If you want to buy a property in Berlin, you will find one of the most popular real estate markets in Germany. When looking at prices per square meter, it is immediately apparent that they have risen sharply in recent years. However, the political situation in Eastern Europe and rising interest rates for loans are having a major impact on the Berlin real estate market. In the third quarter of 2023, prices for condominiums and houses fell in some residential areas. We reveal the current asking prices and analyze the price trend for condominiums in Berlin in the first quarters of 2023.
The real estate boom will be interrupted in 2023
It was already assumed in 2022 that the global coronavirus pandemic and the outbreak of war between Ukraine and Russia would have an impact on property prices in Berlin. Added to this are the steady inflation and rising interest rates. In fact, property prices have fallen in recent months for the first time in recent years. While significant growth was still observed on the real estate market in Berlin in 2022, prices fell by several percentage points this year.
Initial fears focused on the potential impact of the war between Russia and Ukraine. There were already supply bottlenecks for building materials last year, which meant that numerous new construction projects had to be put on hold. In addition, interest rates rose, which is why many people refrained from taking out a loan.
The most important price-setting factors on the Berlin real estate market
Even though political and financial developments have an influence on the real estate market, there are price-forming factors that you can take into account when searching for your dream property or selling your condominium. We would like to show you which six factors have a particular influence on price formation on the Berlin real estate market:
Tangible assets as investment objects
Real estate in Berlin and every other city is under the influence of drastically rising inflation and high geopolitical uncertainty. Against this backdrop, it is particularly remarkable that Berlin real estate remains an important and extremely reliable tangible asset. The real estate market in Berlin offers investors reliable and highly resilient protection against potential losses in value.
Interest rate increases
Interest rates and property prices are in a constant state of flux. Loan interest rates rose significantly in 2023. This reduced demand, as many people could no longer afford the new prices. To make the market more interesting for investors and other buyers, property prices fell by a few percentage points.
Rising construction costs and supply shortage
Construction costs have been rising continuously for several years now. In addition, there are now also interrupted supply routes, sanctions and in some cases even total defaults by Russian producers. They are further fueling the rise in construction costs. Oil-related products, steel and timber are particularly affected by this. The increase in construction costs is passed on to future property buyers. This leads to a sharp rise in prices. In addition, new construction projects that are no longer profitable due to the rise in construction costs are being postponed. This results in a significant shortage of supply.
Regulatory consequences
The Berlin housing market is subject to numerous requirements and comprehensive regulation. Conversion bans and milieu protection areas prevent living space from changing. No new supply can be created by dividing up existing apartments. As a result, prices for existing housing continue to rise.
Developments take place selectively and depending on the situation
It is noticeable that housing in Berlin is not developing evenly. Instead of undifferentiated price increases, developments are very selective. They are highly dependent on location, which is why overpriced properties no longer automatically balance each other out.
Condition and quality of properties are becoming more important
The catch-up effects are slowly coming to an end. This means that the location quality of apartments is becoming increasingly important. Neglected apartments whose technical condition is inadequate are now much harder to find a buyer for.
Average asking prices for properties in Berlin in 2023
Overall, it is clear that asking prices for real estate in Berlin have fallen again this year for the first time in a long time. This applies to both apartment buildings and condominiums. The prices clearly depend on the respective districts and residential areas in which the properties are located. While asking prices remained stable or even rose in a total of four districts of Berlin, they fell in the other 18 districts of the German capital.
New-build apartments have fallen by around 4.10 percent, compared to just 1.20 percent for existing apartments. A property in Berlin currently costs around €5,460/m².
Price increase rate and current average price for condominiums in the portfolio
After the prices for owner-occupied apartments in Berlin in 2022 had risen to well over € 5,000/m² for the first time, they fell in the first quarters of 2023. Prices for existing apartments peaked in the third quarter of 2022 at € 5,291/m². One year later, in the second quarter of 2023, they fell to €5,050/m². This corresponds to a decrease of €241/m².
Price increase rate and current average price for new-build apartments in Berlin
Supply in the new-build apartment segment was already declining at the start of the coronavirus pandemic. After the outbreak of the war in Ukraine, the procurement of various building materials became increasingly difficult. This was compounded by rising interest rates, which prompted many investors to refrain from buying property. Against this backdrop, it is not surprising that prices for new-build properties also fell in the first quarters of 2023.
Rate of price increase and current average price for existing apartment buildings
Apartment buildings cost around €5,450/m² in Berlin in 2022. However, prices also fell in this segment. In the first quarters of 2023, they fell to an average of € 5,250/m².
Prices for existing apartments in 2023: The Berlin districts at a glance
As already mentioned, prices vary greatly in the different districts of Berlin. For this reason, we would like to take a closer look at the price trends in the individual districts of the German capital.
The center: Charlottenburg-Wilmersdorf, Mitte, Friedrichshain-Kreuzberg
According to the current purchase price index, the average purchase price for an existing apartment in Berlin is around €5,450/m². It is noticeable, however, that top prices are achieved in the center of Berlin, which clearly stand out from the above-mentioned average. Prices per square meter are particularly high in the districts of Friedrichshain-Kreuzberg, Charlottenburg-Wilmersdorf and Berlin Mitte.
As in the previous year, the Charlottenburg-Wilmersdorf district remains the undisputed leader. Every second existing property in this part of the city is offered at a price of over €6,160/m². A closer analysis even reveals prices of up to almost €8,100/m². Berlin Mitte takes second place in the ranking of Berlin’s most expensive districts. The average purchase price for existing apartments here is around €6,020/m². However, the top offers have prices of up to almost €7,700/m². In third place is the district of Friedrichshain-Kreuzberg. Here, average prices per square meter of between €5,500/m² and €6,000/m² are paid for existing apartments. While prices in the Friedrichshain district rose slightly, they fell by around 2 percent in the Kreuzberg district compared to the previous year.
The southwest of Berlin: Tempelhof-Schöneberg and Steglitz-Zehlendorf
The south-west of the German capital is particularly well-known for its extensive green spaces. The Wannsee lake is located here and is visited by hundreds of Berliners in summer. The south-west of Berlin also boasts the Schöneberg Nature Park and Tempelhofer Feld. The leisure facilities are extremely extensive and increase the popularity of the districts. The average price for condominiums in Steglitz-Zehlendorf is over €4,900/m². In the Tempelhof-Schöneberg district, it is between €4,500/m² and €5,500/m². However, there are certainly offers that are in a higher price segment.
The south of Berlin: Neukölln and Treptow-Köpenick
Neukölln’s neighborhoods are home to a wide variety of cultures. The district is one of the most vibrant parts of the German capital. The special atmosphere of the district is enhanced by oriental bakeries, numerous artists’ studios and the famous weekly market on Maybachufer. If you want to go for a walk in Neukölln, you can do so with great enthusiasm in the Britzer Garten. You can experience a piece of history up close in the Rixdorf district. The Neukölln district is extremely popular with both long-established Berliners and newcomers. The average price per square meter for condominiums is around €4,860/m². However, there are also higher-priced properties. Their price approaches 6,000 euros per square meter. Treptow-Köpenick is particularly popular with nature lovers. The district in the south of Berlin boasts the extensive Spreepark, which is located in the Plänterwald forest. The standard price for an existing apartment averages just under €4,200/m². If you are lucky, you will find a slightly cheaper property with a price per square meter of around €3,500/m².
The north and east of Berlin: Pankow and Lichtenberg
The thriving north-east of the German capital is a colorful place. Pankow is primarily known for Prenzlauer Berg, Mauerpark and the Kulturbrauerei. However, the popularity of the district can be seen in the high purchase prices for existing apartments. Properties in Pankow can be found from an average price of 5,560 euros per square meter. However, there are also apartments that are sold at a significantly higher price. Such higher-priced offers have a price of up to 6,670 euros per square meter. The district of Lichtenberg in the north-east of Berlin has lower average prices for existing apartments. An average of around €4,400 per square meter can be expected here. However, top prices reach the mark above €5,500/m².
The suburban districts: Marzahn-Hellersdorf, Spandau and Reinickendorf
Those who venture further to the outskirts of the city are rewarded with a rural idyll and close proximity to nature. More and more families with young children are therefore deciding to buy a property on the outskirts of Berlin. Another advantage is that the prices are very different from the asking prices for condominiums in the center of Berlin. Spandau, with its extensive parks, picturesque waterways and picturesque old town, is the perfect place to own a home for those who want to live in a quiet location close to the city. Condominiums in Spandau sell for an average of €3,950/m².
Anyone looking for affordable residential property in the Berlin area should take a closer look at Reinickendorf. The district offers numerous opportunities to spend leisure time with family or friends in the countryside. Tegeler Forst is particularly popular. The average price per square meter for a condominium in the Reinickendorf district is around €4,250/m².
It is cheapest in the east of Berlin, in the district of Marzahn-Hellersdorf. The average asking price in this district is €4,100/m².
Real estate price increases also in the Berlin area
The surrounding area of Berlin is becoming increasingly expensive due to its quiet location and close proximity to the German capital. Until recently, you could find cheap offers for condominiums here. However, prices have risen sharply in recent years. It is also noticeable that there is a large price gap. It is therefore worthwhile not to despair in your search for your dream property and to view various offers.
Current trends in the Berlin real estate market
Berlin remains one of the most popular locations for real estate in Germany. Residential properties stand out in particular because they can be scaled up as apartment buildings or converted into investments. What is attracting particular attention is how stable the real estate market in Berlin has remained during both the global coronavirus pandemic and the war in Ukraine. Even though these events have had an impact on the Berlin real estate market, the demand for condominiums remains high.
It should not be overlooked that banks are currently raising interest rates. This is having a negative impact on the capacities of private investors. At the same time, it cannot be denied that there is still a lot of money in circulation, which can be traced back to the liquidity of potential investors. However, the rise in interest rates means that interested buyers are analyzing a property much more closely. Excessive top prices are no longer being paid, even if this dampens the owners’ sales success.
Regulations are now an integral part of Berlin’s real estate market. They are here to stay, but innovations are currently unlikely. The pre-emption practice and the rent cap were abolished in 2021 following court rulings in Leipzig and Karlsruhe. The milieu protection prevents the conversion or modernization of many apartments. Nevertheless, it can be observed that the real estate market is constantly evolving throughout Berlin.
Construction activity in the German capital is extremely stable and has increased. This will ease the rental market in the long term. At the same time, land prices and construction costs are at a very high level. This is reflected in rental prices and will continue to push up prices for new-build and existing apartments in the future. Ultimately, the net income and purchasing power of households will limit the prices of owner-occupied apartments.
Conclusion
For more than a decade, real estate prices in Berlin only went up. They rose continuously, helped by low interest rates.
However, the coronavirus pandemic, the rise in interest rates and the war in Ukraine have left their mark on the Berlin housing market in the last few months of 2023. The developments of recent months have impacted both the market for existing apartments and the new-build segment.
If you have equity, you will benefit from the current low prices. The investments are worthwhile, as it is foreseeable that purchase prices for Berlin real estate will rise again in the near future.
Interested buyers without a high level of equity have the option of accepting the high interest rates with a short fixed-interest period and negotiating suitable follow-up financing at a more favorable time.
