realestate

Berlin’s property market hit by rent freeze and viral lockdown


Berlin’s coronavirus lockdown has brought its property market to a near standstill. But for many residents, costs were spiralling out of control. A rush in international demand, coupled with the construction of high-end apartments, has led to Berlin’s rental prices rising faster than in any other European capital — jumping 28 per cent in the past five years, according to Deutsche Bank AG data.

Serhiy Pishkovstiy, a 30-year-old marketing manager from Ukraine, has been struggling to find the right property for the past six months. With a budget of €700-€900 a month, Pishkovstiy is looking for a small apartment inside the Ringbahn — the circle railway line around Berlin’s centre.

Before the crisis, he says, he attended viewing days alongside 100 other prospective tenants; other open houses in the capital have attracted more than 1,000 people.

“Now it is only one person at a time,” he says. “Strict rules were in place: no more than 10 minutes for a visit and careful distance from the agent.” The number of apartments available to view has greatly decreased, he adds. 

Some 85 per cent of Berliners rent, and many have been at the mercy of their landlords in recent years, as the supply of new homes has failed to keep up with demand. Between 2011 and 2018, the city’s population grew by about 400,000. Over the same period, 65,698 new homes were built, according to estate agents Ziegert Group.

In 2001, Berlin had a vacancy rate of 5 per cent; by 2017, that had dropped to 1 per cent. Rent rates shot up — 67 per cent in 10 years — due to this shortage and an influx of foreign investors.

They were attracted by Berlin’s low prices compared with other German cities, says Michael Prytula, an urban studies professor at the University of Applied Sciences in Potsdam. 

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In 2009, one square metre in Berlin was priced at €2,900, but today it is about €6,000. However, the city is still quite cheap — in inner London’s zones 1-3, the average price is nearly 30 per cent more, at €7,764 per sq m, according to Hamptons International.

A two-bedroom apartment in Kreuzberg, €578,000 through Knight Frank
A two-bedroom apartment in Kreuzberg, €578,000 through Knight Frank

East Berlin is becoming more popular with investors, says Oliver Banks, a senior negotiator at Knight Frank. “We are seeing good-quality stock coming to East Berlin.” He cites Friedrichshain and Kreuzberg, the former East and West Berlin nieghbourhoods now joined into one — “young, trendy, a nice place to be along the canal”.

A two-bedroom apartment in Kreuzberg with French windows with a park view is on the market for €578,000 with Knight Frank. In Friederichshain, the same agent is selling a two-bedroom riverside apartment for €1.7m. 

In February, in a bid to control steep price rises, the Berlin authorities introduced a rental cap — the Mietendeckel. In effect now but awaiting approval by the federal constitutional court, this freezes rents for the next five years at the level they were on June 18 2019.

It also limits new contracts, depending on the age of the building, to a range of monthly maximums, topping out at €9.80 per sq m — or €10.80 if renovated. Tenants whose rent is significantly higher can apply to have theirs lowered.

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Jochen Moebert, an economist at Deutsche Bank, says the regulation will be an obstacle to creating more housing stock because, while there is an exemption for homes built after 2014, no one is sure how long it will last.

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“No one is willing to build — they say it is not profitable,” says Moebert. “[Rent] needs to be at €12 per sq m so that a building is profitable.”

For now, the legal status of the Mietendeckel is unclear: last week, a county court ruled against it as unconstitutional and a final decision will be made by the federal court later this year. If it is voted down, tenants will pay back any money saved using the law. 

To be safe, wenigermiete.de — a website offering legal expertise for tenants — advises clients to use another rent-control measure, the Mietpreisbremse. Passed in 2015, this prohibits property owners from raising rents by more than 10 per cent of the area’s average.

If the new law does hold, wenigermiete.de calculates that 95 per cent of current rents will need to be lowered. 

Kathrin Hauer, a 39-year-old theatre set designer, is hoping the new rules will help her stay in her flat of 20 years in the now sought-after Prenzlauer Berg district in the east of the city.

“Now we are very chic. Our Kiez [neighbourhood] is disappearing — there are no old people any more and we have more little shops selling gimmicky stuff,” she says.

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The company that manages her building said in 2018 that it was planning renovations that would result in monthly rent rising to €19.29 per sq m, almost double the rent cap and more than triple what Hauer paid. With the cap, her rent could increase by €74 to about €500 a month; without the cap, it could rise by €1,019 to about €1,450.

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Hauer says she would rather live without the “new French windows from the floor to the ceiling” and the extra balconies. “It needs renovating but what the owner wanted to do was ridiculous.”

For newcomers such as Pishkovstiy, the new law will not help solve their predicament. It will only help tenants who are already in a flat, says Prytula. “If you’re new, you won’t find a flat.” 

Buying guide

  • In Berlin’s lockdown, gatherings are limited to two people, which has led to a sharp reduction in apartment viewings
  • Buying costs come to about 15 per cent of the purchase price. This includes the 6 per cent property purchase tax, a notary fee of 1.5 per cent and a Land Registry fee of 0.5 per cent. Agents’ fees can be up to 6 per cent plus VAT, and are typically paid by the buyer
  • In Berlin it is common for flats to be offered for rent without a kitchen. Tenants have to pay to have one fitted

What you can buy for . . .

€250,000 A one-bedroom apartment on the river Spree in Friedrichshain
€578,000 A two-bedroom apartment in trendy Kreuzberg
€1.12m A three-bedroom apartment with a large balcony in Charlottenburg 

More at propertylistings.ft.com

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