspot, and this is being fuelled by additional factors.

In the last three years, for example, over 50,000 new jobs have been created. A strong start-up segment and numerous universities are a particular draw for young adults moving to Germany’s largest city. Experts forecast continuing population growth, which will result in high demand for rental properties. Very few new construction projects are being completed, so pressure on the housing market will remain high. As a result, further increases in rents are expected in future, meaning that reliable cashflows can also be expected.

In the coming months stable prices and the prospect of further base interest rate cuts should ensure higher demand for existing properties. Pa­rallel to this, it can be assumed that market supply will remain high because, on the one hand, ESG requirements will be extended to cover more property types and, on the other, more owners will decide to sell because of the expensive financing terms and conditions. Based on the current increase in trading activity, Engel & Völkers Commercial forecasts that the volume of transactions and turnover on Berlin’s residential investment property market in 2024 will be somewhat higher than in the previous year.

Berlin's residential and commercial real estate market is currently offering good opportunities for both sellers and investors. Increasing ESG requirements place high demands on property owners, yet demand for residential real estate in the capital city has once again increased significantly. No further price reductions can be measured, although no significant price increases can be expected during the course of the year.

Housing in Berlin is becoming increasingly scarce, which keeps the market dynamic. Sellers benefit from the increased demand and stabilized prices, not least because Berlin remains one of the most sought-after real estate locations in Europe.