Berlin still most affordable real estate in Germany
From an international perspective, real estate in Berlin is still regarded as affordable, while market observers disagree on whether some form of price correction is on the horizon, the Handelsblatt reported, devoting extensive coverage to the most attractive real estate markets in Germany and their future potentials. The paper’s weekend edition contained detailed profiles of Berlin, Frankfurt and Hanover.
According to exclusive calculations from VDP Research, property and rental prices rose by an average of 11.4 and 6%, respectively last year, with more substantial increases reported in central districts.
Berlin has experienced positive net migration for a number of years now and the population has swelled to around 3.5 million, with approximately 40,000 new Berliners arriving annually, not including refugees.
The supply of available housing, particularly in central districts, is becoming more and more limited, while new building activity is running well behind demand. A growing number of people find themselves unable to afford housing in central districts and are therefore being forced to move to the urban periphery. Prices in Berlin vary widely and, as market observers are well aware, the decisive factor is the individual micro-location.
“Interest in condominiums in Berlin remains extremely high”, said Thomas Zabel from Zabel Property.
Although Berlin, unlike many other major cities, still boasts enormous potential to develop additional space, there is currently a shortage of development land which has driven prices ever higher.
“There is no real shortage of land, especially brownfield land”, said Zabel, “the problem is just that it rarely makes it to market”.
Land frequently passes through many different pairs of hands and “a number of market participants are acquiring land, and obtaining building permits, simply to sell the land at a premium later on”, added Alexander Harnisch from Diamona & Harnisch, who believes that such practices are driving land prices even higher.
Meanwhile, in Frankfurt, the rate at which property prices are increasing has gained further momentum.
VDP Research reports that condominium prices rose by 9.1% last year, climbing to an average of EUR 4,480/sqm, on the back of a 6.3% increase the year before.
Rental prices rose at a slightly slower pace in 2016, adding 5% and increasing to an average of EUR 13.70/sqm.
Frankfurt is also suffering from an under-supply of new housing, despite the uptick in building permits and completion volumes over the last few years.
speculative
Cologne’s Institute of Economic Research (IW) estimates that Frankfurt requires 7,800 new-build apartments per year until 2020 in order to satisfy current levels of demand. In 2016, only 3,466 apartments were completed.
After Hamburg, Hanover is northern Germany’s second largest economic and administrative centre, boasting a large number of major employers, a university and a robust SME sector, all of which act as magnets to boost net migration figures. Over the last 12 months, the city’s real estate market has enjoyed a complete turnaround. Hanover’s stock of existing housing is not sufficiently large to satisfy current demand.