2021-06-15 02:22:43 | INSIGHTS
CBRE, Berlin Hyp – Berlin Residential Market Report 2021
AUTHOR: Ian Sigmund
The CBRE, Berlin Hyp Berlin Residential Market report released on an annual basis is the most important report to dissect if you are considering investing into Berlin’s residential real estate market. It provides readers with a detailed breakdown of all the data and information they require to make an informed decision, not only as to whether to invest in Berlin but also which districts in the city might have the most attractive returns based on a variety of different factors from population growth, supply and demand dynamics to infrastructure and regeneration projects.

Pankow is one of the standout districts for population growth as it is expected to see the highest levels of growth, an expected 11% increase until 2030 and yet planning permits in this district are notoriously difficult to come by. CBRE’s data highlights that whilst there are 49,320 apartments currently in development in the whole of Berlin, despite Pankow having the largest population of any district in Berlin at 410,716 equating to 10.9% of those living in Berlin, the number of apartments under development in Pankow is only 2,310 in other words only 4.7% of the total. Treptow Köpenick on the other end of the spectrum is seeing a large amount of development with 8,910 units under construction, 18% of Berlin’s total whilst its population is only 276,165, 7.3% of Berlin.

Infrastructure and Regeneration projects

Europacity, Berlin Brandenburg airport, the old Tegel airport is being transformed into a centre for research and technology, Tesla is building an Automobile and Battery plant just outside the city next to the new international airport and Siemens is pumping 600m Euro into Siemens City that will be its global headquarters for Research and Development in key areas such as -

Population growth

As with all major cities around the world the population growth figures in Berlin were drastically lower over the year 2020, registering an increase of only 467 people. This contrasted sharply to the growth levels seen in the previous few years which ranged between 20,000 – 40,000 per annum. These low levels of growth are expected to continue until Germany can fully reopen its borders.

Siemens City 2.0 - Siemens is investing over 600m Euro into “Siemenstadt” district to drive their Research & Development activities ranging from distributed energy systems, energy management, EV technology, machine learning, artificial intelligence, data analytics and blockchain.

Tegel Tech Park – The old TXL Aeroport is being converted to a research and industrial park for urban technology spanning 495 hectares. This will consist of approx. 1,000 Companies, 20,000 employees and 5,000 students where the focus will be on environmentally responsible top-technologies for sustainable urban development.

Tesla Giga Factory – The Tesla Gigafactory will be the most advances high-volume electric vehicle production plant in the world upon completion at the end of 2021. The between 7,000 – 8,000 people working at the plan will be focused on developing Tesla’s most powerful battery systems along with high performance drive units and power electronics.

Europacity - One of the largest regeneration projects in Berlin centered around the Hauptbahnhof Berlin. The 61 hectare Europacity’s aim is to become the central business district for Berlin and will cater to over 16,500 employees with an additional 3,000 apartments upon full completion.

Residential market

The residential market in Berlin saw a 7.4% growth spike in prices despite the Covid pandemic. This fundamentally comes down to the excessively low supply levels that have establish Germany’s capital having one of the lowest residential vacancy rates in the world at 0.8%. The luxury segment of the market has also firmly established itself with prices in Mitte and Charlottenburg-Wilmersdorf above the 10,000 Euro PSM level. Price growth in this segment veered towards the lower side with the locations trending between 6,000 – 8,000 Euro PSM experiencing the highest levels of growth.

In order to buy an apartment that ranks in the top 10% of the most expensive apartments in Berlin you would need to pay a minimum of 7,680 Euro per square metre (PSM). This puts Berlin in only 5th position compared with Munich at 12,710 Euro PSM, Frankfurt at 9,430 Euro PSM, Hamburg at 9,000 Euro PSM and Stuttgart at 7,720 Euro PSM.

The rental market saw the average rentals drop by 2.8% however this was only because these figures consider the approx. 95% of housing stock that was subject to the Berlin rent freeze. These apartments were forced to reduce their rents beyond the federally mandated amount according to the “Mietpreisbrehmse.” When you consider the top segment of the market however which saw no additional regulations and prices are guided by the market, rents increased by 7% which is to be expected in a market with sub 1% vacancy rates.

Looking forward to 2021 and beyond, developments centred around and with good transportation links to the largest infrastructure and regeneration projects will likely see standout growth within the market. However, with the prices of some new build developments in prime locations such as Mitte going for over 16,000 Euro PSM we will continue to focus on central locations within the S Bahn Ring priced where strong value can be achieved and with pricing between 6,000 – 8,000 Euro PSM.

Ian Sigmund

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