Berlin is facing an increasing demand for housing and office buildings. Due to its function as Germany’s capital, this trend in further enforced. A lock at current trends at this special real estate market.
After the takeover of GSW Immobilien AG by Deutsch Wohnen, the transaction volume on the Berlin real estate market has fallen by a fourth during the last year, says Hochtief in their study “Der Immobilienmarkt in Berlin”. But with a transaction volume of still eight billion Euros, transactions remain at a high level. Prices for both, housing and office property, are expected to remain high due to the high demand and despite a small increase in interest rates. The study expects that the investment climate to remain positive despite comparatively high transaction costs.
Office property was traded most frequently. With a volume of 4,3 billion Euro, a new all time high was reached. Due to the entrance of foreign investors as well as due to a lack of alternatives, demand for office property is extraordinary high. The lack of supply drives prices upwards, especially in central locations of Berlin.
Due to the high prices and the high investments required, returns have decreased. At the end of 2014, a rate of return of 4.6 percent was achieved in central locations of Berlin. Those have decreased to a level of 4.5 percent at the end of the first half of the year 2015. Only if rents are beginning to increase again, returns will increase as well, says Hochtief.
The market for housing property was strong as well. Due to a lack of supply, fewer properties have been traded than in the two previous years. Here, German and foreign investors are entering the market at a rapid pace. Due to the high demand, prices have increased to 23 times a years rent. Hochtief expects that prices will drop in 2016/2017 but stagnate at a level of 22.