Berlin the Mieterstadt (tenant city)
To gain a better understanding of the local property market, it is important to know that big cities in Germany did not develop a house-buying culture until very recently. Berlin’s unique history means that a vast majority of Berliners are still renting, even today.
This partly goes back to the separation of the city. In the former communist Eastern part, property ownership was rare. Whereas in the former Western part, its status as an island surrounded by communism meant that it was simply not an attractive location to buy.
Due to the majority of living space having been destroyed during war, the young federal state invested in building rental apartment houses. The rents were very affordable and prices were protected by the government, making cities like Berlin a tenant paradise.
But these ‘old rents’ are dying out and are very hard, if not impossible, to come by. Depending on location and modernisation costs, a new tenant might be unlucky enough to pay double the former rent price.
Prices increasing fast
In 2015, the local government tried to control rising rents by introducing a rent cap that was supposed to protect tenants from having to pay more than 10% above the local average. However, the implementation of the law is lacking due to manpower and landlords taking advantage of loopholes, such as charging modernisation costs.
Consequently prices are still rising rapidly and the demand for residential property is growing. Tenants are looking to buy the apartment they live in, whilst newcomers and investors see a great financial opportunity in the local market. This, coupled with the rapid population growth, put Berlin on the top of the list of the world’s fastest rising property markets in 2017.
Even with this massive rise, one has to remember that the German capital is still cheap in comparison to cities like London, Paris and New York. The growing popularity of Berlin also means rental prices are likely to continue to rise.
Location, location, location
There is a big difference between neighbourhoods in terms of price and popularity and things have been changing a lot over the last years.
Some of the following areas are popular with expats:
- Kreuzberg and Neukolln used to be run-down and not desirable areas, but are today popular with expats and hipsters with Google and other startups locating their offices there.
- Charlottenburg-Wilmersdorf represents old West Berlin glamour with its luxurious designer boutiques, beautiful cafes, bars and theatres around the Kurfürstendamm.
- The multicultural borough of Wedding is an up-and-coming neighborhood that is still affordable.
When considering buying in Berlin, think about using an experienced local real estate company, such as Best Place, as that type of advice can help in a fast-moving property market.