Housing Market Report Berlin 2015

Transcription

1 Housing Market Report Berlin 2015 with Housing Cost Atlas

2 Berlin: strong demand, smaller but more diverse supply On the Berlin housing market, investor and resident demand continues to increase. The main reasons behind this are growth in both population and numbers of households, as well as improved economic performance and purchasing power. Investors intense interest in residential property is based on prices, which are still moderate by international comparison, the positive expectations for the city, low interest rates, and the shortage of alternative investments. However, the focus of this demand is shifting. In previous years, rental growth was concentrated in parti cularly sought-after city-centre districts. In some of these, the growth potential has been exhausted: the pressure of demand is moving from the prime locations to the mainstream. It has become considerably stronger in locations adjacent to the city centre, in districts with good transport links outside the centre, and also in cheaper peripheral locations. This spatial trend is also reflected in property categories: in percentage terms, upscale apartments saw a low increase in asking rents, whereas the increase for modest apartments was particularly high. The prices of condominium apartments, particularly in inner-city locations, are also rising. Apparently, well-off apartment hunters are shifting their demand from rental to condominium apartments. This is not least because, at present interest rates, the monthly payments after purchase can be lower than the rent on a comparable apartment. As in the previous year, new development has sharply increased. Although each new apartment relieves the existing market, new development is still lagging behind the growth in demand. Still concentrated in particular districts, developers are primarily active in the upmarket condominium segment. These and many other trends and background factors are presented in the Housing Market Report Berlin, which, for the first time this year, is a joint publication of Berlin Hyp AG and CBRE GmbH. It is based on more than 100,000 offers of rental and condominium apartments as well as apartment buildings in the first three quarters of All rental apartments have been assigned to one of the 190 Berlin postcodes. This enables small-scale analyses and observation of trends in particular locations. In addition to rents per square metre, the report also analyses data on apartment sizes and purchasing power in the locality, and their relationship with each other. The report provides orientation for all players in the Berlin market but should also contribute to more objective discussions. These includes the overheating of the Berlin market feared by some, which, although evident in certain instances, is not a widespread phenomenon. It should also be emphasised that, although rents have increased, purchasing power in the city is also rising, so that housing costs are increasing only slightly as a proportion of household budgets. This proportion also tends to increase with purchasing power in the districts concerned. Higher-earning households usually invest a larger proportion of their money in housing. In contrast, in districts with weaker purchasing power, the proportion of income spent on rent is considerably lower, despite the increasing strains on the market. There continue to be many modest, budget-priced apartments in the city. We hope you will find the report interesting reading! Gero Bergmann Director Berlin Hyp AG Dr. Henrik Baumunk Managing Director CBRE GmbH Housing Market Report 2015 Berlin 01

3 City comparison 03 Berlin is catching up to other cities in terms of purchasing power and rents. Compared to other major German cities, however, the housing market in the capital is still relatively relaxed Berlin as a location 04 The positive trend in the city s demographic and economic development continues. But wide gaps persist, both across the city districts, and among residential areas within a single district Ownership structure 06 Berlin s housing providers are a large, heterogeneous group, in which private providers make up the majority. The proportion of apartments with special conditions for rent levels and allocation remains high Rents, purchase prices, investments, transactions, and financing 08 Rent increases remain significant and are expanding to affect more areas. Purchase prices for apartments and houses continue to climb. Internationally, Berlin remains an attractive investment location. Overall, the financing market is lively and stable New construction 14 New construction activity maintained its momentum in The Mitte district remains a focal point for residential property development in the city Housing Cost Atlas: Introduction 18 Local trends in the German capital. Detailed analysis of rents, purchasing power, and housing cost burden in Berlin s 190 postcodes Explanation of rent maps 48 Top spots, trendy areas, cheap city centre locations, leafy suburbs, exclusive residential zones Berlin s neighbourhoods are diverse Rent map for Berlin as a whole Cover Berlin s various price levels and location types at a glance. Expensive locations are expanding, but the city still boasts plenty of affordable options Exceptional residential areas Cover An overview of the cheapest and most expensive areas, the biggest and smallest apartments on offer, and the neighbourhoods with the highest and lowest purchasing power, as well as data on housing cost ratios Berlin s 12 districts and their 190 postcodes 20 Charlottenburg-Wilmersdorf 24 Friedrichshain-Kreuzberg 26 Lichtenberg 28 Marzahn-Hellersdorf 30 Mitte 34 Neukölln 36 Pankow 38 Reinickendorf 40 Spandau 42 Steglitz-Zehlendorf 44 Tempelhof-Schöneberg 46 Treptow-Köpenick 02 Housing Market Report 2015 Berlin

4 City comparison: Purchasing power and rents in Berlin catching up rapidly Despite the growing demand for housing and the distinct signs of shortage, Berlin still has the most relaxed housing market of all the seven major German cities. Vacancy is higher than in the six next-largest cities and asking rents considerably lower. The city s economy is continuing to make up ground, although there are constraints on stronger rental growth, including the lowest purchasing power index and the highest unemployment rate of the seven largest cities. The low rents in Berlin stem not only from economic factors but also from the city s political, social and architectural legacy. There is an appreciable proportion of Plattenbau (prefab concrete construction) buildings in the east and (former) social housing in the west of the city, with mostly similarly frugal architecture, ambience, and quality of accommodation. Although many areas with older buildings have an urbane ambience, they often feature apartments with poor natural light, mediocre amenities and impractical layouts. Until 1990, there was virtually no privately-financed construction of apartment buildings in the east of the city and very little in the west. New developments and refurbishments since then have enabled Berlin to catch up in terms of quality, justifying higher rents and prices. On the demand side, the influx of affluent apartment hunters and international investors, as well as the improved economic situation of Berliners, have likewise resulted in an upward trajectory. In many cities, greater purchasing power correlates with higher asking rents The average asking rent in Berlin has been rising more strongly than in most other large cities recently, although still mainly well below their level. Rental values are usually proportionate to the average purchasing power in the relevant city. Although household sizes in the seven cities are not absolutely identical, the link between rental values and purchasing power is unmistakeable. The average purchasing power in Cologne is 15 per cent higher than in Berlin, while asking rents per square metre are 14 per cent higher. Households in Hamburg have more than 20 per cent additional disposable income and have to face advertised rents that are 22 per cent greater. In Stuttgart, purchasing power is 23 per cent more than in Berlin and asking rents are 25 per cent higher. Asking rents comparable in Dusseldorf, considerably higher in Frankfurt and Munich Compared with the local affluence, rental values in Dusseldorf are relatively low. Purchasing power there is 27 per cent higher than in Berlin, while advertised rents are only 8 per cent higher. Inverse relationships apply in Frankfurt and Munich: from the tenant s perspective, the ratio of purchasing power to asking rent in the tense housing markets is considerably less favourable than in Berlin. Purchasing power in Frankfurt is 22 per cent higher, while asking rents per square metre are 40 per cent more. Households in Munich have, by a wide margin, the highest purchasing power in the seven major cities 43 per cent higher than in Berlin. However, asking rents are 66 per cent greater. Both purchasing power and rents in Berlin are expected to continue to rise. The ratio between the two could also change. Within the city, as well as by comparison with other cities, it is evident that asking rents increase as purchasing power rises. Higher earners are prepared to spend a larger proportion of their income on housing. A rising proportion of housing costs does not necessarily imply a financial shortfall; it can also be an indicator of increasing affluence in the city. Berlin: Lower purchasing power lower asking rents Key figures for Germany s seven largest cities City Residents 1) 2013 Berlin 3,421,829 Dusseldorf 598,686 Frankfurt a. M. 701,350 Hamburg 1,746,342 Cologne 1,034,175 Munich 1,407,836 Stuttgart 604,297 Purchasing power index 2014, Germany = Vacancy rate 2) 2013, in % Average asking rent 3) 2014, in Average area of apartments listed 3) 2014 in m Newly finished apartments 4) 2013, per 1,000 residents ) as of ) vacancies in apartment buildings on the active market 3) data collection period: Q1-Q3 4) in residential buildings with three or more apartments Sources: CBRE-empirica vacancy index, CBRE based on data from empirica-systeme, Michael Bauer Research, Federal Statistics Offices, State Statistical Offices Housing Market Report 2015 Berlin 03

5 Continued economic growth coupled with steady population increase The economy, the employment market and incomes in Berlin are growing; the population is rapidly increasing. Although the city has not yet quite overcome all the effects of its division and the upheavals after German reunification, in ever more areas it is catching up with other major European cities. Berlin is a national and international centre of politics, culture, academia, and tourism. Not least, the expanding affluence of the residents of the once poor city is attracting more and more people from other regions. All in all, Berlin is one of the most exciting and, in many respects, most promising locations in Europe, said Gero Bergmann, Member of the Management Board of Berlin Hyp AG. The upswing in the city stems not only from the boom in a single economic sector but from parallel trends in several sectors. Berlin is firmly established as the seat of government and parliament, associations, the media, and many other capital city institutions. However, the largest individual sector of the economy is tourism, in which Berlin is in third place in Europe, behind London and Paris. More than 275,000 jobs in the hospitality Berlin Hyp Berlin Hyp specialises in high-volume real estate financing for professional investors and housing companies, providing them with individually tailored finance solutions. As an affiliate of the German savings banks, it also offers these financial institutions a comprehensive range of products and services. Its clear focus, almost 150 years of experience, and close relationship with the Savings Banks Finance Group make Berlin Hyp one of Germany s leading real estate banks and issuers of Pfandbriefe. industry, retail, and transport are directly based on tourism. Even industry is growing again after languishing for a long period. It employs more than 105,000 people and exports around 55 per cent of its products. Important sectors include vehicle and engine-building, pharmaceuticals, and medical- and electrotechnology. A third of all patents applied for in Berlin are in electrotechnology. There is also a lively culture of entrepreneurship in other sectors: around 40,000 new companies are founded each year in Berlin, the highest ratio by population of all the federal states. These developments in many individual fields add up to a positive overall trend. Ten years ago, Berlin was one of the worst performers in terms of economic growth in Germany; it has now become the leader among the federal states. Positive employment market trend Although Berlin still has the highest unemployment rate among the German federal states, its employment market is developing better than anywhere else in Germany. The number of unemployed has fallen by almost a third since Analogous to the reduction in unemployment, the number of employees paying social insurance contributions increased by 3.3 per cent between mid-2013 and mid-2014, compared with growth of only 1.9 per cent in Germany as a whole. The city is increasingly attractive for highly-qualified people, for ambitious young talent, and as an academic centre, with its numerous renowned universities. In 2013, Berlin recorded a net inward Berlin Barometer District Residents Population density ) per km ) 1 Charlottenburg-Wilmersdorf 302,313 4,671 2 Friedrichshain-Kreuzberg 263,526 12, Lichtenberg 262,760 5,042 4 Marzahn-Hellersdorf 251,007 4, Mitte Neukölln Pankow 337, , ,438 8,553 6,943 3, Reinickendorf 246,412 2, Spandau Steglitz-Zehlendorf 222, ,313 2,420 2, Tempelhof-Schöneberg 324,208 6,105 Built-up space 12 Treptow-Köpenick 244,016 1,449 Water Forest/park Berlin total 3,421,829 3,837 1) as of 31.12, based on census data 2) average forecast variant 3) all employable civilians 4) in residential buildings with three or more apartments 04 Housing Market Report 2015 Berlin

6 migration of nearly 42,000, increasing its population to 3.4 million by the end of that year. The upward trend has continued unbroken since The population of the city is expected to reach around 3.76 million by 2030, although the actual trend is already well ahead of the forecast. The number of households, a significant figure for the housing market, could rise proportionally faster. The trend to smaller household sizes is continuing and an increasing proportion of senior citizens are living alone. It is clear that Berlin must adapt to continuing heavy demand for housing, said Dr. Henrik Baumunk, Head of Residential Valuation at CBRE. Districts have different trends There are very different population and employment trends in the city s 12 districts. The greatest inward migration in 2013 was registered in the Mitte district, which gained around 5,700 residents in one year from migration alone. Berlin s central district is particularly well-known and sought-after by newcomers. Currently, it is also the most important location for residential development projects. In second place regarding gain from migration was Pankow. The district includes large areas of potential development land, both for major projects and for individual houses. Prenzlauer Berg is also still attractive. Smaller gains from migration were recorded in the peripheral districts of Treptow-Köpenick and Marzahn-Hellersdorf, although even there, newcomers considerably exceeded those moving away. CBRE: Leading valuer of residential property CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world s largest commercial real estate services and investment firm (in terms of 2013 revenue). The Company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors, and occupiers through approximately 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities, and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. CBRE Residential Valuation Germany is a market leader in residential property valuation. In 2013, around 940,000 residential units, with a volume of approximately 54 billion were appraised. Please visit our website at There are considerable differences in unemployment between districts. The highest unemployment rates recorded in 2013 were 16.2 per cent in Neukölln and 14.3 per cent in Reinickendorf. At the lower end of the scale, with rates under 10 per cent, were Steglitz-Zehlendorf, Treptow-Köpenick and Pankow, with their high proportions of green space and single houses. A positive factor is that, in the previous year, only one district was below the 10 per cent mark, while this year three districts are below that limit. According to expert forecasts, Berlin s economy will enjoy a positive trend for the foreseeable future. The wide-ranging structure of the economy makes it less susceptible to crises than cities that are heavily dominated by cyclical economic sectors. The city emerged from the 2009/10 recession relatively unscathed. In the future, despite the deficits that still need to be reduced, the outlook for Berlin will remain positive. Population development from ) to ), absolut Population forecast 2) , change in % Unemployment rate 3), average 2013 in % Permits for building new apartments 4) 2013 Newly finished apartments 4) , , , , , , , , , , , , , , , , , ,927 2,629 Sources: Berlin-Brandenburg Statistics Office, Federal Employment Office (unemployment rate), Senate Administration for Urban Development and Environment (population forecast), compiled by: CBRE Housing Market Report 2015 Berlin 05

7 Ownership structure: Diverse landlords, many regulations on rent contracts Landlords of apartments in Berlin are not a homogeneous unit; rather they belong to groups that operate under diverse general conditions. Their differing procedures and outlooks have an important effect on current market events and the future structure of the stock of rental housing in the city. In its latest survey in 2012, the Berlin Senate Department for Urban Development and the Environment registered around 1,616,000 rental apartments (around 84 per cent of the total housing stock in Berlin). Municipal companies owned 17 per cent of these, almost 12 per cent were owned by housing associations. Together they own over 450,000 units: more than a quarter of all rental apartments in Berlin. In addition there is an unknown number of federally-owned apartments in the city. Privatisations and demolitions between 1990 and 2011 reduced the size of this submarket. In this period, the State of Berlin alone sold around 230,000 apartments. Since 2011, however, the non-profit-oriented segment of the market has slowly expanded through developments and acquisitions. The municipal landlords want to increase their stock to some 300,000 apartments by 2017, financed by increased borrowing and a federal state-owned development fund, with which about 1,000 apartments each year should be subsidised. These will not necessarily be conventional social housing with fixed rents and defined income limits on entry. According to CBRE s calculations, in 2012 there were almost 168,000 social rental apartments, of which 22 per cent were municipal and 6 per cent were housing association units. A further 121,300 apartments owned by communal housing companies or associations in the eastern districts of Berlin were subject to an occupancy commitment in accordance with the Berlin Belegungsbindunggesetz (occupancy commitment act) on the basis of the Altschuldenhilfegesetzes (a federal act that aids regulation of housing association debts dating from GDR times). This means that they may only be relet to a holder of a Wohnberechtigungsschein (certificate of eligibility). Social apartments and those subject to occupancy commitments are mostly owned by the municipal companies and associations. Nevertheless, in 2012 around 132,000 rental apartments owned by e.g. private or stock-market quoted providers were subject to one or more ties. Adding these apartments to those owned by the non-profit-oriented landlords, there is a total of around 600,000 rental apartments subject to special conditions of rent control and occupation. More than 38 per cent of all rental apartments in Berlin are therefore affected by these specific regulations. Heterogeneous group of private providers The private housing providers are a large and heterogeneous group. The data gathered for the 2011 census provided the most recent detailed breakdown of apartments let for residential occupation in Berlin, by ownership groups. According to the census, the largest subgroup is private individuals, between them owning almost a quarter of all rental apartments in Berlin. Individual buildings, constructed as traditional residential investments in the 19th and early 20th centuries and which are concentrated in the inner-city districts and suburban centres, form an important part of these. Older buildings in private ownership are often in need of particularly extensive refurbishment and Apartments in Berlin by ownhership structure Proportion 2002 and 2012 in % apartments used by the owner 1) Rental apartments cooperatives Rental apartments municipal housing companies Rental apartments listed housing companies Rental apartments private and other institutional owners ) includes condominiums, single-family houses, townhouses, semi-detached houses, company apartments Source: CBRE based on data from own research and Senate Administration for Urban Development and Environment 06 Housing Market Report 2015 Berlin

8 modernisation work. However, in recent years, many districts with concentrations of older buildings have registered the highest rental growth. This group of owners is also important for the development of districts, because, by their individual and varied dealings, its members conserve the small-scale and varied structure that often accounts for the quality of older districts. The next-largest group of owners, with around 21 per cent of the units registered, are the private housing companies. They have particularly expanded their influence in the past 15 years by taking over former state-owned housing stock and by further acquisitions. According to CBRE, around 10 per cent of all rental apartments in Berlin are currently owned by listed companies. Deutsche Wohnen, with more than 100,000 units, owns the largest proportion of these. The listed companies Deutsche Annington, Akelius and Gagfah also hold more than 10,000 apartments in the city. Proportion of owner-occupiers still small Statistically, the group of private housing companies is followed by the condominium owners associations, i.e. the owners of individual apartments. According to the census, around 16 per cent of the rental apartments in the city are condominiums that have been rented out. Overall, more than two thirds of all the apartments owned by condominium associations are not owneroccupied but are let out. This demonstrates the major importance of individual housing ownership in Berlin, both for investment and providing pensions. The range of owners extends from the landlord of a single studio apartment to the largest property owner, holding a large number of units. The final subgroup of private landlords is other private companies, which, when the census was carried out, owned around 8 per cent of rental apartments in Berlin. Some of these are groups of private persons, while others are large companies with different main objectives, for example current or former company housing. Worthy of mention are also the unlet condominiums in Berlin. According to the census, in 2011 these accounted for nearly 15 per cent of all apartments. The proportion is growing slowly but steadily. Although the major hopes for privatisation by some owners, primarily in the last decade, have not been fulfilled, there is a trend towards owner-occupation that is being boosted by low interest rates, shortages on the rental market, and rising incomes. Nevertheless, the owner-occupation rate in Berlin is still considerably lower than in all the other German federal states. CAPPING OF RENTS ON RE-LETTING Rents on new lettings of apartments in Berlin have increased significantly since 2009 in around 80 per cent of all residential areas. In Germany, only about a third of the cities and regions are affected by strongly rising rents. The bill to moderate the rise in rents was approved by the Federal Cabinet on 1 October The draft regulations plan to limit allowable rents on re-lettings, in areas with strained housing markets, to a maximum of 10 per cent above the ortsübliche Vergleichsmiete (comparative rent for the area). Not affected by the controls are, however, newly-developed and furnished apartments, rent increases on modernisation in accordance with 559 Para. 1 to 3 BGB, and stepped or indexed leases. For Berlin, it can be assumed that, like the Kappungsgrenzen-Verordnung (capping ordinance) that came into force in May 2013, reducing the maximum increase in existing rents under 558 Para. 3 BGB from 20 to 15 per cent within a three-year period, control of rents on re-letting will also be applied to the whole city. A prerequisite for issuing such a decree is for the facts on which the supposed existence of a strained housing market is based to be presented. The measures that will be taken to relieve the pressure on the housing market during the five-year period when the capping will apply must also be stated. In this connection there are major legal uncertainties concerning the definition of extensive modernisation. In its latest policy paper, the Federal Ministry of Justice and Consumer Protection states that this applies if the investment reaches about a third of the expenditure required to build a comparable new apartment. Finally, it must be taken into account that the average rent in the Berlin Mietspiegel (official rent table), so far used as a basis for determining the normal rent for the locality in accordance with 558 Para. 3 BGB and to be the new guideline for capping rents on re-letting, has risen by an average of 3.1 per cent per annum since In its first statement since the cabinet resolution on 7 November 2014, the Bundesrat called for further improvements. The federal states regret that the bill does not include new provisions on rent increases following modernisation works. They also criticise the planned provisions for refunding overpaid rent on apartments subject to rent control. The Bundesrat considers the criteria for areas with strained housing markets in the bill to be dispensable. The law will merely determine that such areas exist if the adequate provision of rental apartments for the population, on appropriate conditions, is particularly endangered. Consideration in property valuation Based on simulations of CBRE, it can be concluded that the market values of residential properties in modest to mid-range locations will not or only very slightly be affected by the planned legislation. In good residential areas and/or gentrified areas where rents are well above the Mietspiegel figures, there will also probably be no effects when extensive refurbishments are carried out. For property valuation this means that, as before, there will be a tendency to incur high refurbishment costs on apartments where rents are high, but no or only low refurbishment costs where rents are low. For valuers, the legal uncertainties surrounding the implementation of the capping of rents on re-letting mean that there is no need for changes in the approach to valuation at the end of In transactions recorded so far, no effects on prices of the planned capping of rents on re-letting have been ascertained. (As per 19 November 2014) Housing Market Report 2015 Berlin 07

9 Rents, condominiums, investments in apartment buildings: Continuing very high demand Rents: Growth only slightly lower than in the previous year and still substantial Asking rents in Berlin are still rising. However, the rate of growth fell slightly in 2014 from 6.9 to 6.6 per cent year-on-year. The average size of the apartments advertised has also fallen from 72.4 to 70.6 square metres. In 2014, the average net rent per apartment therefore only rose from 581 to 603, i.e. by 3.8 per cent. At the same time, the healthy economic situation meant that the average purchasing power of households in Berlin rose almost as fast: it was up by 3.5 per cent. Housing costs therefore take up the same proportion of purchasing power (20.4 per cent) as in Income growth in Berlin is almost in line with the trend of average asking rents. Rental growth extending spatially Geographically, rental growth is shifting from the core outward. In previous years it was primarily concentrated in particularly sought-after city-centre districts. However, in numerous central areas, it has almost come to a halt. Average asking rents have actually fallen in a few districts, primarily in particularly attractive locations in Mitte, Charlottenburg-Wilmersdorf, Schöneberg, Kreuzberg, and Prenzlauer Berg, where rents are already very high and/or there has been very strong growth in recent years. The peak seems to have been reached there: prospective tenants willingness to pay has apparently reached its limit, so that they are shifting their attention to less expensive neighbouring districts. The situation in many locations on the edge of the city centre, in the wider inner city and those with good transport connections confirms this presumption. Districts experiencing aboveaverage rental growth include those in northern Moabit and in Wedding, as well as peripheral districts such as Tempelhof, Spandau, and Marzahn- Hellersdorf. In particular, districts where rental values were previously very low and vacancy was a problem are now catching up. These factors are apparently no longer a restraint on rental growth. Lower growth in upper market segment The spatial trend is also apparent when looking at segments of the market. The average rent per square metre of the most expensive decile of apartments offered rose by only 2.6 per cent in The growth potential of highest-quality apartments has been widely exhausted. In the lower segment of the market, however, average rental growth in the cheapest 10 per cent of apartments is around 8.5 per cent. This also shows that the rental growth is increasingly changing from a peak occurrence to a widespread phenomenon that is penetrating to the bottom end of the market. The construction of new apartments plays a paradoxically dual role in the rental statistics. Overall, it somewhat relaxes the market, reducing demand for existing apartments and so curbing rental growth. As new apartments are usually Current rental development Rental price range for new lettings, 2014 District Charlottenb.-Wilm. Friedrichsh.-Kreuzb. Lichtenberg Marzahn-Hellersd. Mitte Neukölln Pankow Reinickendorf Spandau Steglitz-Zehlendorf Tempelh.-Schöneb. Treptow-Köpenick Berlin average Number of rental offers 7,479 6,884 2,756 3,144 9,446 4,644 8,483 3,485 3,472 4,900 5,064 4,413 64,170 1) excl. bottom and top tenth percentile of quotes Middle market segment 1) price range in Bottom market segment Median in Change from 2013 in % Top market segment Median in Change from 2013 in % All market segments Median in Change from 2013 in % Source: CBRE, based on data from empirica-systeme 08 Housing Market Report 2015 Berlin

10 more expensive than existing ones, they primarily draw well-off potential tenants from the existing market. This mechanism applies to new condominiums as well as new rental apartments. However, this effect can have a quite different impact at local level. When numerous new build apartments are marketed in areas not having an excessive supply of apartments, the average asking rent rises, because the new supply is generally dearer than the existing stock. Such an effect can often occur even if the competition from new developments reduces demand, and asking rents for the remaining supply in the neighbourhood fall. The statistically drastic increase is usually only temporary. As soon as the new building has been marketed, average asking rents in the area decline again. Strong rental growth in peripheral districts The 12 districts of Berlin have populations between around 220,000 and 368,000 and are correspondingly heterogeneous, in terms of both locations and market trends. This applies above all to the Mitte district, where, as before, growth in average asking rents per square metre is among the highest in the city. The lower-priced peripheral areas of the district were primarily responsible for this. In contrast, asking rents in the most expensive areas and for upmarket apartments stagnated and even fell in some cases. The highest rental growth this year was in Lichtenberg, a district increasingly being discovered as an alternative by apartment hunters for whom the supply inside the S-Bahn ring is inadequate or too expensive. In third place for rental growth, behind Lichtenberg and Mitte, is Neukölln. Here it is concentrated primarily on the smaller apartments in older buildings in the north, where demand shifting from the adjoining and more expensive Kreuzberg plays a part. Next in the rental growth league table are three districts with peripheral locations and large post-war high-rise estates, where rents per square metre have so far been well behind and even now are among the lowest: Marzahn-Hellersdorf, Spandau, and Reinickendorf. Methodology of the Residential Market Report asking rents Net asking rents (excluding heating and ancillary costs) of apartments in Berlin are included in the analysis. In the period from the first to third quarters of 2013 and 2014 a total of 113,486 rental offers were evaluated. From these the medians, i.e. the rental values separating the upper half of the data from the lower half, for each year were calculated. In order to represent extreme values, the lowest-priced and dearest 10 per cent of the rental offers were analysed separately. These represent the topmost and lowest market segments. The medians of each of these segments are also stated. Rental growth slowing in many locations In all other districts, rental growth is below the Berlin average. Tempelhof-Schöneberg and Treptow-Köpenick are typical, with some strong growth on the periphery, while rents in the locations closer to the city centre are stagnating. In Charlottenburg-Wilmersdorf, particularly in prime locations around Kurfürstendamm, rents are at a standstill. After its dynamic rental growth in previous years, Friedrichshain-Kreuzberg is now third from the bottom of the table, while in Pankow the upward trend of prices has also considerably slackened. The backmarker in rental growth is Steglitz-Zehlendorf, where rental values were already extremely high for a peripheral location. Continued strong growth in sale prices of apartments and houses Prices in the Berlin condominium and apartment building markets again increased strongly in The average asking price for apartments rose by 10.1 per cent, with apartment buildings up by as much as 11.7 per cent. Some of the reasons for the continuing growth in prices are specific to the city: the population and incomes are rising; purchasing power is on a positive trend; rental and condominium apartments are in increasingly short supply and more sought-after, therefore more expensive. At the same time, given the existing market supply and the continued growth in demand, the volume of new construction on residential properties has not yet reached an extensive enough dimension. Another major reason for the upswing in the owner-occupier market is global: the continuing low level of interest rates. Safe alternative investments produce lower returns, while the costs of property finance have seldom been as low. As an investment location, the city is therefore still attractive for buyers from the rest of Germany and abroad. Comparing rents on new leases and the asking prices for condominium apartments shows that in some residential areas the growth is no longer parallel and that sale prices have become decoupled from rents. In view of the relatively high entry prices, particularly for new developments, investors should therefore take heed of the quality of the location and the rents achievable. Housing Market Report 2015 Berlin 09

11 A further considerable rise in the sale prices of apartment buildings and residential portfolios has been perceived in the last 12 months. Provided that conversion from rental to condominium apartments in good residential locations continues, and while sale prices in the medium and low-priced segments remain significantly below construction costs, it can be assumed that there will be further price increases. Condominium apartments: Highest prices in the central districts The highest prices for condominium apartments are still obtained in the three central districts: Mitte, Friedrichshain-Kreuzberg and Charlottenburg-Wilmersdorf. In 2014, a new record for the city was set in Mitte: an average asking price of 3,646 per square metre. New apartment construction in Mitte is more vibrant than in other parts of Berlin and the range between the top and bottom price segments is greater than anywhere else. The most expensive 10 per cent of the apartments offered, which appear to be concentrated Methodology of the Housing Market Report condominium apartments and investments In the periods Q1 to Q3 of 2013 and 2014, a total of 67,237 offers of condominium apartments and 3,243 of apartment buildings for sale were evaluated. As with the properties on offer to let, the median values were calculated. The lowest-priced and dearest offers for sale were again considered separately. in the historic city centre, have an average asking price of 6,184 per square metre. The 10 per cent with the lowest asking prices are centred, to all appearances, in Wedding and Moabit. In this segment an average of only 1,421 is being asked less than for apartments in the same segment of the market in the inner-city districts of Charlottenburg-Wilmersdorf and Friedrichshain-Kreuzberg, as well as in the Pankow district. The second-highest asking prices, 377 per square metre less than in Mitte, are in Friedrichshain-Kreuzberg. The uppermost segment is around a fifth cheaper than Mitte, at 5,000 per square metre, while the lowest, at 1,776, is about 25 per cent dearer. In 2014, the average asking price for condominium apartments in Charlottenburg-Wilmersdorf is only slightly less than in Friedrichshain-Kreuzberg: 3,129 per square metre. In the top segment of the market average asking prices have already surpassed the 5,500 per square metre mark. Fourth in the price league table, as in the previous year, comes Pankow. Prices at the lower end of the market are also particularly high here. There is no major supply in modest, inter- or post-war buildings: most of the older buildings have been refurbished and modernised since the 1990s. In the top segment, the average price in Pankow is below that of the city as a whole, in which the highpriced markets in the historic centre and around Kurfürstendamm play an important part. In terms of average prices for condominium apartments, Steglitz-Zehlendorf is in fifth place. Al- Current price development, condominiums Purchase price range, 2014 District Charlottenb.-Wilm. Friedrichsh.-Kreuzb. Lichtenberg Marzahn-Hellersd. Mitte Neukölln Pankow Reinickendorf Spandau Steglitz-Zehlendorf Tempelh.-Schöneb. Treptow-Köpenick Berlin average Number sale offers 6,609 4,525 1, ,829 1,547 4,957 1,646 1,383 3,240 3,489 2,660 36,432 1) excl. bottom and top tenth percentile of quotes Middle market segment 1) price range in /m ,800 4,828 2,016 4,450 1,257 3, ,663 1,693 5,510 1,236 3,100 1,700 4,200 1,158 3,078 1,029 2,530 1,417 4,218 1,350 3,618 1,358 3,386 1,416 4,399 Bottom market segment Median in /m 2 Change from 2013 in % 1, , , , , , , , , , , Top market segment Median in /m 2 5,515 5,000 3,614 2,996 6,184 3,350 4,600 3,533 3,176 4,708 4,007 3,650 5,000 Change from 2013 in % All market segments Median in /m 2 3,129 3,269 2,432 1,500 3,646 2,083 2,879 1,848 1,389 2,443 2,243 2,369 2,725 Change from 2013 in % Source: CBRE, based on data from empirica-systeme 10 Housing Market Report 2015 Berlin

12 Current price development, apartment buildings Purchase price range, 2014 District Charlottenb.-Wilm. Friedrichsh.-Kreuzb. Lichtenberg Marzahn-Hellersd. Mitte Neukölln Pankow Reinickendorf Spandau Steglitz-Zehlendorf Tempelh.-Schöneb. Treptow-Köpenick Berlin average Number sale offers ,511 1) excl. bottom and top tenth percentile of quotes Middle market segment 1) price range in /m ,412 4,100 1,387 2, , , , ,983 1,109 2,917 1,076 2, ,308 1,325 3,667 1,043 2, , ,859 All market segments Median in /m 2 2,219 1,919 1,330 1,660 1,537 1,380 1,746 1,505 1,301 2,086 1,660 1,352 1,644 Change from 2013 in % Top and bottom segment: In the apartment building segment, different quality levels and locations have a substantial impact on price development. There were relatively few purchase offers at the district level during the observation period, meaning that in the top and bottom segments, prices and price comparisons with the previous year are not significant. For this reason, they are not represented in this report. Source: CBRE, based on data from empirica-systeme though there is interest in property ownership and the financial strength is particularly great, both are heavily oriented to individual houses and villas, somewhat weakening the market for apartment ownership. The district of Lichtenberg ranks in sixth position. The market there is dominated by a wide midfield, including numerous buildings constructed since There is currently renewed development activity in the district, which also tends to increase the average asking price. In contrast, prices in neither the top nor the bottom segments stand out considerably. The amazing thing is that apartments are on offer here at average prices per square metre that are only minimally less than in Steglitz-Zehlendorf, the district with the highest purchasing power in Berlin. Among the remaining districts, Neukölln and Treptow-Köpenick stand out because of their very strong price trends: Neukölln registered the highest proportional and the second-highest absolute growth in average prices in the city. The northern part of the district, formerly regarded as impoverished, is gradually becoming acceptable for middle-class purchasers. Some regard Neukölln as an alternative market to nearby, but much more expensive, Kreuzberg. In Treptow-Köpenick there are residential areas in both the more urbane northwestern and central parts of the district as well as in the extensive green suburbs. In Reinickendorf, Marzahn-Hellersdorf and Spandau, apartments are on offer for an average of well under 2,000 per square metre, while price rises in the latter two districts have also been very low. As in previous years, there are very few condominium apartments for sale in Marzahn- Hellersdorf. Apartment buildings: Highest prices in the west and southwest For the first time, the average asking prices for apartment buildings exceeded the 2,000 per square metre mark in two Berlin districts in 2014 both having the highest purchasing power in the city. In Charlottenburg-Wilmersdorf vendors were asking an average of 2,219, in Steglitz-Zehlendorf 2,086. The year-on-year increase in Charlottenburg-Wilmersdorf, 20.5 per cent, was particularly sharp. Steglitz-Zehlendorf was slightly behind, at 15.9 per cent. In third place for average asking prices in 2014 was Friedrichshain-Kreuzberg. Despite 17.8 per cent growth, the 2,000 threshold was missed, albeit by only 81. Pankow was next, after a wide margin. The average price there was 1,746, while the increase was less than in the previous year. This district has the most properties on offer in Berlin. In terms of prices, this large market is directly followed by the smallest: less than 50 buildings were on offer in Marzahn-Hellersdorf. However, because of this small number the peculiarly high average asking price in this district has only limited significance. All five districts so far mentioned, together with Tempelhof-Schöneberg, are above the average price per square metre in Berlin, while the other six districts are below it. Mitte and Reinicken- Housing Market Report 2015 Berlin 11

13 dorf are slightly below the city average. In terms of asking prices, the Mitte district is in only seventh place of the 12 districts, surprising in view of its location and prominence. Evidently, the properties on offer in Mitte were not concentrated in the historic city centre, but in the subdistricts of Wedding and Moabit. Nevertheless, Mitte registered the sharpest growth in asking prices in the city: 24.2 per cent. The four lowest-priced submarkets for apartment buildings are in Neukölln, Treptow-Köpenick, Lichtenberg, and Spandau, where asking prices range between 1,300 and 1,400 per square metre. Prices rose year-on-year by more than the city average in Spandau and Neukölln, slightly less in Lichtenberg and by the smallest amount in Berlin only 2.5 per cent in Treptow- Köpenick. Berlin remains an attractive international investment location The attractiveness of Berlin as a location for investment is based on the positive trend of its socio-demographic and economic conditions; the potential for rental growth; the volume of transactions; and the fungibility of the investment market. By national comparison, the prices of condominium apartments, residential investments and portfolios have moved considerably further upward in the last 12 months. In its latest property market report, the Berlin Gutachterausschuss (land valuation board) reported a 5 per cent increase in the number of sales transactions in condominium apartments from 2012 to 2013, while the transaction volume rose by 14 per cent. The number of sales of pure rental apartment building rose by 15 per cent, the transaction volume by 41 per cent. Unlike cities such as Munich or Hamburg, however, there is still an adequate supply in Berlin. Compared with other European capitals, there are considerable structural differences. Whereas there is a concentration on investment in existing property in Berlin due to its comparatively Selected residential property portfolio transactions in Berlin in 2013 and 2014 Buyer Seller Number of apartments Price in million Deutsche Wohnen AG GSW Immobilien AG 60,500 3,500 Deutsche Wohnen AG Blackstone 6, Deutsche Wohnen AG WVB Centuria i. A. Petrus-Fonds 5, GSW / Immeo Lincoln Equities Group 4, degewo Institutional investor 2, PEARS Global MCT Berlin Residential SCA 2, BUWOG AG Capricornus Capital Manag. GmbH 1, German institutional investor U. S. joint venture 1, Gesobau / WBM / Stadt und Land Caleus / Tristan Capital Partners 1, Deutsche Investment Kapitalanlagegesellschaft Zentral Boden Immobilien AG 1, Internationales Family Office Luxemburger Fondsgesellschaft 1, Union Investment Institutional TAG Tegernsee Immobilien- Property GmbH und Beteiligungs-AG 1, Akelius Fastigheter AB Round Hill Capital Akelius Fastigheter AB Pramerica Real Estate Investors moderate prices, London, for example, is experiencing a real boom in the development of condominiums and, increasingly, rental apartments in the upmarket segment. 7.5 billion investment volume A distinctive feature of Berlin is the availability and investment volume of residential property portfolios. According to CBRE, between 2013 and the third quarter of 2014, 37 residential property portfolios with volumes exceeding 50 million changed hands. Some or all of the properties concerned were in Berlin. The investment volume in Berlin amounted to around 7.5 billion, 31.5 per cent i.e. almost a third of the 23.8 billion total investment volume in Germany. The most important group of purchasers, by a wide margin, are the listed residential property companies, which accounted for 5.3 billion, around 70 per cent of the total investment volume. The largest deal was the takeover of GSW AG, with its around 60,500 residential units, by Deutsche Wohnen AG. A total of around 120,000 residential units changed hands. As well as Deutsche Wohnen AG, the active companies were primarily BUWOG AG, Akelius, and Grand City. Against the background of the decreasing supply of housing and with the political mandate to further increase the public housing stock, the State of Berlin s own housing associations are the second-largest group of investors. They accounted for an investment volume of around 625 million, 8 per cent of the total. Overall, around 7,500 residential units have been acquired in the last two years. A significant trend in the investment market for portfolio transactions in 2014 is the withdrawal of the somewhat opportunistic investors and, in some cases, the listed housing companies, because of the downward pressure on initial yields. On the other hand, we note that the capping of rents on re-letting, which is expected to come into force in mid-2015, so far has had no effect on the continuing heavy demand from investors. 12 Housing Market Report 2015 Berlin

14 Financing: Lively market vigilance required In the recent past, sale prices in some of the housing markets in Berlin and other thriving major and university cities have increased considerably. Prices of condominium apartments and apartment buildings are still rising and no change in the trend is anticipated in the near future. The population and the number of households are continuing to increase, while the volume of new construction is still too low compared with the growth. This has led to a lively financing market. The situation for commercial property finance in Germany is currently very good from the client s point of view because of the historically low interest rates, and from the provider s point of view because of the major potential for new business. Because of the extremely low interest rates and the vastly extended money supply, inter alia in the US and the Eurozone, globally there is a great deal of available liquidity that is in search of investment opportunities. The real estate market is therefore characterised by very high liquidity. However, the so-called core segment of premium properties let on long-term leases to good covenants is virtually sold out, so that investors are now also switching to secondary locations or second-order cities. This is also the reason why a trend to investments in alternative asset classes can be observed, for example in the properties of companies that no longer wish to own them but often want to continue to use them. German real estate market stable These trends are leading to intensive competition between real estate banks. The pressure on margins can already be clearly felt. Fortunately, however, no increased willingness to take risks among the financiers can be observed. They have learned their lessons from the financial crisis, which had its origin in the US real estate market and its often questionable financial conduct. The crisis and its consequences have considerably sharpened the real estate financiers awareness of security. In the case of mortgage bonds, the spreads between capital being received and loaned out are now back at their pre-crisis level providing a significant sign of solidity from the market. According to an analysis by IREBS, the growth rates in new commercial property finance business are moving in a similar direction. In 2013, although the volume of finance our new business increased by 11.3 per cent year-on-year, this was less than in the previous years. In 2012 new business grew by 15.6 per cent, in 2011 by 16.2 per cent. The stiff price competition and the continuing pressure on margins are leading to growing misgivings that real estate market players might reduce their standards for the quality of property or financing. One result of the recent financial crisis is the risk-averse market behaviour by the banks. We should maintain this! Gero Bergmann, Director of Berlin Hyp AG Finance providers and new forms of cooperation The traditional real estate financiers, such as mortgage banks, are currently open to new business and are making extensive finance available. The main reasons for this are the extremely low interest rates and the robust economic situation. In addition to the German real estate banks, new financial providers are coming into the market. These include insurance companies, loan funds and equity investors. Regulatory developments are also affecting the market. The increasing activities of the loan funds, insurance companies and financial intermediaries are enabling novel, interesting forms of cooperation with the banks, which could further expand their function as financial arrangers and enrich the market with new, practical types of products. On the other hand, another important factor is limiting the demand: the high liquidity and investment pressure in the market are leading to lower demand for borrowed capital. Investors are effecting their property purchases with ever-increasing proportions of equity capital. Controllable risk for the banks Nevertheless, there are animated discussions about a price bubble in Germany. After many years with only small changes in price, the current significant growth gives the impression of a risky trend. However, consideration of the past can initially assuage these doubts: long-term fixedinterest loans and refinancing through mortgage bonds are typical in Germany. It was not least for these reasons that the German real estate market has come through the financial and economic crisis since 2008 with more stability than many other European countries. In addition, the structure of financing is considerably more conservative than before the crisis. However, continuing disciplined risk management is also important. This applies in particular to the current market situation, in which some prices are rising faster than rents. From the banks point of view, however, the high proportion of equity means that the risk is manageable. At the moment, there is no discernible risk for the banking system and therefore for the whole economy. Housing Market Report 2015 Berlin 13

15 New buildings: 226 projects offer more than 17,600 apartments Apartment construction in Berlin has gained considerable momentum since Currently, 226 projects either under construction or definitely planned, totalling more than 17,600 apartments, can be identified. However, if the growth in population, numbers of households and incomes continues, current construction will be nowhere near adequate. The number of households has been rising by well over 20,000 per annum recently. Around 70 per cent of the apartments registered are planned as condominiums. However, some of the condominiums will later become available on the rental market after they are acquired by investors and re-let. A hardly surprising rule of thumb applies: the nearer to the centre a district is situated, the higher the proportion of rental apartments. In Mitte they account for around 40 per cent of all planned apartments. In contrast, projects in the five districts with large peripheral areas are planned to have almost exclusively condominiums. The two largest individual developments, each with more than 800 units, mainly include detached, semi-detached and terraced houses. They have long-term development prospects until 2019 or The anticipated sale prices start at 1,490 per square metre in the Wohnpark Gartenstadt project in Alt-Hohenschönhausen and rise to just under 20,000 in the Living Levels project at the East Side Gallery. Rents range from 6.50 per square metre per month in a project by a municipal company in Alt-Treptow to more than 30 in the Leipziger Platz Quartier. Spandau Charlottenburg- Wilmersdorf Mitte is the focus of new construction In every district apart from Marzahn-Hellersdorf, at least 100 apartments are currently planned or under construction. The number in Neukölln has considerably increased, albeit from a low level. Five developments are currently under construction there. More than a quarter of all new apartments planned for Berlin are in the Mitte district. The focus is in and around the historic centre, which was enclosed on three sides by the Berlin Wall. Twenty-five years after it fell, the last major gaps in the former border strip are being developed, as are nearby sites undergoing change of use, and numerous small derelict and undeveloped sites. Fourteen major projects with 100 or more apartments are planned or under construction in the district. Two of them include more than 400 apartments: a site in Europacity to the north of the central train station and, slightly further to the east, the Feuerlandhöfe on Chausseestrasse. Slightly further afield, 12 projects with more than 1,100 apartments, Steglitz-Zehlendorf 14 Housing Market Report 2015 Berlin

16 Locations of selected new construction projects Condominiums Rental apartments Mixed use Exact use unknown Reinickendorf Pankow Lichtenberg Mitte Marzahn-Hel lers dorf Friedrichshain- Kreuzberg Tempelhof- Schöneberg Neukölln Treptow-Köpenick Source: CBRE, as per November 2014 Housing Market Report 2015 Berlin 15

17 are planned. Another focus of construction activity in the district is in and around the former border area between Mitte and Kreuzberg, where more than 670 apartments are planned. As well as new development projects, many apartments are to be constructed in conversion projects in Mitte, for example in former office, retail or industrial buildings. By a wide margin, the largest project of this type is the conversion of a former department store site on Brunnenstrasse to 265 rental apartments. Sale prices still high Mitte is also the central focus of rental apartment construction, where more than a third of those planned in the whole of Berlin are to be built. A wide range is on offer. Projected rents range from 9 per square metre per month in Markgrafenkarree to over 30 on the Leipziger Platz Quartier, where apartments of up to 362 square metres will be on offer. At the other end of the spectrum are 390 student apartments, with floor areas starting at 23 square metres, to be marketed as condominiums in a project close to Alexanderplatz. In the owner-occupier segment, most properties on offer are in the 3,000 to 5,000 per square metre price bracket. However, substantially higher asking prices are not uncommon in Mitte. In many projects the promoters are asking more than 6,000 per square metre, while in four developments, apartments are priced at over 10,000. High volume of construction in Lichtenberg In second place for numbers of apartments under construction is the district of Lichtenberg. Around half the new developments planned, on two large sites in Falkenberg and Karlshorst, will be detached, semi-detached, or terraced houses. Development periods of up to 16 years are quoted. A further approximately quarter of new developments in Lichtenberg are two projects by the municipal company HOWOGE, to be let at rents from around 7 per square metre. The remainder of the planned apartments are spread over 16 projects, most of which are in Alt-Hohenschönhausen and the subdistricts of Lichtenberg and Rummelsburg, close to the city centre. Friedrichshain-Kreuzberg is in third place in the league table of new developments. Around 80 per cent of all projects are in the subdistrict of Friedrichshain. The literally outstanding single project is for the two high-rise buildings Max und Moritz. One of the two towers is the largest rental property in the district, housing 210 units. The most-discussed project is Living Levels, in the former border zone near the East Side Gallery, where prices of up to 20,000 per square metre will be asked. There are other concentrations in redevelopment sites and derelict areas of eastern Friedrichshain, between Warschauer Strasse and the S-Bahn ring. Quite a few of these are traditional Berlin single-property sites, for 10 to 30 apartments each. The asking prices for most of the projects in Friedrichshain range from 3,000 to 4,000 per square metre. In the Kreuzberg area, more than 80 per cent of residential development is concentrated on the western edge of the new Gleisdreieckpark on Flottwellstrasse, within walking distance of Potsdamer Platz. In fourth place for developments is Treptow- Köpenick, with around 2,000 apartments planned. The expected sale prices and rents are among the lowest in the city, primarily due to the relatively low land prices in the extensive, often uncongested district, with many peripheral areas. The most prominent concentration of development New apartment construction: 226 projects in development District Projects Projects with rental apartments Total number of apartments Quoted rent price in Quoted purchase price in /m 2 Apartment size in m 2 Charlottenburg-Wilmersdorf , ,490 11, Friedrichshain-Kreuzberg , ,450 19, Lichtenberg , ,490 4, Marzahn-Hellersdorf 1 8 2,300 2, Mitte , ,190 15, Neukölln avg ,160 4, Pankow , ,290 7, Reinickendorf ,430 4, Spandau ,670 4, Steglitz-Zehlendorf ,980 6, Tempelhof-Schöneberg ,860 4, Treptow-Köpenick , ,900 5, Berlin total , ,490 19, Source: CBRE, own research 16 Housing Market Report 2015 Berlin

18 is Adlershof, where around 600 apartments in 11 projects are planned. Investors are showing interest in the science park as well as the proximity of, and good links to, the future major airport. The target groups are up-and-coming scientists, students, and workers with heavy travel commitments. Around 40 per cent of the apartments in Adlershof are planned for letting. The secondlargest amount of development, in the subdistrict of Köpenick, is quite different. In the often idyllic locations close to lakes and forests, over 90 per cent of the more than 500 apartments planned are to be sold as condominiums. The two developments in Alt-Treptow are relatively large, with 98 and 200 apartments. Four of the five projects in Friedrichshagen and Grünau are in attractive waterside locations. Expansion of new development in Pankow By number of apartments, two major projects in the Prenzlauer Berg area in Pankow are well ahead of all others. They are the site on the northern Mauerpark, on which 450 condominium and rental apartments are planned, and the La Vie project, near Senefelderplatz, which includes more than 350 rental apartments. Apart from these, only one of the eight projects on Prenzlauer Berg has more than 50 apartments. Three of the projects are small, with less than 25 apartments. Although there is still good demand, there is a shortage of sites in the densely-developed subdistrict. Investors are shifting northwards. In the often idyllic Weissensee alone, around 330 apartments in 10 projects are planned, and circa 170 apartments in five developments in Niederschönhausen. Almost 220 additional units are planned in the Pankow subdistrict. There and in Niederschönhausen, the municipal GESOBAU AG is about to take over two projects with around 100 apartments each, which it intends to let at rents from 6.90 per square metre per month. In Pankower Gärten they include a privately-financed section, where apartment rents will be up to per square metre. Apart from these, the owner-occupier market is largely dominant, particularly in the numerous smaller projects. In the northern subdistricts such as Weissensee, Französisch Buchholz and Wilhelmsruh, only condominium apartments are being constructed. Charlottenburg-Wilmersdorf, sixth in terms of numbers of new apartments, is mainly a denselydeveloped inner-city district. Almost the only large undeveloped sites are in peripheral locations, for instance on Seesener Strasse near the motorway and S-Bahn, and on a former hospital site on Mollwitzstrasse and Pulsstrasse. Infill sites dominate by number of projects. The smallest are the very upmarket developments in the western The biggest projects in the city Project Location Number of apartments (rounded) AuenFlügel Berlin Falkenberg 850 1,000 Gartenstadt Karlshorst I and II Karlshorst 820 Europacity, 1 st sect., CA Immo & Hamburg Team Moabit 520 Northern section of Mauerpark, Groth Gruppe Prenzlauer Berg 450 Max und Moritz Friedrichshain 420 Treskow-Höfe 1) Karlshorst 410 Lindenhof 2) Lichtenberg 410 Feuerlandhöfe 3) Mitte 400 Studio:B (student residence) Mitte 390 Markgrafenkarree Mitte 370 1) former site of HTW technical college 2) former site of children s hospital 3) former silver bromide factory villa area of Grunewald. There are four projects in inner-city Wilmersdorf and three in Westend. Condominium developments dominate, with up to 80 per cent of activity. The sometimes generous sizes of the planned apartments is striking. In nine projects, apartments larger than 200 square metres are on offer, while three will even include units of more than 300 square metres. These carry prices that, in a number of instances, exceed the 6,000 per square metre mark. Rents of up to 15 per square metre are being quoted for rental apartments in the district. Smaller projects on the edge of Steglitz Steglitz-Zehlendorf is one of the six Berlin districts in which fewer than 1,000 new apartments are planned. More than 70 per cent of activities are concentrated in the green and affluent subdistricts of Zehlendorf and Dahlem. These are also the location of the only three projects in the district to include more than 100 apartments, led by the Cedelia development of 274 units on the site of a former barracks. Two of these three projects will have more rental apartments than condominiums. In the eastern areas of Steglitz, Lichterfelde and Lankwitz there are only smaller projects, with six to 67 apartments. Overall, anticipated minimum initial rents and lowest sale prices in the district are higher than the city average, while the highest rents and prices are well below those in the most highly sought-after city centre locations. The remaining districts each have between only one and seven development projects, including two larger developments in Neukölln, each of more than 100 apartments. Without exception these are condominium apartments in the 2,300 to 4,900 price bracket, the latter an exceptional case on the Humboldtinsel in Tegel. There is only minor development activity in Tempelhof-Schöneberg, Spandau and Marzahn-Hellersdorf, with just 275 apartments planned. Housing Market Report 2015 Berlin 17

19 Housing Cost Atlas: Detailed analysis of 190 postcodes in the city of Berlin Berlin postcode areas are broadly homogeneous in terms of structure of population and development, qualities of location, amenities and transport connections, rental value, housing market and purchasing power of households. Their average population is around 18,000. Data at postcode level therefore gives an insight into particular situations and differences in local development and allows detailed analysis of smallscale local trends in the city. Relationship between rent, floor area, and purchasing power Even deeper insights come to light when such data is correlated. A high rent per square metre in a locality is put into perspective if, as in parts of Kreuzberg and Neukölln, the apartments on offer are frequently small and their total costs are therefore limited. Data on rental values gain particular significance when they are viewed in relation to the purchasing power of households in the Methodology of the Housing Cost Atlas The 64,170 apartments on offer where floor area and rent were stated in the first three quarters of 2014 were allocated to the 190 Berlin postcodes. This provided a statistically adequate number of offers for all areas apart from (Wartenberg), (Blankenburg), (Blankenfelde) and (Olympiastadion). The tables give the median rent per square metre (excluding heating and services) of all the properties on offer, as well as the medians of the upper and lower deciles of the offers. This therefore enables perception of the local high-and low-price segments. In order to determine the so-called warm rents (i.e. including heating and services), flat-rate ancillary costs of 2.83 per square metre for the western districts of Berlin and 2.19 for the eastern districts were added. This is based on the current data provided by the BBU. The average purchasing power per capita and per household is calculated annually at postcode level by Michael Bauer Research GmbH. The average housing cost ratio was calculated using the following formula: average asking rent + ancillary costs x average apartment floor area average purchasing power = average housing cost ratio 18 Housing Market Report 2015 Berlin

20 locality. Arithmetical division of average local asking rents (inclusive of heating) by average household purchasing power gives the housing cost ratio. Where this is high, the local population often finds it difficult to afford the apartments on offer: the providers are apparently aiming at higherearning potential tenants. If the housing cost ratio is low, the location has comparatively low financial priority: other needs are more important. For this reason, even when local purchasing power is high, the potential for rent increase is often limited. The significance of the housing cost ratio is reduced, however, if an appreciable number of new developments come on to the market at higher than the usual rental values and make up a significant proportion of the total supply in an area. The average rental value in such areas is then heavily influenced by the new development. The district texts on the following pages refer to such phenomena in individual cases. Major variations, even within areas It is useful to examine the extremes at the upper and lower ends of the market in the accompanying tables. The average asking rents per square metre for the lowest- and highest-priced deciles of apartments are provided for all postcodes. This reveals the strengths or weaknesses of the highpriced segment concerned as well as the existence or absence of market niches for less-welloff tenants. In a few areas there is a wide range across the segments. This indicates particularly high social variety. Put positively, this means that there are apartments for all income groups, the structure of the population and buildings is mixed, and therefore urban life is particularly varied. In other areas there are only narrow ranges between the figures for the overall market and its cheapest and most expensive segments. In these, the housing market and population structure may be rather homogeneous. High supply figures in the centre and periphery If a large number of apartments are on offer in an area, this can be interpreted in several ways. It might simply mean that there are many apartments there. However, it could mean that there is high tenant fluctuation and a particular dynamism in the market. This requires closer analysis at the local level. In Berlin, the areas with large numbers of apartments on offer are widely spread. They are found both in the central locations of the city, such as Unter den Linden and Chausseestrasse, and in trendy locations in Friedrichshain and Prenzlauer Berg. However, large numbers of offers can also be registered in peripheral areas such as Hellersdorf North. Area type 1: Stagnating expensive locations Savignyplatz Charl.-Wilmersdorf Hackescher Markt Mitte Kollwitzplatz Pankow Unter den Linden Mitte Potsdamer Platz Mitte Postcode Postcode Postcode Gesundbrunnen Mitte , Stephanstrasse Mitte , Richardplatz Neukölln , Görlitzer Park Friedrichsh.-Kreuzb , Hochmeisterplatz Charl.-Wilmersdorf , Area Area Area District District District Asking rent 1) in /m 2 1) median per month net rent excl. utilities 2) average asking rent year on year Asking rent 1) in /m 2 Asking rent 1) in /m 2 Housing cost ratio in % Purchasing power 2) in /month Purchasing power 2 in /month Change in asking rent 2) in % Stagnating expensive locations In many areas of Berlin where there are high average asking rents, rental growth has reached its limits. If moving within the area, households often need to commit more than 40 per cent of their purchasing power in rent (including heating). When asking rents are very high, apartment hunters from outside the district broaden their search to less expensive neighbouring areas. The housing providers have reacted and have hardly increased their asking rents in a few of these areas, they have actually fallen. Area type 2: Up-and-coming city centre neighbourhoods 1) median per month net rent excl. utilities 2) average per household 3) average asking rent year on year Change in asking rent 3) in % Up-and-coming city centre neighbourhoods There is an unbroken trend of rental growth in many areas with older buildings in the city centre. This primarily concerns locations that are alternatives to very highly sought-after districts and, as a special phenomenon, the already very expensive east of Kreuzberg. In these areas, household purchasing power is often low and will remain so for the foreseeable future, as newcomers with moderate incomes, for whom the location is very important or who are content with small apartments, move in. Area type 3: Catching up on the periphery Housing cost ratio in % Buckow East Neukölln , Märk. Viertel West Reinickendorf , Falkenhagener Feld Spandau , Hellersdorf North Marzahn-Hellersd , Mehrower Allee Marzahn-Hellersd , ) median per month net rent excl. utilities 2) average per household Catching up on the periphery Areas of high-rise buildings on the edge of the city previously appeared to be decoupled from the rental growth in the city centre. Recently, demand has noticeably increased there as well: asking rents are rising significantly. However, they continue to be among the lowest in the city and will probably retain this position. In these areas, many apartments are still available for less than 6 per square metre and are therefore very important for low-income groups of the population. Housing Market Report 2015 Berlin 19