HousingMarketReport. with HousingCostAtlas. HousingMarketReport_Berlin_February 2013

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1 HousingMarketReport with HousingCostAtlas 2013 HousingMarketReport_Berlin_February 2013

2 MASTHEAD 9th Edition Publisher: GSW Immobilien AG Charlottenstraße 4, Berlin Tel. +49 (0) Fax +49 (0) Market data: Dr. Henrik Baumunk, Kristina Kröger, Michael Schlatterer MRICS Residential Valuation, CBRE GmbH Editor: Roland Stimpel Graphics/Layout: Storkan Informationsdesign Proect management: Kata Binnyus, RUECKERCONSULT GmbH Responsible under German press law: Thomas Rücker, Head of Corporate Communications, GSW Immobilien AG, (also for download of HousingMarketReport) Cover photo: Caro/Eckelt DISCLAIMER 2013 GSW/CBRE Information herein has been obtained from sources which are accessible to the public, (or, in certain cases, in exchange for a fee) and believed reliable. While we do not doubt its accuracy, we have not verified each piece of information and cannot make any guarantees about it, barring willful intent and gross negligence. It is your responsibility to independently confirm its accuracy and completeness. The information contained in this market report may not be used, reproduced or published without prior written permission of GSW and CBRE. HousingMarketReport_Berlin_February 2013

3 Strong upturn in Berlin The Berlin housing market is experiencing the strongest growth in rents and purchase prices in more than 20 years. On average, rents for listed apartments are more than 13 percent higher than in the previous year. Inner-city locations are enoying the most pronounced demand, but interest is also growing in other parts of the city. The markets for owner-occupied apartments and apartment buildings are seeing an even bigger boom. Here, buyers are increasingly discovering simple locations and properties that often used to be seen as difficult to rent or that could only be rented at extremely low rents. And it s been proven that when buyers and investors discover a location, the rent prices go up. GSW-Vorstand Andreas Segal, Thomas Zinnöcker, Jörg Schwagenscheidt (left to right) Boom times like these in particular require a precise and detailed analysis of the markets and their potential. Among the individual districts and neighborhoods, there are some trailblazers that are already extremely expensive. By contrast, some areas are lagging behind or have yet to feel the upturn to a significant extent. The Housing Market Report 2013 prepared by GSW and CBRE provides a precise breakdown of the 190 locations at postal level. Almost 105,000 properties advertised for rental or purchase were analyzed for the report based in terms of price and size for various geographical levels. The 190 Berlin postal s allow for differentiated allocation. For 188 of the postal s, there is a sufficient data pool that is used in the Housing Cost Atlas to calculate the average asking rents and their development compared with the previous year. Average asking rents in the lower and upper market segments are also shown, allowing readers to identify the most pronounced luxury markets and affordable niches. The purchasing power of the residents of each postal as calculated by Michael Bauer Research GmbH enables a deeper analysis. These figures were used to calculate the housing cost ratio the relationship between average asking rents and purchasing power in the respective area. This ratio reveals which areas are particularly expensive for local residents, as well as places that remain affordable for low-income households. This also highlights potential for investors, such as in areas where purchasing power is stable but rents are low, meaning that there could be demand for higher-quality residential construction. The analysis of a total of 199 new construction proects throughout Berlin, to which we have dedicated its own chapter, also provides useful information. In order to more immediately capture the rapid market development, the publication date of the Housing Market Report has been brought forward compared with previous years, so that data on asking rents and purchase prices covers the first three quarters of But this period provides a more than solid data pool, with over 100,000 properties registered as available for rent or purchase. We would like to expressly thank CBRE, our partner in preparing this Housing Market Report, for the extensive work involved in collecting and processing the data. All in all, the aim of the report is to provide an obective, in-depth contribution to the discussion about Berlin s housing market. It seeks to combat generalizations and distortions with solid, proven facts. The report shows that while the Berlin housing market is seeing a general positive development, there are still big differences between individual neighborhoods. Boom locations are often found next to quiet niches; luxury and simple apartments will remain immediate neighbors in the future. The dynamic nature of Berlin s housing market aside, its diversity will remain. Thomas Zinnöcker Chairman of the Board GSW Immobilien AG Jörg Schwagenscheidt Member of the Board (COO) GSW Immobilien AG Andreas Segal Member of the Board (CFO) GSW Immobilien AG 1_HousingMarketReport_Berlin_February 2013

4 City comparison Berlin as a location Apartment rents Investments and ownership New construction HousingCostAtlas: A detailed analysis 190 neighborhoods in 12 districts Rent levels Exceptional residential areas Berlin is catching up with other maor cities in terms of income and rents but living remains affordable compared with purchasing power. More inhabitants, more obs and higher expectations are driving demand, while there is scarcely any supply-side growth Rents are rising across the board most notably in up-and-coming inner-city locations, less so at the edge of the city House and apartment buyers are coming to Berlin from around the world and increasingly taking a chance on simple locations. Around 200 apartment building proects are in the works, mostly in the inner city. Building cooperatives are booming too Rents, purchasing power and supply structure broken down by neighborhood: A precise analysis of the local markets Charlottenburg-Wilmersdorf Friedrichshain-Kreuzberg Lichtenberg Marzahn-Hellersdorf Mitte Neukölln Pankow Reinickendorf Spandau Steglitz-Zehlendorf Tempelhof-Schöneberg Treptow-Köpenick Berlin s neighborhoods at a glance: Expensive locations in the city center, middle-class suburbs and affordable areas on the edge of town Rent map for Berlin as a whole The highest and lowest rents, household income, apartment sizes and rents as a proportion of local purchasing power Back cover Back cover 2_HousingMarketReport_Berlin_February 2013

5 City comparison: Housing costs on the rise as Berlin catches up in both income and rents The residents of economic centers in many countries typically have the highest income, but also pay the highest rents and property prices. However, Germany s price structure shows that, despite the upturn it has experienced, Berlin has yet to catch up with the other maor cities in the country. Purchasing power and rents are significantly higher in the four next-largest cities of Hamburg, Munich, Cologne and Frankfurt. Thanks to their income, residents of these cities still have more left in their pockets after their high housing costs are deducted. But the gap is narrowing. At present, rent including heating accounts for 27.4 percent of monthly household purchasing power in Berlin. Only Cologne comes in lower (24.7 percent). By contrast, the figure is 28.4 percent in Hamburg, 28.6 percent in Munich and as much as 31.1 percent in Frankfurt. Compared with the total household budget, housing costs in Berlin remain moderate. Living costs are rising in all maor cities In a number of cities, the proportion of purchasing power accounted for by housing costs is likely to increase over the coming years. The number of residents is rising, as is their income; meanwhile, new construction activity will be nowhere near sufficient to keep pace in the foreseeable future. Ancillary expenses for energy and housing maintenance services are also on the rise. Housing is commanding a larger share of the private budget in all maor cities, not ust in Berlin. But househunters can compensate for rising housing costs to a certain extent by moving to an area that is further outside the city center or living more centrally but compromising on factors such as quiet, comfort, or floor space. To date, despite lower purchasing power, Berliners have been living in spaces comparable to those in other cities: Listed apartments in Berlin and Hamburg average 74 square meters, while the figures for Frankfurt and Munich are 76 and 75 square meters respectively. Only Cologne with its large number of small post-war apartments has a smaller average size of 68 square meters. If prices and rents rise in inner-city locations in particular, residents will increasingly have to ask themselves what is more important to them space or location. And many are likely to come down on the side of location, preferring to remain close to their obs and city infrastructure. They will be able to offset the higher costs per square meter not only by living in smaller apartments, but also through lower travel costs and more affordable retail and service offerings. This applies across all income groups and puts into perspective the frequently expressed fear that central Berlin could soon only be affordable for the wealthy. In any case, well-off residents would not wish occupy the entire inner city. Many centrally located neighborhoods are dominated by post-war prefabricated apartment blocks and social housing with cramped layouts, or developments that lack infrastructure and are impacted by traffic and commerce. In these areas, rents will remain lower than elsewhere. Central Berlin will retain its mixed population structure. Indeed, neighborhoods that are currently mainly home to low-income households, such as parts of Neukölln, Wedding and Moabit, will see an intensification of this social mix. Although not everyone who wants to live in the inner city will be able to do so any more, this also applies to the middle classes and is the inevitable consequence of a general excess demand for centrally located apartments. No risk of a bubble on the rental market The debate on the Berlin housing market has recently been dominated by the issue of crowding out. In the near future, however, its attention is likely to turn to the growing scarcity of apartments throughout the city. Although some market observers are currently expressing fears of a bubble, this does not relate to a surplus on the supply side, but rather to the possibility of overheated purchase prices as apartments in Berlin are seen as a safe haven against inflation and the crisis affecting the euro zone. Even if new construction were to increase, a situation like in the late 1990s is not anticipated in the foreseeable future. Back then, it was the consequence of the euphoria following the fall of the Berlin Wall, and extremely high level of housing promotion subsidies. Today, expectations remain optimistic, but are more moderate than before. Tax breaks and subsidies are thin on the ground, and there is far less land available for development. Even if an economic downturn were to coincide with increased new construction activity, one fundamental phenomenon would remain: For more than a decade, Berlin has seen a rise in demand for housing, but almost no new production. Investors who avoid overpriced locations and asking prices are assured of a stable market with growth potential. Total rent in Berlin on average one-third cheaper than in Munich Comparison of housing costs and retail purchasing power in maor German cities City Purchasing power per resident Retail purchasing power 1) per resident in /m 2 /month Total rent 2) per resident Purchasing power per resident excl. retail purchasing power, excl. total rent Munich Cologne Hamburg Frankfurt am Main Berlin 2,303 1,868 1,897 1,944 1, , ) Retail purchasing power includes the purchasing power attributed to each resident of a location for consumption, not including costs such as telecommunications, car ownership, amortization and insurance that arise independent of a location 2) Basis for calculation: 1.8 residents per household, incl. operating costs Munich: 2.94 /m 2 (rent index 2011), Cologne: 3.14 /m 2 (operating costs index 2010), Berlin: average operating cost 2.15 /m 2 for East Berlin and 2.75 /m 2 for West Berlin (BBU 2012), Hamburg: 3.13 /m 2 (operating costs index 2011), Frankfurt am Main: 2.90 /m 2 (rent index 2010) Sources: empirica-systeme, Michael Bauer Research, compiled by: CBRE In the table, retail purchasing power and rent including heating is subtracted from the total purchasing power in each city. The numbers are based on data from Michael Bauer Research (purchasing power) and are presented per resident, based on an average 1.8 residents per household. The resulting figure represents the amount of money residents of each city have available to them, either for saving or spending on luxuries. 3_HousingMarketReport_Berlin_February 2013

6 Growing economy boosts the housing market particularly in the city center Berlin s growth is continuing unabated. There has been a stable upward trend in terms of population, economic output and employment for a number of years. This can be attributed to the city s varied industry structure, which has a promising future, as well as its attractiveness for residents and visitors and its growing importance as a German and European center for politics, culture, science and tourism. The quality of the location is improving from year to year, said Jörg Schwagenscheidt, Chief Operating Officer of GSW Immobilien AG. We are happy to see that private individuals and investors are increasingly recognizing the virtues of Berlin. The city s upturn is documented by its population development. The number of inhabitants has been on the rise for eight years now. Around 130,000 more people are currently living in the city than in 2004, and the population increased by some 15,500 in the first half of 2012 alone. Population growth is not only concentrated on districts located entirely or partially in the city center. Pankow and the Prenzlauer Berg area are leading the way, followed by Neukölln and Mitte, where the number of inhabitants increased by between 4.7 and 4.9 percent in the period from 2007 to The other end of the table is occupied by three districts that are entirely or partially located on the edge of the city: In Marzahn-Hellersdorf, Reinickendorf and Tempelhof-Schöneberg, the number of inhabitants increased by less than 2 percent. Young people who are new to Berlin are particularly attracted to the inner city but this trend can also be observed among older households. However, the situation is different for families with young children. According to a study by the Berlin-Brandenburg Association of Housing Companies (BBU) covering the period from 2006 to 2010, they preferred less densely populated and more affordable neighborhoods on the eastern, western and south-western edges of the city. Compared to the inner city, these locations offer more space something that is needed by growing families in particular at a lower price. Economic output is a key indicator for the housing market. In the first half of 2012, economic output in Berlin increased by 1.8 percent the highest figure recorded by any of the German states. According to the official statistics, financial, insurance and corporate service providers enoyed the strongest growth. Industry is playing a positive role, while the blossoming startup sector is also becoming increasingly important for the city. Berlin is now Germany s maor center for the development of new Internet ideas and venture capital. The business magazine Wirtschaftswoche recently described Berlin as heaven on earth for Internet startups. The tourism sector, another important pillar of the city s economy, is continuing to grow. In terms of overnight stays, Berlin is ranked third in Europe, behind London and Paris. The average number of visitors on a given day is around 500,000. Hotels in the city counted More people, more obs, more expectations around 22.4 million overnight stays in 2011, and Investitionsbank Berlin expects this figure to reach around 30 million by According to the hotel and restaurant association DEHOGA, tourism currently accounts for around 275,000 obs. Negative headlines concerning the delayed opening of the new international airport have done nothing to slow this trend. Although Berlin still has the highest unemployment rate of all German federal states, it is making progress. In the period from March 2011 to March 2012, the number of employed persons increased by 3.4 percent, a higher rate than elsewhere in the country. The highest relative growth was recorded by the construction industry (almost 6 percent) and the service industry (3.6 percent). The latter sector dominates the employment market, accounting for around a million employees. Almost 182,000 people work in the manufacturing industry including construction. More inhabitants, more obs and more purchasing power all of this means rising demand for housing. The impact of this development varies from district to district. Central areas are leading the way in terms of both rents and purchase prices. The four districts with the highest growth in asking rents compared with the previous year are located entirely or partially in the city center Mitte, Neukölln, Friedrichshain-Kreuzberg and Charlottenburg-Wilmersdorf. By contrast, the four Berlin Barometer City district Residents ) Residents ) change from ) 1 Charlottenburg-Wilmersdorf 325, , , , , , , , , , , ,487 3,517,389 +3,898 +4,588 +3,754 +2,494 +6,958 +5,912 +4,780 +3,063 +2,293 +1,942 1,976 +1,917 39,623 2 Friedrichshain-Kreuzberg Lichtenberg 4 Marzahn-Hellersdorf 5 Mitte 6 Neukölln 7 Pankow 8 Reinickendorf 9 Spandau 10 Steglitz-Zehlendorf 11 Tempelhof-Schöneberg 12 Treptow-Köpenick Berlin total Built-up space Water Forest / park 1) as of: June 2) all employable civilians 4_HousingMarketReport_Berlin_February 2013

7 districts with the lowest growth are all outside the city center: Spandau, Marzahn-Hellersdorf, Lichtenberg and Treptow-Köpenick. Apartments with particularly high asking prices are mostly located in the city center, too: The highest rents in the upper market segment were recorded in Mitte, Charlottenburg-Wilmersdorf, Friedrichshain-Kreuzberg and Pankow particularly in the Prenzlauer Berg area. The price gap is widening With the exception of Treptow-Köpenick district, this rental development is also reflected in the development of purchase prices. After Treptow-Köpenick, which saw an extraordinary rise in prices compared with the previous year, Neukölln (albeit starting from a low level) and Charlottenburg-Wilmersdorf recorded the strongest growth in owner-occupied apartments in Sellers in Steglitz-Zehlendorf, Tempelhof-Schöneberg and Mitte are also benefiting from rising prices. Mitte leads the way in terms of prices per square meter. The district also has a particularly pronounced high-end market segment. On average, asking prices in the most expensive city-center districts are around double the level seen in the districts at the edge of the city at the end of the table. The gap in terms of rents is less significant, but is also widening. Rents inside and outside the commuter train ring are becoming increasingly differentiated, explained Michael Schlatterer, a housing market expert from CBRE s Residential Valuation team. However, the increase in rents is being accompanied by a significant About GSW With a portfolio of approximately 52,100 residential units, GSW Immobilien AG is one of the leading private residential property companies in Berlin. GSW s corporate strategy is focused on the long-term rental management of residential property, applying a systematic approach intended to enhance both customer satisfaction and operational efficiency. As of December 31, 2011, the company s property portfolio was valued at approximately 2.9 billion. Since this date, GSW has acquired around 7,000 residential units with a value of around 350 million. About CBRE Group, Inc. improvement in the quality of fixtures and fittings. In near-city center areas such as southern Reinickendorf or Charlottenburg-Nord, affordable rental apartments can still be found despite increased rents. New construction activity which remains modest is also concentrated in the city center. 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 firm (in terms of 2011 revenue). The Company has approximately 34,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and proect management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at CBRE Residential Valuation Germany is one of the market leaders for the valuation of real estate portfolios. In 2011, around 700,000 residential units with a volume of some 38 billion were valued. Seven of the top 10 institutional real estate portfolio holders are CBRE customers. Friedrichshain-Kreuzberg, Pankow and Mitte saw the largest number of building permits in 2011, while Spandau, Neukölln and Marzahn- Hellersdorf brought up the rear. As building lots in the city center are becoming increasingly scarce, however, new construction is likely to focus increasingly on areas outside the city center over the coming years. Population development 1) 2007 to 2012 Population density per km Unemployment rate 2) 2011 Existing apartments 2011 Permits for building new apartments 2011 Newly finished apartments , , , , , , , , , , , , , , , , , , , , , , , , , ,688,431 3,519 1,990 Sources: Berlin-Brandenburg Statistics Office, Federal Employment Office (unemployment rate), compiled by: CBRE 5_HousingMarketReport_Berlin_February 2013

8 Rents: Growth accelerating, new construction still weak, city particularly sought after Rents for advertised apartments in Berlin are increasing ever more quickly. Median asking rents rose by 4.5 percent between 2009 and 2010, by 7.8 percent in 2011, and by as much as 13.8 percent in The latter is the result of an analysis of more than 170,000 rental properties advertised in 2011 and The top 10 percent of properties in terms of asking rents saw particularly strong growth of 16 percent. By contrast, rents in the lower market segment increased by only 8.7 percent. There are various reasons for this development. The first is the demand situation, which is driven by Berlin s population and economic growth. In recent years, the number of households has increased by an average of more than 15,000 annually. Residents are earning more money, and their obs are more secure than they used to be. Many of the city s inhabitants are seeking larger, better appointed apartments. The growing demand is also concentrated on certain city-center neighborhoods, where every apartment could now be rented out several times over. Further reasons for the rent increase can be found on the supply side. New construction is failing to keep pace with the rise in demand. Although construction activity has increased compared with previous years, it is still a long way from the required level: Only 1,990 new apartments were completed in 2011, corresponding to a little more than one-tenth of a Plenty of properties in the better locations percent of the housing stock and representing less than one apartment per 1,000 inhabitants. The prospects for 2012 are slightly better, with approval granted for the construction of 3,519 apartments. But even if all of these are completed, they will only absorb around one-fifth of the demand generated from migration to the city and that is before considering the increased demand among existing residents. The construction of new rental apartments has a paradoxical effect. In reality, it reduces demand-side pressure slightly, and hence curbs the increase in rents. However, it has precisely the opposite impact statistically. Asking rents for new apartments are generally higher than for existing properties. As such, when they come on to the market, the average asking rent increases. To date, this tends to affect individual areas with large-scale new construction proects, and has had a largely minimal impact on the city as a whole; however, the overall effect is set to intensify over the coming years. Those with lower rents don t want to move Average asking rents are also being driven by a third factor: When the number of available properties is falling, people move house less often, as the gap between their existing low rent and the current market conditions can prove unacceptably high. Even downsizing to a smaller apartment tends not to be an option for them if their new home would cost ust as much as their current residence, if not more. Housing Market Report methodology advertised rental properties The analysis includes the asking rents for apartments in Berlin; in 2011 and the period from Q1 to Q3 2012, a total of 172,642 available rental properties were evaluated. The median values for both years were calculated, i.e. the rental level that is higher than half of all available properties and lower than the remaining half. In order to present the extremes of the respective markets, however, the lowest and highest 10 percent of asking rents are presented separately for each district and the city as a whole. The medians within the respective segments are also presented. The low level of fluctuation serves to further reduce the supply of available properties. And as affordable properties with existing tenancies are held for longer, the focus of supply is shifting: Relatively few simple apartments are advertised, with comparatively more high-end properties coming on to the market instead. This means that the average rent is increasing to a greater extent than rents for the respective apartments within a quality category. There is a corresponding shift in available properties from comparatively affordable to Current rental development Rental price range for new lettings, 2012 District Number Middle market segment 1) of rental price range in /m 2 /month offers Charlottenb.-Wilm. Friedrichsh.-Kreuzb. Lichtenberg Marzahn-Hellersd. Mitte Neukölln Pankow Reinickendorf Spandau Steglitz-Zehlendorf Tempelh.-Schöneb. Treptow-Köpenick Berlin average 8,362 6,007 2,591 3,394 9,077 4,206 8,741 3,790 4,016 5,406 5,071 4,417 65, ) excl. bottom and top tenth percentile of quotes 2) forecast 12-month-trend for total market segment Bottom market segment Top market segment All market segments Trend 2) Median in Median in Median in /m 2 /month /m 2 /month /m 2 /month Change from Change from Change from Source: empirica-systeme (2012 statistics), IDN ImmoDaten (2011 statistics); compiled by: CBRE 6_HousingMarketReport_Berlin_February 2013

9 Rental apartments: Current position in market cycle 2012 Rental growth accelerating Rental growth slowing Rental decline accelerating Rental decline slowing MH Marzahn-Hellersdorf Lichtenberg L Steglitz-Zehlendorf SZ Berlin total B Tempelhof-Schöneberg TS Neukölln N Sp Spandau Mitte M TK Treptow-Köpenick R Reinickendorf P Pankow CW Charlottenburg-Wilmersdorf FK Friedrichshain-Kreuzberg Source: CBRE The graph shows the position of the districts and the city as a whole within the rental market cycle as derived from market data and trend forecasts. The districts at the far left are at the start of a rental growth phase; for districts to the right along the curve, this phase is further developed. relatively expensive areas. In 2011, around 53 percent of all properties advertised were in the more affordable half of the areas surveyed. This situation had turned around by 2012: Only 44 percent of properties advertised were in the more affordable half of the city, meaning that around 56 percent were in more expensive areas. In the already expensive districts of Mitte, Charlottenburg-Wilmersdorf, Friedrichshain-Kreuzberg and Pankow, which account for half of all properties advertised, the absolute rise was extremely high at up to 1.05 per square meter. This is one of the reasons that average asking rents in Berlin as a whole have seen particularly substantial growth of 13.8 percent higher than the average figure for most individual districts. The fact that relatively few affordable apartments and comparatively more expensive apartments are coming on to the market is not only due to individual landlords driving up their asking rents, but can also be attributed to the narrowing of the market and tenants opting to remain in lower-priced apartments. Short supply across all segments in center The highest rental growth is being seen in central locations. Two very different districts are leading the way: Friedrichshain-Kreuzberg and Charlottenburg-Wilmersdorf have median asking rents of 8.94 and 8.93 per square meter respectively, followed by Mitte with average asking rents of 8.11 per square meter. Within the latter district, however, there is a considerable difference when it comes to conditions in the historical Mitte neighborhood and the less prosperous areas of Tiergarten and Wedding. Mitte district as a whole saw the highest year-on-year increase in asking rents in Berlin (14.7 percent), which suggests that there are shortages in all market segments. Pankow and the well-off district of Steglitz- Zehlendorf also come in at or above the 8 threshold. The middle of the list is home to Tempelhof-Schöneberg, although here, too, the market is highly differentiated between the attractive inner-city neighborhoods of Schöneberg and the suburban areas of Tempelhof. Next in line is a climber among the districts: Neukölln, where median asking rents on the market as a whole increased by 12.2 percent. All of the other districts have three things in common: They are located partially or entirely on the edge of the city, they have relatively Cyclical development on the housing market The real estate market develops cyclically and in waves. The waveform cycle graph produced by CBRE shows the phase in which each of the local markets currently finds itself. The extremely high property prices at the apex are followed by a drop in prices that initially accelerates before slowing towards the bottom of the curve. After passing the low point, prices return to growth slowly at first, before picking up speed. As they approach the apex, the rate of price growth slows down again. This cyclical development can be attributed to the delayed reaction on the supply side to changes in demand. As a result, growth in the advertised rental space is typically at its greatest when providers respond to past price rises by making new properties available. Due to this time lag, properties that need to be made market-ready in response to price rises sometimes only reach low average asking rents of between 5.11 per square meter (Marzahn-Hellersdorf) and 6.51 per square meter (Treptow-Köpenick), and rental growth is comparatively modest at around 6 to 8 percent. Population growth is also relatively low. This applies for Treptow-Köpenick, Lichtenberg, Reinickendorf, Spandau and Marzahn-Hellersdorf. It is no coincidence that rents in the upper market segment in these districts are also lower than elsewhere in the city and that they have the most affordable apartments at the lower end of the market. the market after the downturn has already started. By contrast, relatively few properties are made ready for the market when prices are low. This means that they cannot be used meet the greater demand in the next phase of the cycle, resulting in price growth followed by excess supply establishing itself once again. Movements within the waveform cycle of the real estate market can occur backwards as well as forwards. The presentation of the market as a waveform reflects the amplitudes of the real estate cycle and allows the reader to quickly determine the phase in which a market currently finds itself. Generally speaking, the cycle on the local residential property markets is slower and weaker than on the office markets. Movements within the cycle are triggered by sociodemographic and socioeconomic conditions and, in particular, soft image factors. 7_HousingMarketReport_Berlin_February 2013

10 Purchase prices: Buildings, apartments becoming more expensive particularly in basic locations The Berlin housing investment market is seeing significant price growth. Between 2011 and 2012, the median asking price per square meter for apartment buildings rose from 1,149 to 1,349, an increase of more than 17 percent. This development is particularly pronounced in the lower market segment, which consists of the bottom 10 percent of properties in terms of price. Asking prices per square meter increased by almost 56 percent, from 481 to 749. This reflects a significant expansion in the demand base, explained Dr. Henrik Baumunk, Head of Residential Valuation at CBRE in Germany. The low level of new construction activity and rising rents mean that investors expect properties to be rentable in the long term, even in this market segment. Housing Market Report methodology investments and owner-occupied properties In 2011 and the period from Q1 to Q3 2012, a total of 108,896 advertisements for owner-occupied properties and 3,773 advertisements for apartment buildings were evaluated. In the same way as for rental properties, the average (median) values were calculated on this basis. The lowest and highest 10 percent of asking prices were also determined separately. Price development at the upper end of the market was more muted, with the average asking price for the most expensive 10 percent of properties increasing by 7 percent, from 2,550 to 2,727 per square meter. As in the previous year, apartment buildings advertised for sale were distributed unevenly across the individual districts. While only around 50 properties were available in Marzahn-Hellersdorf and ust under 100 properties were advertised in Friedrichshain-Kreuzberg, the districts of Pankow and Treptow-Köpenick had more than 200 properties on the market. There are also considerable differences in terms of the asking prices in the 12 districts of Berlin. At 1,833 per square meter, asking prices for apartment buildings in Charlottenburg-Wilmersdorf were the highest in the city by some distance. Second place was occupied by Friedrichshain-Kreuzberg at 1,501. By contrast, the average asking price in Lichtenberg was 1,118 per square meter, while the figure in Mitte was 1,146. Although price comparisons with the previous year must be interpreted with some caution due to the differing quality of the properties advertised and the relatively small statistical basis, it can still be ascertained that asking prices for apartment buildings have climbed to more than 1,000 per square meter in all districts of Berlin. One district was still below this threshold last year; in 2010, there were four. Many potential buyers; not enough sellers Everyone wants to own in Berlin Prices for owner-occupied apartments saw even stronger growth than investment properties and rental apartments. The median price for all apartments advertised was 2,258 per square meter, 19.9 percent higher than in the previous year. Demand for apartments in Berlin is also continuing to grow among individual investors. This is being driven by inflation expectations and low interest rates, as well as the low prices compared with other maor cities and confidence in the development of the Berlin housing market. The buyers are international. Estavis AG established that foreign investors accounted for 29 percent of buyers in the first three quarters of 2012, while the figure for the previous year was as high as 34 percent. Buyers came from more than 30 countries, with Italy some way ahead of Russia, France, Turkey, the USA and Israel. However, there was a tangible narrowing of the market in Despite or even because of the sharp rise in prices, many owners are refraining from selling their apartments at present. They expect further price growth and do not have any attractive and safe alternative investments for the proceeds of sale. However, those who do choose to offer their properties at a price that is consistent with the market are encountering a large number of potential buyers, many of whom are looking to make a quick purchase. While sellers often had to Current price development, apartment buildings Purchase price range, 2012 District Number sale offers Middle market segment 1) price range in /m 2 Charlottenb.-Wilm. Friedrichsh.-Kreuzb. Lichtenberg Marzahn-Hellersd. Mitte Neukölln Pankow Reinickendorf Spandau Steglitz-Zehlendorf Tempelh.-Schöneb. Treptow-Köpenick Berlin average , ,209 2,657 1,058 2, , , , , , , ,804 1,139 2, , , ,255 1) excl. bottom and top tenth percentile of quotes 2) forecast 12-month-trend for total market segment All market segments Median in /m 2 Change from , , , , , , , , , , , , , Trend 2) k 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: empirica-systeme (2012 statistics), IDN ImmoDaten (2011 statistics); compiled by: CBRE 8_HousingMarketReport_Berlin_February 2013

11 Apartment buildings and owner-occupied apartments: Current position in cycle 2012 Sales price growth accelerating Sales price growth slowing Sales price decline accelerating Owner-occupied apartments Apartment buildings Sales price decline slowing Steglitz-Zehlendorf SZ CW Charlottenburg-Wilmersdorf Friedrichshain-Kreuzberg FK L Lichtenberg Lichtenberg L Pankow P Sp Spandau Steglitz-Zehlendorf Friedrichshain-Kreuzberg Charlottenburg- Wilmersdorf CW FK Mitte SZ M M B TK B Berlin total Berlin total P Pankow Treptow- Köpenick TK TS Sp R MH Marzahn-Hellersdorf Reinickendorf Spandau Tempelhof-Schöneberg Marzahn-Hellersdorf MH R Reinickendorf Tempelhof-Schöneberg TS N N Neukölln Source: CBRE The graph shows the position of the districts and the city as a whole within the market cycle for the purchase of owner-occupied properties and apartment buildings as derived from market data and trend forecasts. The districts at the far left are at the start of a period of price growth, whereas this growth phase has partly already taken place for the districts higher up the curve. The districts to the right of the peak are seeing falling prices, while the districts at the far right are likely to recover from the low point in the cycle and record price growth again in the near future. reduce their initial asking price in crisis periods, some buyers are now prepared to offer in excess of the asking price in order to secure a property. The local debate on unk properties bought at excessive prices and in excess haste is doing little to inhibit the enthusiasm of potential buyers. Prices up 60 percent in the boom district Instead, there has been an increase in demand for simple apartments in particular. Average prices per square meter in the lower market segment, consisting of the most affordable 10 percent of properties, have risen by 21.2 percent in the space of ust one year and the figure for the boom district of Friedrichshain- Kreuzberg is as high as 59.3 percent. In the upper market segment, the price rise for Berlin as a whole was comparatively moderate at 10.7 percent; however, absolute prices reached a new high of up to 6,650 per square meter in Mitte district. Mitte is the most expensive district on the market as a whole, followed by Friedrichshain-Kreuzberg, Charlottenburg- Wilmersdorf and Pankow with its large number of sought-after apartments in Prenzlauer Berg. The green areas of Steglitz-Zehlendorf and Treptow-Köpenick beyond the city center are the best performers among the other districts. The latter district saw the highest rise in average asking prices, closely followed by the up-and-coming Neukölln. The word bubble is occasionally mentioned in conunction with purchase prices for apartments and apartment buildings in Berlin. This may be appropriate for overpriced individual investments, and it is true that purchase prices have risen to a greater extent than rents over recent years, meaning lower yields for buyers. However, the latter reflects the expectation of many market participants that there is absolutely no bubble, but rather that Berlin is closing the gap to other maor cities in terms of rents and prices, explained Jörg Schwagenscheidt, CEO of GSW Immobilien AG. This is backed up by the city s positive economic and population development and the growing demand-side pressure on the market. Current price development, owner-occupied apartments Purchase price range, 2012 District Number sale offers Middle market segment 1) price range in /m 2 Charlottenb.-Wilm. Friedrichsh.-Kreuzb. Lichtenberg Marzahn-Hellersd. Mitte Neukölln Pankow Reinickendorf Spandau Steglitz-Zehlendorf Tempelh.-Schöneb. Treptow-Köpenick Berlin average 6,420 4, ,526 1,628 5,614 1,909 1,721 4,106 3,635 2,593 38, ,440 4,120 1,776 3, , ,448 1,306 5,353 1,000 2,481 1,498 3, , ,227 1,250 3,701 1,179 3,182 1,105 3,091 1,198 3,875 1) excl. bottom and top tenth percentile of quotes 2) forecast 12-month-trend for total market segment Bottom market segment Top market segment All market segments Trend 2) Median Median Median in /m 2 in /m 2 in /m 2 1,292 1, , , ,146 1, ,028 Change from ,702 3,941 2,981 2,800 6,650 2,959 4,200 2,778 2,499 4,333 3,580 3,392 4,480 Change from ,586 2,704 1,755 1,289 3,365 1,450 2,473 1,512 1,239 2,105 1,923 1,990 2,258 Change from Source: empirica-systeme (2012 statistics), IDN ImmoDaten (2011 statistics); compiled by: CBRE 9_HousingMarketReport_Berlin_February 2013

12 Revival in new construction Focus on owner-occupied apartments in city center New residential construction in Berlin is picking up fast, albeit from a low initial level. At the end of 2012, this report examined around 200 proects that were either under construction or that, according to investors, have a fixed, imminent start date. These proects comprise nearly 12,000 apartments. Most of these are scheduled for completion in 2013 and 2014, with selected proects to follow by This report only looks at proects that are to be sold or rented, and not those that will serve the contractors own needs. The latter category applies to individual private residences and a number of building cooperatives for more on these see p.13. Reinickendorf New construction is still focused on the city center, the borders of which are defined by the S-Bahn commuter train ring. The historic Mitte neighborhood and its surrounding areas have the most and the biggest proects in terms of number of apartments and are the most expensive by square meters and absolute prices. Many proects are still tailored to the luxury segment and therefore meet the demand of affluent Germans and international residents flocking to Berlin s center. Lower prices are asked in the new inner-city construction proects in Friedrichshain-Kreuzberg, Pankow, Schöneberg and Charlottenburg-Wilmersdorf, though these districts also have very highquality proects with a correspondingly high price level. The price per square meter in the city center is usually above 3,000. In 2011, the maority of the proects looked at were in central Berlin; now there are also a number of proects outside the S-bahn ring. The main areas here are Treptow-Köpenick and Lichtenberg, both havens for low-cost new constructions with lots of offers for under 3,000 per square meter, and Steglitz- Zehlendorf with significantly higher prices. Rental apartments are only explicitly offered in around 10 percent of all proects analyzed. It cannot yet be said how many of the apartments will be bought by investors and later rented out. In the few reported proects with rental units, the asking rents are mostly in the range of 9 to 14 per square meter. But this sector is also seeing more activity by private investors and cooperatives. The wave of new construction has not yet spread across the whole of Berlin: While in Treptow-Köpenick several developments have already been realized, Spandau, Reinickendorf and Marzahn- Hellersdorf have yet to enter this stage of development. Spandau Steglitz- Zehlendorf Charlottenburg- Wilmersdorf 10_HousingMarketReport_Berlin_February 2013

13 Locations of selected new developments Pankow Owner-occupied apartments Rental apartments Mixed use Exact use not known Mitte Lichtenberg Marzahn- Hellersdorf Friedrichshain-Kreuzberg Tempelhof- Schöneberg Neukölln Treptow- Köpenick Source: CBRE, as of: November _HousingMarketReport_Berlin_February 2013

14 Despite its central location, most new construction proects are not in the Mitte district, but rather in Pankow. However, by far the most apartments are planned in Mitte. On average, these proects are the largest in the entire city. This sounds astonishing given the standard notion that the central district would also be the one with the fewest large plots of land available. But in Berlin there are still spaces even in the center. Some of this is due to land that previously bordered the Wall and is only now being developed; some of it is disused industrial and railway land or vacant space in residential and mixed use areas that was developed only sparingly while the city was divided. Mitte s gaps are now being filled in not in the entire district, which also includes Tiergarten and Wedding, but almost exclusively in historic Mitte. This is the home of 34 of the 38 total proects registered in the district. However, the biggest proect is ust a few meters to the west of the former border in Moabit: Part of Europacity, on the former freight yard close to the new central station. There are other big proects where the Wall used to stand on Chausseestrasse and Boyenstrasse, and in the south of the district on the border with Kreuzberg in Beuthstrasse, Seydelstrasse, Sebastianstrasse and Kommandantenstrasse. In total, 10 proects with more than 100 apartments each are being built in the district. Mitte is also the center of luxury residential construction in Berlin; some of the city s most expensive apartments can be found here. Prices in the yoo building near Friedrichstrasse go up to 3.8 million for a 339 m² apartment. A more lavish option for less (relatively speaking) is the Fellini Residences with 565 m² apartments for a little over 2.5 million. The highest square meter prices are being demanded in the Crown Princes Gardens diagonally opposite the State Department up to 15,000 for townhouses of undisclosed size. Pankow und Mitte leading in construction Second place for number of apartments goes to Berlin s record holder for individual proects: Pankow with 41 identified proects. Proects in Prenzlauer Berg, close to the city center, are mainly filling in gaps. This is also the site of the borough s biggest proect, La Vie, with around 360 planned rental apartments on 17,800 m² of land that has lain vacant since the Wall fell. The apartments will not be sold individually but rather will be entirely rented. Thanks to this proect and several others in Alt-Pankow, Pankow is the only Berlin district in which large numbers of both rental and owner-occupied apartments are planned. In historic Pankow there are larger rental and owner-occupier proects such as the Floragärten and numerous smaller proects, usually plugging the gaps in existing blocks. To the north of here in Niederschönhausen there are still individual plots free for city villas in green areas. One notable feature for a district outside the center of Berlin is the number of proects in Weissensee: Thirteen are planned here. Two of these are to have almost 100 apartments; some of the others will be very small on suburban lots. A cooperative at the top in Kreuzberg Third place for number of apartments goes to Friedrichshain-Kreuzberg. By number of proects, the focus here is on gaps in Friedrichshain neighborhoods, particularly in the Samariter quarter, around Boxhagener Platz and around the Rummelsburg Bay. These proects are mostly for between 10 and 50 apartments a typical strategy when filling in between existing buildings. However, the biggest proects in the district are starting up in Kreuzberg. Leading the way is the ambitious Möckernkiez cooperative. It is planning almost 400 apartments around the new Gleisdreieck Park, but is facing rising cost pressure. However, the second proect in the newspaper district close to Mitte is being run by a global investor planning owner-occupied apartments for up to 5,000 per square meter, and also quite a high share of rental apartments, for which there is strong demand in the district. The biggest proect in Friedrichshain is My Berlin with around 150 apartments being built directly opposite the Friedrichshain public park. Two thirds of these will be owner-occupied; one third will be rented. More than 100 apartments are also being planned in the Green Village in Rigaer Strasse to the north of Frankfurter Allee on former garage land, though this proect is also refurbishing an existing pre-war building. Treptow-Köpenick is the exception a district in which new residential construction is booming despite being outside the center. One key area is the Adlershof quarter, which is drawing investors for four reasons: Firstly, this is the home of Germany s biggest technology park with interesting potential tenants. Secondly, there are too few adequate apartments for these people nearby. Thirdly, Adlershof will be ust a few minutes away from the new airport by train and highway in future. Fourthly, this neighborhood has been very loosely developed; land is relatively plentiful and cheap. The developments in Adlershof are almost all part of the Wohnen am Campus proect being created by various developers in several stages. Overall, the proects in Adlershof are characterized by moderate prices they are aimed at younger scientists or even students as well as airport employees and buyers looking to rent to these tenants. With 380 apartments, the biggest proect offers small living spaces mainly for students. In total, around 1,200 apartments are set to be built in various proects at the Adlershof science park in the coming years. Here, like in other parts of the district, large numbers of new buildings will be available for square meter prices of well below 3,000, in selected cases even ust under 2,000. The proects outside of Adlershof are distributed Apartment construction proects: Where the cranes are District Charlottenburg-Wilmersdorf , ,490 6, Friedrichshain-Kreuzberg ,650 approx ,300 7, Lichtenberg approx ,540 3, Marzahn-Hellersdorf Mitte ,300 2,280 15, Neukölln ,720 3, Pankow , ,000 6, Reinickendorf ,200 4, Spandau Steglitz-Zehlendorf approx ,300 5, Tempelhof-Schöneberg ,490 5, Treptow-Köpenick , ,900 4, Berlin total , ,540 15, Source: CBRE Number of proects Proects with rental apartments Total number of apartments Rent price in /m 2 /month Purchase price in /m 2 /month Apartment size in m 2 12_HousingMarketReport_Berlin_February 2013

15 The biggest proects in the city Proect District Number of apartments Europacity am Hauptbahnhof Moabit 700 Möckernkiez Kreuzberg 380 Wohnen am Campus/ Student residences Adlershof 380 La Vie Prenzlauer Berg 360 Markgrafenstraße/Lindenstraße/Rudi-Dutschke-Straße Kreuzberg 280 Cedelia Zehlendorf 280 Le Biou Mitte 270 Mendelstraße/Bleichroder Straße Pankow 270 Floragärten (five construction phases) Pankow 250 Rosengärten Wilmersdorf 210 Carré Reimar Charlottenburg 210 Source: CBRE Cooperatives: Investors working for themselves Today and in the past, cooperatives have built and continue to build several hundred apartment buildings with thousands of apartments in Berlin, though no one knows the exact number. In these cooperatives, the future users themselves operate as the proect developers and contractors. In selected cases, a maority of all the properties in a block or a street are developed by groups examples include Schwiebusser Strasse in Kreuzberg, the street Am Eschengraben in Pankow or presently Boyenstrasse in Mitte. quite evenly throughout the sprawling district, with clusters in Alt-Treptow near the city center, in small-town Köpenick and in Friedrichshagen, which is today expected to suffer on account of new flight paths in future. Fifth place for number of proects and planned apartments goes to Charlottenburg-Wilmersdorf. New construction work here is focused on Wilmersdorf in the south. This is mostly filling in the gaps in blocks that have been loosely developed in the past. Exceptions include the maor proects in Seesener Strasse and the expansive Rosengärten, which will take over a plot of the small urban gardens that are a typical feature of Berlin in this case, ust 300 meters from Kurfürstendamm. There are very few proects in the northern part of Charlottenburg, but this is enough for more than 200 apartments in Carré Reimar on a former parking lot opposite Deutsche Oper. This is the work of the same investors responsible for the nearby Carré Charlotte proect. Several smaller proects are spread throughout the green districts of Schmargendorf, Westend and Grunewald. As befits their high status, the asking prices per square meter are in excess of 5,000. Residential construction in Steglitz-Zehlendorf is concentrated on the most affluent and greenest parts of the district. In Zehlendorf there are two proects with more than 100 apartments; other than this, there are predominantly small and very small proects, including one with ust three apartments. The biggest proect is Cedelia with 280 apartments in the south of the district. Half of these apartments are intended for rental, the other half for owner-occupiers. Other proects are building exclusively for owner-occupiers. This is also true of the second-biggest proect Fünf Morgen Dahlem Urban Village around an artificial lake. Owner-occupancy is preferred by many of this district s residents, who tend to buy rather than rent. The asking prices for individual houses in the paradise proect in Dahlem are up to 5,600 per square meter. Significantly less than 3,000 is paid for individual apartments in the relatively urban Steglitz, and also further out in Wannsee. Most of the construction proects have one thing in common: They are not filling a gap between houses in closed blocks; they are out in the open on their own green lots. Lofts and private homes in Lichtenberg The new buildings in the Lichtenberg borough are both varied and relatively affordable for buyers. The range here extends from lofts in a former department store and urban villas in Lichtenberger Lofts, to rental complexes such as Storkower Bogen, to townhouses in Sandinostrasse in Alt-Hohenschönhausen and owner-occupier areas such as Gartenstadt Karlshorst and Sonnenblick in Neu-Hohenschönhausen. But almost all these proects have one thing in common square meter prices of between 2,000 and 3,000. New construction activity in the Tempelhof- Schöneberg district is centered around innercity Schöneberg and comprises mostly smaller and medium-sized proects, usually in attractive locations. Asking prices per square meter in Queens Garden at Viktoria Luise Platz are between 4,700 and 5,900; elsewhere in Schöneberg asking prices start at 2,600 and sometimes end well above 4,000. With the exception of three proects in Mariendorf, Friedenau and Tempelhof, all proects in Tempelhof-Schöneberg are located within the S- bahn commuter train ring. There is little new construction in the other districts, except for three proects close to the water in Tegel in Reinickendorf where comparatively high prices of up to 4,900 are being asked per square meter on account of the attractive location. There are two proects in Neukölln, both in the green areas of Britz; one with terraces in the Gartenviertel in Spandau; and no proects to date in Marzahn- Hellersdorf. This may change in the coming years as land here is still particularly plentiful and inexpensive. The members of these groups want to have a hand in designing their future home and are often particularly ambitious in ecological and social respects. They save the margin that contractors demand for their risk, marketing and profits, in addition to a maority of the incidental costs of purchase. A rule of thumb is that members of these groups pay around 20 percent to 25 percent less than the market cost of new apartments of similar quality in the same location. However, this is also offset by disadvantages: Cost and planning risks, uncertain time horizons and a substantial commitment in planning and organization. These groups are sometimes initiated by those willing to build themselves and sometimes by architects, who initially act as proect developers and later handle the planning. When the group reaches a sufficient size and achieves consensus on the rough planning, a plot of land is bought, usually by a GbR (a company constituted under civil law). The professional part of the subsequent construction process is delegated to architects and often proect managers. On completion, the building is usually transferred from the GbR to a community association, the members of which buy the individual apartments. There are also building cooperatives or other ointly owned companies that rent the apartments to the members. In the coming years, such cooperatives are expected to be responsible for a double-digit share of new construction activity in Berlin. For commercial investors, they are often the competition for land acquisitions and residential marketing. However, they often also address entirely different target groups. They are therefore helpful in invigorating the urgently needed new construction in the city; they often umpstart the development of new locations, acting as pioneers in certain areas. 13_HousingMarketReport_Berlin_February 2013

16 Photo: plainpicture/rick Roberts HousingCostAtlas: Detailed structure of 190 areas Berlin has 12 districts, 96 localities and 190 postal s. The latter have fewer than 20,000 residents on average and include what the Berliners refer to as a kiez small, relatively homogeneous neighborhoods with particular local features. And often also with a characteristic residential market in terms of rents, apartment sizes, trends and resident purchasing power. The markets of the 190 postal s have been analyzed in detail in the Housing Cost Atlas. This is based on details of location, size and asking rents for more than 65,000 apartments currently being advertised. There was a sufficient number of offers to create an informative database in 188 areas. The data enables a precise look at the detailed structure of the city. It can be used to derive not ust average values, but also local extremes such as the existence of a particularly good value sub-market or that of a high-quality luxury segment. It is not rare for these two to be found in the same quarter. Area type 1: Neighborhood luxury The absolute top locations of the city are too functional for many sophisticated tenants with high purchasing power they do not want to be surrounded by offices and hotels. Instead, they prefer mixed and diverse neighborhoods, where at best there are still upper-class prewar buildings alongside unrefurbished houses from the Imperial period and new attic stories are appearing on social housing from the post-war years. The prices for top apartments in the upper market segment are well above the 15 line. Postal Kollwitzplatz Pankow Rosenthaler Platz Mitte Graefestraße Friedrichsh.-Kreuzb Viktoria-Luise-Platz Tempelhof-Schöneb Görlitzer Park Friedrichsh.-Kreuzb ) median in /m 2 /month Section District 1) top market segment 1) bottom market segment Housing cost ratio The combination of residential market data is particularly revealing. One especially intriguing aspect in this regard is the ratio of asking rents to local purchasing power, as expressed by the housing cost ratio. Where this is particularly high, local residents would have to pay a relatively large share of their income to find a new apartment in the same area. This indicates a high-quality location: Residents who already live there usually pay a lot for the location; people from other quarters and places of origin with higher purchasing power who are looking for an apartment are interested in this area. A low housing cost ratio indicates an area for which there is less demand. Or this may be an indication that residents have a higher purchasing power, but only wish to invest a certain amount of this in their apartments and a good location. This applies to many areas on the city s outskirts. What is notable is that the lowest housing cost ratios are found not in the affluent quarters with medium rents, but in the most basic living areas, where households with low purchasing power only have to spend around 20 percent of their budgets on living costs. This share is usually much higher in the more expensive areas. As income in- 14_HousingMarketReport_Berlin_February 2013

17 HousingCostAtlas methodology Exactly 65,078 properties advertised in the first three quarters of 2012, including size and rental information, were allocated to Berlin s 190 postal s. There was a sufficient statistical basis for all postal s except for (Blankenfelde) and (Olympic Stadium). The tables show the median values for all asking rents per square meter for each area, plus the median values for the top and bottom 10 percent of asking prices. This allows an insight into the local high and low-price segment. To calculate rents including heating, flatrate additional costs of 2.75 per square meter were added to basic asking rents for western boroughs and 2.15 for eastern boroughs. This was based on data provided by the Berlin-Brandenburg Association of Housing Companies (BBU). Michael Bauer Research GmbH calculates the average purchasing power per resident and household at postal level each year. The average housing cost ratio per household was calculated using the following formula: average asking rent + additional costs x average apartment size average purchasing power = average housing cost ratio Unlike in earlier years, vacancy rates have no longer been calculated in This is because the statistical base was too low in the maority of postal s. In the particularly popular quarters, vacancies practically only occur during phases of tenant changeover. Area type 2: Best central locations Berlin s most expensive apartments are clustered around two centers: The historic one in Mitte and the newer one around Kurfürstendamm. These apartments usually have large layouts; the living costs are correspondingly high. These neighborhoods are also highly frequented by tourists and visitors from all parts of Berlin. People who live here care about prestigious addresses and façades, elegant shopping and upscale restaurants. Landlords of properties in these areas demand correspondingly high prices. Postal Unter den Linden Mitte Hackescher Markt Mitte Chausseestraße Mitte Sybelstraße Charl.-Wilmersdorf Potsdamer Platz Mitte ) median in /m 2 /month Section District 1) total market 1) top market segment Apartment size in m 2 Area type 3: Central low-price areas The inner-city areas of Berlin are continuing to see clear hikes in rent on top of what is already a high rent level. Nonetheless, there are also micro-locations even in the central, high-priced city quarters distinguished by affordable asking rents. They are not attractive to large numbers of tenants and buyers on account of basic property or location qualities. For example, they might have a predominance of simple post-war buildings or be subected to noise from traffic and industry, and are thus below the Berlin average for asking rents. Postal Humboldthain Mitte (Wedding) Gesundbrunnen Mitte (Wedding) Nauener Platz Mitte (Wedding) Beusselstraße Mitte (Moabit) Prinzenstraße Friedrichsh.-Kreuzb Area type 4: Apartment markets In some inner-city areas the apartments on offer are particularly small and the asking rents conspicuously high by comparison. Tenants in these locations are willing to forsake living space for a good location and pay good money for relatively small apartments. An investment in (small) apartments can be worthwhile here. One noticeable aspect is the concentration of such areas in the north of Neukölln. This constellation is only found in areas with pre-war housing, not high-rise apartments or social housing. Postal Section District 1) total market 1) median in /m 2 /month 2) ranking among the 188 Berlin postal s analyzed Section District 1) total market ranking 2) Apartment size in m 2 Housing cost ratio Housing cost ratio Hermannstr. West Neukölln Sonnenallee North Neukölln Schöneberger Insel Tempelhof-Schöneb Maybachufer Neukölln Wrangelstraße Friedrichsh.-Kreuzb ) median in /m 2 /month creases, an ever-greater share of purchasing power is generally invested in living costs. Comparisons over time are also revealing: Where have average rents increased especially strongly in 2012, where have they risen only slightly, where have they remained unchanged? A stronger rise points to more dynamism in the area. Either the asking prices for the same types of apartments have become much more expensive compared to the previous year or prices have risen because of improvements in the quality of the buildings. Or a lot of newly built apartments have come onto the market, statistically raising the local rent level. Area type 5: Well-connected niches Not every Berliner wants to pay big city rents and live in big city surroundings but almost everyone wants to be able to reach the big city easily. A good compromise is offered by the neighborhoods between the center and the outskirts, where not much has happened to rents so far. However, they have the potential to rise once househunters discover them. In terms of architectural style, these areas are mostly characterized by high-rises and earlier social housing. These neighborhoods often have abundant green space or are located near parks. Postal Section District 1) total market Friedrichsfelde North Lichtenberg , Charlottenb.-North Charl.-Wilmersdorf , Alt-Wittenau Reinickendorf , Fennpfuhl Lichtenberg , Buschkrugallee Neukölln ,394 1) median in /m 2 /month 2) median total market, change from ) Ø per household Rent development 2) (basic rent) Purchasing power 3) in /m 2 /month 15_HousingMarketReport_Berlin_February 2013

18 Charlottenburg-Wilmersdorf: Peak rents and middle-class havens Along with Friedrichshain-Kreuzberg, Charlottenburg-Wilmersdorf has been one of the districts with the highest average asking rents for several years now. In terms of their median, Charlottenburg-Wilmersdorf was on a par with Friedrichshain-Kreuzberg in 2012, and posted a slightly higher increase in this figure (by 0.1 percentage points). Despite almost identical rents per square meter, it is much more expensive to live in Charlottenburg-Wilmersdorf because apartments there are an average one-third larger. The largest apartments in Berlin on average can be found in Grunewald (postal 14193) at 113 square meters. They also fetch the highest rents including heating in the entire city on average: 1,511 per month with average utility costs of 2.75 per square meter. The 10 areas in the city with the largest apartments also include Sybelstraße (10629), Olivaer Platz (10707), Ludwigkirchplatz (10719) and Westend-West (14057). With the exception of Westend-West, the first three of the areas listed are all located off Kurfürstendamm and still have many historic old buildings. These three areas and Grunewald are also among the 10 most expensive in the city in terms of median asking rents. With regard to rents per square meter (excluding heating), a newcomer now tops the charts in the district at the area around Otto-Suhr-Allee (10587) between Tiergarten, the Technical University, the Spree Traditional character on Kurfürstendamm and Charlottenburg Palace. This is a very central and green residential area, but traditionally not a fashionable one. Its top position in asking rents and the city s highest increase in average rents per square meter (median) of around 51 percent result from a large-scale proect combining new construction and renovation rather than a maor upgrade of the housing stock. Once this new building has been let and if no more are constructed asking rents for apartments in this area will fall again. It only comes 81st in Berlin in terms of household purchasing power. In addition, the neighborhood is characterized by simple post-war properties and commercial space. Regarding average rents per square meter, this atypical case and the central part of Kurfürstendamm are followed by further areas in the catchment area of this grand boulevard: Savignyplatz (10623), Bahnhof Halensee (10711) and Tauentzienstraße (10789).on the outer ends of Kurfürstendamm. On average, the available apartments are around 15 square meters smaller here, and rents including heating are around 300 lower than in the central part of Kurfürstendamm. Prices are even lower in the quiet neighborhoods around Güntzelstraße (10717), Karl- August-Platz (10625), Lietzensee (14050) and Hochmeisterplatz (10709). Rent levels are similar further out in Westend (14052, 14057). with its villas and smaller apartment buildings. The areas around the Deutsche Oper (10585), Mierendorffplatz (10589) and Eichkamp/ Heerstraße (14055) offer a special combination: Each has medium to high purchasing power but average rents below 8 per square meter and therefore the most affordable housing costs in the district. The Westliche Kantstraße area (10627) has the most affordable sub-segment in the district: The cheapest 10 percent of apartments are listed at 4.32 per square meter on average here. However, the most affordable neighborhood overall is Charlottenburg-North (13627). Here, average rents per square meter for the overall market in the district stand at It is adacent to Siemensstadt, part of which has been designated as a Unesco World Heritage Site. Extensive renovation work has been carried out here in recent years, and that has seen tenants benefit from falling ancillary costs. Housing market data Postal Number of rental offers in all market segments 1) in in bottom market in top market Housing cost Apartment size Ø in m² Total housing cost 2) Ø Purchasing power per household Ø Housing cost ratio 3) (69) 5.63 (69) (38) 70 (110) 749 (74) 3,015 (45) 24.8 (122) (3) 6.03 (36) (48) 80 (44) 1,141 (11) 2,753 (81) 41.4 (2) (71) 5.48 (87) (72) 66 (144) 695 (90) 2,718 (90) 25.6 (106) (15) 5.56 (73) (18) 89 (24) 1,127 (12) 3,545 (15) 31.8 (32) (35) 6.14 (30) (37) 80 (43) 934 (34) 3,048 (40) 30.6 (40) (66) 4.32 (173) (53) 78 (57) 838 (53) 3,042 (42) 27.5 (72) (9) 6.49 (16) (15) 107 (3) 1,368 (4) 3,502 (16) 39.1 (7) (9) 7.00 (2) (21) 104 (6) 1,326 (5) 3,501 (17) 37.9 (8) (50) 6.00 (38) (49) 78 (54) 878 (43) 3,165 (29) 27.7 (69) (19) 6.80 (6) (13) 87 (27) 1,069 (18) 3,201 (25) 33.4 (18) (58) 5.80 (57) (43) 72 (90) 793 (60) 2,825 (68) 28.1 (68) (55) 6.15 (29) (58) 74 (80) 813 (59) 2,842 (64) 28.6 (64) (32) 6.25 (24) (35) 92 (18) 1,074 (16) 2,885 (58) 37.2 (9) (9) 5.99 (45) (16) 102 (9) 1,303 (6) 3,564 (14) 36.6 (11) 16_HousingMarketReport_Berlin_February 2013

19 Allocation of postal s Due to space restrictions, the location of postal s is not precisely identified in the Housing Cost Atlas, e.g. on the basis of street and place names. Some postal s cover several districts. In this Housing Cost Atlas, such areas are listed only in the district in which they are primarily located. Housing cost ratio of households 36.0 and over Map courtesy of: Baumgardt Consultants, Gesellschaft für Marketing und Kommunikation br, up to 20.9 Housing market data Postal Number of rental offers in all market segments 1) in in bottom market in top market Housing cost Apartment size Ø in m² Total housing cost 2) Ø Purchasing power per household Ø (25) 7.00 (2) (27) 87 (28) 1,034 (22) 3,333 (20) 31.0 (37) (149) 5.65 (66) 7.57 (175) 67 (137) 601 (143) 2,186 (177) 27.5 (73) (40) 5.85 (53) (41) 93 (14) 1,051 (21) 2,834 (65) 37.1 (10) (44) 6.17 (28) (97) 91 (20) 1,018 (24) 3,193 (26) 31.9 (30) (86) 5.50 (80) (92) 84 (38) 850 (51) 3,601 (13) 23.6 (144) (37) 5.91 (50) (29) 99 (10) 1,124 (13) 3,192 (27) 35.2 (13) (60) 5.50 (80) (73) 71 (101) 768 (66) 2,591 (114) 29.6 (48) (7) 6.80 (6) (7) 113 (1) 1,511 (1) 3,778 (8) 40.0 (4) (59) 6.01 (37) (76) 72 (87) 783 (63) 2,644 (101) 29.6 (49) (54) 6.00 (38) (67) 90 (22) 998 (27) 3,147 (36) 31.7 (33) Bezirk 1) 8, ,025 3, Berlin 1) 65, , Housing cost ratio 3) 1) median 2) includes operating costs (BBU 2010) 2.15 /m² (East) and 2.75 /m² (West) 3) total rent as percent of household purchasing power ( ) rank among the 188 postal s with rental data Sources: empirica-systeme, IDN ImmoDaten, Michael Bauer Research (purchasing power), compiled by: CBRE 17_HousingMarketReport_Berlin_February 2013

20 Friedrichshain-Kreuzberg: Rent increase trend continues Of all Berlin districts, Friedrichshain-Kreuzberg has been posting some of the highest rises in new-lease rents for several years now. For the second time in a row, average rents per square meter across all segments are more than 11 percent higher than before. The figure of 8.94 is the highest in Berlin on a par with middle-class Charlottenburg- Wilmersdorf. However, the apartments advertised in Friedrichshain-Kreuzberg are mostly a bit smaller, especially in the Kreuzberg neighborhoods dominated by historic buildings around Wrangelstraße (postal 10997), Gneisenaustraße (10961) and Graefestraße (10967). Gneisenaustraße and Görlitzer Park (10999) are also typical examples of quarters with very high rents per square meter (around 9.50), although absolute rents including heating (at 786 and 856) remain affordable here because of the small floor plans. In terms of rents including heating, these areas therefore only rank 61st and 50th in the city despite their high rents per square meter. Booming neighborhoods, low-cost niches Some areas of Kreuzberg now have a luxury segment, which was unimaginable in this district ust a few years ago. In four areas, the most expensive 10 percent of available apartments cost more than 16 per square meter on average; Graefestraße is ranked 5th among all Berlin areas here at 17.43, and Wrangelstraße, Gneisenaustraße and Görlitzer Park come between 8th and 14th. However, rents also rose at the bottom end of the market, especially in the Friedrichshain neighborhood this time. Here, average rents per square meter for the most affordable 10 percent of apartments are over 6 across the board. They are highest in Volkspark Friedrichshain (10249) at 6.46, followed by Ostkreuz (10245) at 6.38 and Samariterstraße (10247) at By contrast, the figure for the lower segment in Kreuzberg is mostly around The gap between expensive and affordable is much wider than in Friedrichshain. The area around Prinzenstraße (10969) has the lowest rents in the entire district. Although it is close to Berlin city center, the area is dominated by former social housing proects dating from the post-war era. This postal is the only one in the district where average asking rents are still below 7 per square meter and rent including heating is below 650 per apartment. The area also has one of the most affordable housing cost ratios in the whole of Berlin: Asking rents as a proportion of purchasing power are ranked 168th out of the 188 Berlin areas monitored, at 21.5 percent of average household purchasing power. Housing cost ratio of households 36.0 and over up to 20.9 The area around Görlitzer Park posted one of the sharpest rent increases in the city in 2012: On average, one square meter costs ust under 26 percent more in 2012 than in In addition, the neighborhoods around Wrangelstraße and Graefestraße showed the most dynamic rent trends with increases of ust under 19 percent and around 16 percent respectively. Compared with this, the progression was slower in Friedrichshain, especially around Samariterstraße (10247), which posted an increase of ust under 7 percent, and Ostbahnhof (10243), where asking rents per square meter were ust under 5 percent up on the previous year. Demand-side pressure in Friedrichshain is therefore at a similar level, whilst the pace of development is clearly far greater in Kreuzberg. Elsewhere in the district, the combination of moderate purchasing power and high asking rents is leading to above-average housing cost ratios. Ostkreuz and the Kreuzberg area around Mehringdamm and the popular Bergmannstrasse (10965) top the list here at 32 percent, followed by Görlitzer Park at 30.4 percent. Wrangelstraße and Prinzenstraße are at the bottom end with housing cost ratios of less than 25 percent. Some areas in the district have relatively high household purchasing power. This is because of new residents earning high incomes as well as urban middle-class residents who have been living here for a long time. Households in Kreuzberg-West (10963) are the only ones in the district to have purchasing power of over 3,000 per month. This neighborhood near Potsdamer Platz already has a very urban character in certain areas and has become more attractive due to the new Gleisdreieck Park. At the same time, it also contains many pre-war and modest post-war buildings. However, some other areas, especially in Friedrichshain, are well below average for the city as a whole, with the lowest figures to be found in the neighborhood around Ostbahnhof with purchasing power of 2,428, the Volkspark area with 2,436 and Ostkreuz with 2,439. Map courtesy of: Baumgardt Consultants, Gesellschaft für Marketing und Kommunikation br, 18_HousingMarketReport_Berlin_February 2013