The cycle has peaked: rents in Berlin are falling significantly 2

The cycle has peaked: rents in Berlin are falling significantly

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<p class=While the new buildings are booming, immigration is slowing down towards the big cities.

(Photo: imago images / Ulli Winkler)

The offer is on the rise, but the demand in the metropolises is on the decline: rents in Berlin are decreasing significantly for the first time in a long time. If politics remains calm now, this could be the turnaround in the real estate market.

The asking rents in Berlin sink greatly. According to data from the Empirica consulting firm, the rents required in advertising fell by just under four percent in the third quarter from its historic peak a year earlier. As a result, at least stagnation is emerging in other large cities such as Hamburg and Munich. According to the CEO of Empirica Rainer Braun, all this indicates a turnaround in the real estate markets of the main German cities. "This cycle of rent increases has exceeded its peak," said Braun Good king News.

For a new standard apartment from 60 to 80 square meters with good services in the capital in the third quarter of 2019 an average of 12.32 euros per square meter was requested, for an existing apartment 9.91 euros. It's 45 cents or 36 cents less than a year ago.

One of the reasons for the decline after almost a decade and a half of uninterrupted growth in rents is the growing construction of Braun. More than 10,000 new apartments have been completed in Berlin in recent years. At the beginning of the decade, this number was still around 3,000. Moreover, the influx both from home and abroad, while more and more people moved to the outskirts of the cities or to completely different places. Political measures such as the curbing of rental prices or the expected rent coverage in Berlin would not play a role in the period included in the statistics, according to Braun.

Significant excess supply possible

"With the price level reached, many young families in Berlin are moving into the surrounding area," said Braun. "Students, for example, are considering studying elsewhere." As a result, rents in so-called swarming cities in the metropolitan area or in alternative cities such as Schwerin, Pforzheim and Flensburg continued to increase relentlessly. While independent city rents fell by 0.3 percent on average in the last quarter, they rose by 0.8 percent in the districts.

Also the purchase prices of private houses, according to Empirica data, continue to grow strongly and therefore to separate from rents. The reason for this, according to Braun, is above all extremely low interest rates.

According to Braun, rents could decrease much more in the future. "There are many construction projects in cities in the pipeline," said Braun. If these arrive on the market and at the same time the demand continues to decrease, there could be a considerable excess of supply of apartments. But Braun does not expect a huge rate of vacancies in cities, for example. "There are many people who have moved into the surrounding area and would have returned."

Braun urged politicians, especially in Berlin, to refrain from the reduction in rents due to controversial regulatory measures such as the envisaged rental coverage. "Investors are already taking off for many of the projects in the pipeline," warns Braun. This could ruin the emerging sustainable easing in the real estate market.