Berlin’s housing market is so tight that a steep increase in borrowing costs seems to have only briefly hit the brakes on rising prices.
(Bloomberg) — Berlin’s housing market is so tight that a steep increase in borrowing costs seems to have only briefly hit the brakes on rising prices.
The cost of buying a newly-built apartment in the German capital rose by 0.8% last quarter, partially reversing a dramatic drop recorded in the previous three-month period, according to figures compiled by property ad firm Immobilien Scout for Bloomberg News. A square meter now sells for an average of 6,093 euros, up about 100% from just seven years ago.
Germany’s decade-long boom in residential property prices came to a sudden halt last year after the European Central Bank embarked on a series of interest rate hikes. Those moves doubled — and sometimes even tripled — mortgage rates for house buyers, pricing many out of the market and causing asking prices to fall across the country.
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Prices for existing apartments in Berlin fell for a second consecutive quarter, the Immobilien Scout data shows. However, that drop — 0.3% — was extremely small and followed a 5.3% plunge the previous quarter, indicating that this development, too, is likely to reverse soon.
If and when it does, it will return to earlier trends. While a decade of low interest rates saw property prices soar across Germany, few places saw an explosion as dramatic as in Berlin, where housing is notoriously scarce.
The German capital has long faced a serious mismatch between supply and demand in its rental market, with government data showing that about 26,000 people in Berlin were sleeping in shelters, couch-surfing or otherwise lacked a fixed address at the beginning of last year. The city would need to build more than 100,000 apartments to meet demand, some researchers estimate.
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The lack of housing has driven up rents, which in turn push up prices paid for buildings. With inflation recently hitting record highs, landlords have been tempted to flout Berlin’s tough price-control regulations and charge renters even more.
Other industry sources also indicate that Germany’s residential real estate market has already returned to a previous era of steady price increases. The Europace house price indicator, which tracks residential real estate in Germany, posted a month-on-month increase in February, breaking a streak of seven consecutive drops that began last July.
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